[35 Pa.B. 2729]
[Continued from previous Web Page] § 89.780. Loss ratio standards and refund or credit of premium.
(a) Loss ratio standards.
(1) A Medicare Supplement policy form or certificate form may not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to return to policyholders and certificateholders in the form of aggregate benefits, a percentage of the aggregate amount of premiums earned as listed in this paragraph. The amount returned to policyholders and certificateholders shall be calculated on the basis of incurred claims experience or incurred health care expenses when coverage is provided by a health maintenance organization on a service rather than reimbursement basis, and on earned premiums for the period. The calculation shall be made in accordance with accepted actuarial principles and practices. This does not include anticipated refunds or credits provided under the policy form or certificate form. The amount returned as benefits shall be equal to:
(i) At least 75% of the aggregate amount of premiums earned in the case of group policies.
(ii) At least 65% of the aggregate amount of premiums earned in the case of individual policies.
(2) Incurred health care expenses where coverage is provided by a health maintenance organization shall not include:
(i) Home office and overhead costs.
(ii) Advertising costs.
(iii) Commissions and other acquisition costs.
(iv) Taxes.
(v) Capital costs.
(vi) Administrative costs.
(vii) Claims processing costs.
(3) Filings of rates and rating schedules shall demonstrate that expected claims in relation to premiums comply with this section when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards.
(4) For policies issued prior to July 30, 1992, expected claims in relation to premiums shall meet the following:
(i) The originally filed anticipated loss ratio when combined with the actual experience since inception.
(ii) The appropriate loss ratio requirement from paragraph (1) when combined with actual experience beginning with May 11, 1996, to date.
(iii) The appropriate loss ratio requirement from paragraph (1) over the entire future period for which the rates are computed to provide coverage.
(b) Refund or credit calculation.
(1) An issuer shall collect data for each standard Medicare supplement benefit plan and file the data with the Commissioner on or by May 31 of each year using an applicable Refund Calculation Form, as prescribed by the Department.
(2) If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a Statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded.
(3) For the purposes of this section, for policies or certificates issued prior to July 30, 1992, the issuer shall make the refund or credit calculation separately for all individual policies combined and all other group policies combined for experience after May 11, 1996. The first report is due by May 31, 1998.
(4) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. This refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the Secretary of Health and Human Services, but it may not be less than the average rate of interest for 13-week Treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based.
(c) Annual filing of premium rates. An issuer of Medicare supplement policies and certificates issued before, on or after July 30, 1992, in this Commonwealth shall file annually its rates, rating schedule and supporting documentation, including ratios of incurred losses to earned premiums by policy duration for approval by the Commissioner in accordance with the filing requirements and procedures prescribed by the Commissioner. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. That demonstration shall exclude active life reserves. An expected 3rd-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than 3 years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare polices or certificates in this Commonwealth shall file with the Commissioner, in accordance with the applicable filing procedures of the Commonwealth:
(1) Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. Supporting documents as necessary to justify the adjustment shall accompany the filing.
(i) An issuer shall make premium adjustments as necessary to produce an expected loss ratio under the policy or certificate that will conform with minimum loss ratio standards for the Medicare supplement policies, and that will result in an expected loss ratio at least as great as that originally anticipated by the issuer for that policy or certificate. A premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described in this section may not be made with respect to a policy at any time other than upon its renewal date or anniversary date.
(ii) If an issuer fails to make premium adjustments acceptable to the Commissioner, the Commissioner may order premium adjustments, refunds or premium credits deemed necessary to achieve the loss ratio required by this section.
(2) Appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. These riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.
(d) Public hearings. The Commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before, on or after July 30, 1992, if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the Commissioner.
§ 89.781. Filing and approval of policies and certificates and premium rates.
(a) Approval of policy or certificate. An issuer may not deliver or issue for delivery a policy or certificate to a resident of this Commonwealth, unless the policy form or certificate form has been filed with and approved by the Commissioner in accordance with filing requirements and procedures prescribed by the Commissioner.
(b) An issuer shall file any riders or amendments to policy or certificate forms to delete outpatient prescription drug benefits as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the act of December 8, 2003 (Pub. L. No. 108-173, 117 Stat. 2066), only with the commissioner in the state in which the policy or certificate was issued.
(c) Filing of rating schedule and supporting documentation. An issuer may not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule and supporting documentation have been filed with and approved by the Commissioner in accordance with the filing requirements and procedures prescribed by the Commissioner.
(d) Exceptions.
(1) Except as provided in paragraph (2), an issuer may not file for approval more than one form of a policy or certificate of each type for each standard Medicare supplement benefit plan.
(2) An issuer may offer, with the approval of the Commissioner, up to three additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan. These additional forms may include one or more of the following three variations. Forms with only these variations will be regarded as new policy forms under each type:
(i) The inclusion of new or innovative benefits.
(ii) The addition of either direct response or producer marketing methods.
(iii) The addition of either guaranteed issue or underwritten coverage.
(3) For the purpose of this section, a ''type'' means an individual policy, a group policy, an individual Medicare Select Policy or a group Medicare Select Policy.
(e) Availability of policy form.
(1) Except as provided in subsection (a), an issuer shall continue to make available for purchase any policy form or certificate form issued after July 30, 1992, that has been approved by the Commissioner. A policy form or certificate form may not be considered to be available for purchase, unless the issuer has actively offered it for sale in the previous 12 months.
(i) An issuer may discontinue the availability of a policy form or certificate form if the issuer provides to the Commissioner in writing its decision at least 30 days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the Commissioner, the issuer may not offer for sale the policy form or certificate form in this Commonwealth.
(ii) An issuer that discontinues the availability of a policy form or certificate form under subsection (a) may not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for 5 years after the issuer provides notice to the Commissioner of the discontinuance. The period of discontinuance may be reduced if the Commissioner determines that a shorter period is appropriate.
(2) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this section.
(3) A change in the rating structure or methodology shall be considered a discontinuance under paragraph (1), unless the issuer complies with the following requirements:
(i) The issuer provides an actuarial memorandum, in a form and manner prescribed by the Commissioner, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates.
(ii) The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The Commissioner may approve a change to the differential which is in the public interest.
(f) Combination of forms.
(1) Except as provided in paragraph (2), the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in § 89.780 (relating to loss ratio standards and refund or credit of premium).
(2) Forms assumed under an assumption reinsurance agreement may not be combined with the experience of other forms for purposes of the refund or credit calculation.
§ 89.782. Permitted compensation arrangements.
(a) An issuer or other entity may provide a commission or other compensation to a producer or other representative for the sale of a Medicare supplement policy or certificate only if the 1st-year commission or other 1st- year compensation is no more than 200% of the commission or other compensation paid for selling or servicing the policy or certificate in the 2nd year or period.
(b) The commission or other compensation provided in subsequent (renewal) years shall be the same as that provided in the 2nd year or period and shall be provided for no fewer than 5 renewal years.
(c) An issuer or other entity may not provide compensation to its producers or its other representatives and a producer may not receive compensation greater than the renewal compensation payable by the replacing issuer on renewal policies or certificates if an existing policy or certificate is replaced.
(d) For purposes of this section, compensation includes pecuniary or nonpecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate, including bonuses, gifts, prizes, awards and finders fees.
§ 89.783. Required disclosure provisions.
(a) General rules.
(1) Medicare supplement policies and certificates shall include a renewal or continuation provision. The language or specifications of this provision shall be consistent with the type of contract issued. This provision shall be appropriately captioned and shall appear on the first page of the policy, and shall include any reservation by the issuer of the right to change premiums and any automatic renewal premium increases based on the policyholder's age.
(2) Except for riders or endorsements by which the issuer effectuates a request made in writing by the insured, exercises a specifically reserved right under a Medicare supplement policy, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, riders or endorsements added to a Medicare supplement policy after the date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require a signed acceptance by the insured. After the date of policy or certificate issue, a rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term shall be agreed to in writing signed by the insured, unless the benefits are required by the minimum standards for Medicare supplement policies, or if the increased benefits or coverage is required by law. When a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy.
(3) Medicare supplement policies or certificates may not provide for the payment of benefits based on standards described as ''usual and customary,'' ''reasonable and customary'' or similar words.
(4) If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, these limitations shall appear as a separate paragraph of the policy and be labeled as ''Preexisting Condition Limitations.''
(5) Medicare supplement policies and certificates shall have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the policyholder or certificateholder has have the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the insured person is not satisfied. The notice shall contain a company mailing address to which the policyholder or certificateholder should direct the return policy or certificate. Upon receipt of a request for a refund, the company shall promptly refund the total premium amount paid directly to the policyholder or certificateholder. When an insurer asks questions in the application concerning the medical history of an individual applying for ''coverage,'' a notice shall be given to the individual urging them to verify the accuracy and completeness of the medical history information on the application and warning them that erroneous or incomplete application data could jeopardize their claim.
(6) Issuers of accident and sickness policies or certificates which provide hospital or medical expense coverage on an expense incurred or indemnity basis to a person eligible for Medicare, shall provide to these applicants a Guide to Health Insurance for People with Medicare in the form developed jointly by the National Association of Insurance Commissioners and Centers for Medicare & Medicaid Services (CMS) and in a type size no smaller than 12-point type. Delivery of the Guide shall be made whether or not these policies or certificates are advertised, solicited or issued as Medicare supplement policies or certificates as defined in this subchapter. Except in the case of direct response issuers, delivery of the Guide shall be made to the applicant at the time of application and acknowledgment of receipt of the Guide shall be obtained by the issuers. Direct response issuers shall deliver the Guide to the applicant upon request but not later than at the time the policy is delivered.
(7) For the purposes of this section, ''form'' means the language, format, type size, type proportional spacing, bold character and line spacing.
(b) Notice requirements.
(1) As soon as practicable, but no later than 30 days prior to the annual effective date of Medicare benefit changes, an issuer shall notify its policyholders and certificateholders of modifications it has made to Medicare supplement insurance policies or certificates in a format acceptable to the Commissioner. The notice shall:
(i) Include a description of revisions to the Medicare Program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate.
(ii) Inform each policyholder or certificateholder as to when a premium adjustment is to be made due to changes in Medicare.
(2) The notice of benefit modifications and premium adjustments shall be in outline form and in clear and simple terms to facilitate comprehension.
(3) These notices may not contain or be accompanied by solicitation.
(4) Once the Department has approved the form, a ''Notice of Change'' can be used to modify the deductible and co-payment amounts to reflect Medicare changes without submitting the notice for additional approval. Once the Department has approved the form, only format changes are required to be submitted for review.
(c) MMA notice requirements. Issuers shall comply with any notice requirements of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the act of December 8, 2003 (Pub. L. No. 108-173, 117 Stat. 2066).
(d) Outline of coverage requirements for Medicare supplement policies.
(1) Issuers shall provide an outline of coverage to applicants at the time the application is presented to the prospective applicant and, except for direct response policies, shall obtain an acknowledgement of receipt of the outline from the applicant.
(2) If an outline of coverage is provided at the time of application and the Medicare supplement policy or certificate is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate shall accompany the policy or certificate when it is delivered and contain the following statement, in no less than 12 point type, immediately above the company name:
''NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued.''
(3) The outline of coverage provided to applicants under this section consists of four parts: a cover page, premium information, disclosure pages and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed in this paragraph in no less than 12 point type. All Plans A--L shall be shown on the cover page, and the plans that are offered by the issuer shall be prominently identified. Premium information for plans that are offered shall be shown on the cover page or immediately following the cover page and shall be prominently displayed. The premium and mode shall be stated for all plans that are offered to the prospective applicant. All possible premiums for the prospective applicant shall be illustrated.
(4) Once the Department has approved the format, an ''Outline of Coverage'' can be modified to have the deductible and co-payment requirements reflect Medicare changes, and the rate changes reflected, without submitting the Outline of Coverage for review. Only those forms containing a format change are required to be submitted for review.
(5) The following items shall be included in the outline of coverage in the order prescribed in this paragraph:
PREMIUM INFORMATION (Boldface Type) We (insert issuer's name) can only raise your premium if we raise the premium for all policies like yours in this Commonwealth. (If the premium is based on the increasing age of the insured, include information specifying when premiums will change.) DISCLOSURES (Boldface Type) Use this outline to compare benefits and premiums among policies. READ YOUR POLICY VERY CAREFULLY
(Boldface Type)This is only an outline describing your policy's most important features. The policy is your insurance contract. You must read the policy itself to understand all of the rights and duties of both you and your insurance company. RIGHT TO RETURN POLICY (Boldface Type) If you find that you are not satisfied with your policy, you may return it to (insert issuer's address). If you send the policy back to us within 30 days after you receive it, we will treat the policy as if it had never been issued and return all of your payments. POLICY REPLACEMENT (Boldface Type) If you are replacing another health insurance policy, do NOT cancel it until you have actually received your new policy and are sure you want to keep it. NOTICE (Boldface Type) This policy may not fully cover all of your medical costs. (for producers:) Neither (insert company's name) nor its producers are connected with Medicare. (for direct response:) (insert company's name) is not connected with Medicare. COMPLETE ANSWERS ARE VERY IMPORTANT (Boldface Type) When you fill out the application for the new policy, be sure to answer truthfully and completely all questions about your medical and health history. The company may cancel your policy and refuse to pay any claims if you leave out or falsify important medical information. (If the policy or certificate is guaranteed issue, this paragraph need not appear.) Review the application carefully before you sign it. Be certain that all information has been properly recorded. (Include for each plan prominently identified in the cover page, a chart showing the services, Medicare payments, plan payments and insured payments for each plan, using the same language, in the same order, using uniform layout and format as shown in the charts below. No more than four plans may be shown on one chart. For purposes of illustration, charts for each plan are included in this subchapter. An issuer may use additional benefit plan designations on these charts pursuant to § 89.777(d)). (Include an explanation of any innovative benefits on the cover page and in the chart, in a manner approved by the Commissioner.) (6) The cover page and the accompanying charts for Plan A to Plan L of the Outlines of Coverage are available upon request from the Department in printed and electronic formats. In addition, notice will be published, in the Pennsylvania Bulletin, of the availability of the amended outlines when revisions are made available to the Department by the United States Department of Health and Human Services as published in the Federal Register. The Outlines of Coverages will be made available on the Department's website at http://www. insurance.state.pa.us.
(e) Notice regarding policies or certificates which are not Medicare supplement policies.
(1) An accident and sickness insurance policy or certificate, other than a Medicare supplement policy; a policy issued under a contract under section 1876 of the Social Security Act (42 U.S.C.A. § 1395mm), disability income policy; or other policy identified in § 89.771(b) (relating to applicability and scope) issued for delivery in this Commonwealth to persons eligible for Medicare, shall notify the insured under the policy that the policy is not a Medicare supplement policy or certificate. The notice shall be printed or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy, or certificate delivered to insureds.
The notice shall be at least 12 point type and shall contain the following language:
''THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT (POLICY OR CONTRACT). If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company.''
(2) Applications provided to persons eligible for Medicare for the health insurance policies or certificates described in subsection (d)(1) shall disclose the extent to which the policy duplicates Medicare. The disclosure statement shall be provided in the form prescribed by the Department as set forth in the Medicare Supplement forms relating to Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries that Duplicate Medicare as a part of, or together with, the application for the policy or certificate.
(f) Applicable forms relating to Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries that Duplicate Medicare, Refund Calculations and Reporting of Duplicate Medicare Policies for Medicare Supplement Chapter 89 are available upon request from the Department in printed and electronic formats. In addition, notice will be published, in the Pennsylvania Bulletin, of the availability of amended Medicare Supplement forms when revisions are made. These Medicare Supplement forms will be made available on the Department's website at http://www.insurance.state.pa.us.
§ 89.784. Requirements for application forms and replacement coverage.
Application forms shall include the following requirements and questions designed to elicit information as to whether, as of the date of application, the applicant currently has Medicare supplement, Medicare Advantage, Medicaid coverage, or another health insurance policy or certificate in force or whether a Medicare supplement policy or certificate is intended to replace any other accident and sickness policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and producer containing these questions and statements may be used.
(1) Statements.
(i) You do not need more than one Medicare supplement policy.
(ii) If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages.
(iii) You may be eligible for benefits under Medicaid and may not need a Medicare supplement policy.
(iv) If, after purchasing this policy, you become eligible for Medicaid, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, during your entitlement to benefits under Medicaid for 24 months. You must request this suspension within 90 days of becoming eligible for Medicaid. If you are no longer entitled to Medicaid, your suspended Medicare supplement policy or, if the Medicare supplement policy is no longer available, a substantially equivalent policy will be reinstituted if requested within 90 days of losing Medicaid eligibility. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of suspension.
(v) If you are eligible for, and have enrolled in a Medicare supplement policy by reason of disability and you later become covered by an employer or union-based group health plan, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, while you are covered under the employer or union-based group health plan. If you suspend your Medicare supplement policy under these circumstances, and later lose your employer or union-based group health plan, your suspended Medicare supplement policy (or, if that is no longer available, a substantially equivalent policy) will be reinstituted if requested within 90 days of losing your employer or union-based group health plan. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of suspension.
(vi) Counseling services may be available in your state to provide advice concerning your purchase of Medicare supplement insurance and concerning medical assistance through the state Medicaid program, including benefits as a Qualified Medicare Beneficiary (QMB) and a Specified Low-Income Medicare Beneficiary (SLMB).
(2) Questions. If you lost or are losing other health insurance coverage and received a notice from your prior insurer saying you were eligible for guaranteed issue of a Medicare supplement insurance policy, or that you had certain rights to buy such a policy, you may be guaranteed acceptance in one or more of our Medicare supplement plans. Please include a copy of the notice from your prior insurer with your application. PLEASE ANSWER ALL QUESTIONS.
Please mark Yes or NO below with an ''X''
To the best of your knowledge,
(i) Did you turn age 65 in the last 6 months?
Yes ____ NO ____
(ii) Did you enroll in Medicare Part B in the last 6 months?
YES ____ NO ____
(iii) If yes, what is the effective date? ______
(iv) Are you covered for medical assistance through the state Medicaid program?
YES ____ NO ____
(A) NOTE TO APPLICANT: If you are participating in a ''Spend-Down Program'' and have not met your ''Share of Cost,'' please answer NO to this question.
(B) If yes,
(1) Will Medicaid pay your premiums for this Medicare supplement policy?
YES ____ NO ____
(2) Do you receive any benefits from Medicaid OTHER THAN payments towards your Medicare Part B premium?
YES ____ NO ____
(v) If you had any from any Medicare plan other than the original Medicare within the last 63 days (for example, a Medicare Advantage plan, or a Medicare HMO or PPO), fill in your start and end dates below. If you are still covered under this plan, leave ''END'' blank.
START ____ / ____ / ____ END ____ / ____ / ____
(vi) If you are still covered under the Medicare plan, do you intend to replace your current coverage with this new Medicare supplement policy?
YES ____ NO ____
(vii) Was this your first time in this type of Medicare plan?
YES ____ NO ____
(viii) Did you drop a Medicare supplement policy to enrollment in the Medicare Plan?
YES ____ NO ____
(ix) Do you have another Medicare supplement policy in force?
YES ____ NO ____
(A) If so, with what company and what plan do you have (optional for Direct Mailers)?
__________(B) If so, do you intend to replace your current Medicare supplement policy with this policy?
YES ____ NO ____
(x) Have you had coverage under any other health insurance within the past 63 days? (For example, an employer, union, or individual plan)
YES ____ NO ____
(A) If so, with what company and what kind of policy?
__________
__________
__________
__________
__________
(B) What are your dates of coverage under the policy (If you are still covered under the other policy, leave ''END'' blank.)?
START ____ / ____ / ____ END ____ / ____ / ____
(3) Producers shall list on the application form the following health insurance policies they have sold to the applicant:
(i) Policies sold which are still in force.
(ii) Policies sold in the past 5 years which are no longer in force.
(4) Notice. The notice for an issuer shall be provided in substantially the following form in at least 12 point type.
NOTICE TO APPLICANT REGARDING REPLACEMENT OF MEDICARE SUPPLEMENT INSURANCE OR MEDICARE ADVANTAGE
(Insurance company's name and address)
SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE. According to (your application) (information you have furnished), you intend to terminate existing Medicare supplement or Medicare Advantage and replace it with a policy to be issued by (Company Name) Insurance Company. Your new policy will provide thirty (30) days within which you may decide without cost whether you desire to keep the policy.
You should review this coverage carefully. Compare it with all accident and sickness coverage you now have. If, after due consideration, you find that purchase of this Medicare supplement coverage is a wise decision, you should terminate your present Medicare supplement or Medicare Advantage coverage. You should evaluate the need for other accident and sickness coverage you have that may duplicate this policy.
STATEMENT TO APPLICANT BY ISSUER, PRODUCER (OR OTHER REPRESENTATIVE):
I have reviewed your current medical or health insurance coverage. To the best of my knowledge, this Medicare supplement policy will not duplicate your existing Medicare supplement or, if applicable, Medicare Advantage coverage because you intend to terminate your existing Medicare supplement coverage or leave your Medicare Advantage plan. The replacement policy is being purchased for the following reason(s) (check one):
____ Additional benefits.
____ No change in benefits, but lower premium.
____ Fewer benefits and lower premiums.
____ My plan has outpatient prescription drug coverage and I am enrolling in Part D.
____ Disenrollment from a Medicare Advantage plan. Please explain reason for disenrollment (optional only for Direct Mailers.)
__________
__________
__________
____ Other. (please specify)
__________
__________
1. Note: If the issuer of the Medicare supplement policy being applied for does not, or is otherwise prohibited from imposing pre-existing condition limitations, please skip to statement 2 below. Health conditions which you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.
2. State law provides that your replacement policy or certificate may not contain new preexisting conditions, waiting periods, elimination periods or probationary periods. The insurer will waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.
3. If you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical and health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, review it carefully to be certain that all information has been properly recorded. (If the policy or certificate is guaranteed issue, this paragraph need not appear.)
4. Do not cancel your present policy until you have received your new policy and are sure that you want to keep it.
__________
(Signature of producer or other representative)*
(Typed Name and Address of issuer, producer or other representative)
__________
(Applicant's Signature)
__________
(Date)
*Signature not required for direct response sales.
(f) Paragraphs 1 and 2 of the replacement notice (applicable to preexisting conditions) may be deleted by an issuer if the replacement does not involve application of a new preexisting condition limitation.
§ 89.786. Standards for marketing.
(a) An issuer, directly or through its producers, shall:
(1) Establish marketing procedures to assure that comparison of policies by its producers will be fair and accurate.
(2) Establish marketing procedures to assure excessive insurance is not sold or issued.
(3) Display prominently by type, stamp or other appropriate means, on the first page of the policy the following:
''Notice to buyer: This policy may not cover all of your medical expenses.''
(4) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the types and amounts of this insurance.
(5) Establish auditable procedures for verifying compliance with this subsection.
(b) In addition to the practices prohibited by the Unfair Insurance Practices Act (40 P. S. §§ 1171.1--1171.15), the following acts and practices are prohibited:
(1) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of insurance policies or insurers for the purpose of inducing, or tending to induce, a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert an insurance policy or to take out a policy of insurance with another insurer.
(2) High pressure tactics. Employing a method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.
(3) Cold lead advertising. Making use directly or indirectly of a method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by a producer or insurance company.
(c) The terms ''Medicare Supplement,'' ''Medigap,'' ''Medicare Wrap-Around'' and similar words may not be used unless the policy is issued in compliance with this subchapter.
§ 89.787. Appropriateness of recommended purchase and excessive insurance.
(a) In recommending the purchase or replacement of a Medicare supplement policy or certificate, a producer shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.
(b) A sale of Medicare supplement coverage that will provide an individual more than one Medicare supplement policy or certificate is prohibited.
(c) An issuer may not issue a Medicare supplement policy or certificate to an individual enrolled in Medicare Part C unless the effective date of the coverage is after the termination date of the individual's Part C coverage.
§ 89.790. Guaranteed issue for eligible persons.
(a) Guaranteed issue.
(1) Eligible persons are those individuals described in subsection (b) who, seek to enroll under the policy during the period specified in subsection (c), and who submit evidence of the date of termination, disenrollment, or Medicare Part D enrollment with the application for a Medicare supplement policy.
(2) With respect to eligible persons, an issuer may not:
(i) Deny or condition the issuance or effectiveness of a Medicare supplement policy described in subsection (e) that is offered and is available for issuance to new enrollees by the issuer.
(ii) Discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care or medical condition.
(iii) Impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy.
(b) Eligible persons. An eligible person is an individual described in paragraphs (1)--(7):
(1) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare; and the plan terminates, or the plan ceases to provide all supplemental Medicare health benefits to the individual; or the individual is enrolled under an employee welfare benefit plan that is primary to Medicare and the plan terminates, or the plan ceases to provide health benefits to the individual because the individual leaves the plan.
(2) The individual is enrolled with a Medicare Advantage organization under a Medicare Advantage plan under Part C of Medicare, and any of the following circumstances apply, or the individual is 65 years of age or older and is enrolled with a Program of All-Inclusive Care for the Elderly (PACE) provider under section 1894 of the Social Security Act (42 U.S.C.A. § 1395eee), and there are circumstances similar to those described as follows that would permit discontinuance of the individual's enrollment with the provider if the individual were enrolled in a Medicare Advantage plan:
(i) The certification of the organization or plan under this part has been terminated.
(ii) The organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides.
(iii) The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the HHS Secretary, but not including termination of the individual's enrollment on the basis described in section 1851(g)(3)(B) of the Social Security Act (42 U.S.C.A. § 1395w-21(g)(3)(B)) (when the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under section 1856 of the Social Security Act (42 U.S.C.A. § 1395w-26), or the plan is terminated for all individuals within a residence area).
(iv) The individual demonstrates, in accordance with guidelines established by the HHS Secretary, that one of the following applies:
(A) The organization offering the plan substantially violated a material provision of the organization's contract under this part in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide the covered care in accordance with applicable quality standards.
(B) The organization, or producer or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual.
(v) The individual meets other exceptional conditions the HHS Secretary may provide.
(3) The individual's enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under paragraph (2) and the individual is enrolled with one of the following:
(i) An eligible organization under a contract under section 1876 of the Social Security Act (42 U.S.C.A. § 1395mm) (Medicare cost).
(ii) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999.
(iii) An organization under an agreement under section 1833(a)(1)(A) of the Social Security Act (42 U.S.C.A. § 1395l(a)(1)(A)) (health care prepayment plan).
(iv) An organization under a Medicare Select policy.
(4) The individual is enrolled under a Medicare supplement policy and the enrollment ceases because one of the following applies:
(i) The insolvency of the issuer or bankruptcy of the nonissuer organization or of other involuntary termination of coverage or enrollment under the policy.
(ii) The issuer of the policy substantially violated a material provision of the policy.
(iii) The issuer, or a producer or other entity acting on the issuer's behalf, materially misrepresented the policy's provisions in marketing the policy to the individual.
(5) The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare Advantage organization under a Medicare Advantage plan under Part C of Medicare, any eligible organization under a contract under section 1876 of the Social Security Act (Medicare cost) (42 U.S.C.A. § 1395mm), any similar organization operating under demonstration project authority, any PACE provider under section 1894 of the Social Security Act, or any Medicare Select policy and the subsequent enrollment under this paragraph is terminated by the enrollee during the first 12 months of the subsequent enrollment (during which the enrollee is permitted to terminate the subsequent enrollment under section 1851(e) of the Social Security Act).
(6) The individual, upon first becoming eligible for benefits under Part A and enrolled in Part B, if eligible, of Medicare, enrolls in a Medicare Advantage plan under Part C of Medicare, or with a PACE provider under section 1894 of the Social Security Act, and disenrolls from the plan or program within 12 months after the effective date of enrollment.
(7) The individual enrolls in a Medicare Part D plan during the initial enrollment period and, at the time of enrollment in Part D, was enrolled under a Medicare supplement policy that covers outpatient prescription drugs and the individual terminates enrollment in the Medicare supplement policy and submits evidence of enrollment in Medicare Part D along with the application for a policy described in subsection (e)(4).
(c) Guaranteed issue time periods.
(1) In the case of an individual described in subsection (b)(1), the guaranteed issue period begins on the later of one of the following:
(i) The date the individual receives a notice of termination or cessation of all supplemental health benefits (or, if a notice is not received, notice that a claim has been denied because of a termination or cessation).
(ii) The date that the applicable coverage terminates or ceases; and ends 63 days thereafter.
(2) In the case of an individual described in subsection (b)(2), (3), (5) or (6) whose enrollment is terminated involuntarily, the guaranteed issue period begins on the date that the individual receives a notice of termination and ends 63 days after the date the applicable coverage is terminated.
(3) In the case of an individual described in subsection (b)(4)(i), the guaranteed issue period begins on the earlier of the following:
(i) The date that the individual receives a notice of termination, a notice of the issuer's bankruptcy or insolvency, or other such similar notice if any.
(ii) The date that the applicable coverage is terminated, and ends on the date that is 63 days after the date the coverage is terminated.
(4) In the case of an individual described in subsection (b)(2), (4)(ii), (4)(iii), (5) or (6) who disenrolls voluntarily, the guaranteed issue period begins on the date that is 60 days before the effective date of the disenrollment and ends on the date that is 63 days after the effective date.
(5) In the case of an individual described in subsection (b)(7), the guaranteed issue period begins on the date the individual receives notice pursuant to section 1882(v)(2)(B) of the Social Security Act from the Medicare supplement issuer during the 60-day period immediately preceding the initial Part D enrollment period and ends on the date that is 63 days after the effective date of the individual's coverage under Medicare Part D.
(6) In the case of an individual described in subsection (b) but not described in subsections (d)--(f), the guaranteed issue period begins on the effective date of disenrollment and ends on the date that is 63 days after the effective date.
(d) Extended medigap access for interrupted trial periods.
(1) In the case of an individual described in subsection (b)(5) (or deemed to be so described, under this paragraph) whose enrollment with an organization or provider described in subsection (b)(5) is involuntarily terminated within the first 12 months of enrollment, and who, without an intervening enrollment, enrolls with another organization or provider, the subsequent enrollment shall be deemed to be an initial enrollment described in subsection (b)(5).
(2) In the case of an individual described in subsection (b)(6) (or deemed to be so described, under this paragraph) whose enrollment with a plan or in a program described in subsection (b)(6) is involuntarily terminated within the first 12 months of enrollment, and who, without an intervening enrollment, enrolls in another such plan or program, the subsequent enrollment shall be deemed to be an initial enrollment described in subsection (b)(6).
(3) For the purposes of subsection (b)(5) and (6), no enrollment of an individual with an organization or provider described in subsection (b)(5), or with a plan or in a program described in subsection (b)(6), may be deemed to be an initial enrollment under this paragraph after the 2-year period beginning on the date on which the individual first enrolled with such an organization, provider, plan or program.
(e) Products to which eligible persons are entitled. The Medicare supplement policy to which eligible persons are entitled under:
(1) Subsection (b)(1)--(4) is a Medicare supplement policy which has a benefit package classified as Plan A, B, C, F (including F with a high deductible), K or L offered by an issuer.
(2) Subsection (b)(5) is one of the following:
(i) Subject to subparagraph (ii), the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in paragraph (1).
(ii) After December 31, 2005, if the individual was most recently enrolled in a Medicare supplement policy with an outpatient prescription drug benefit, one of the following:
(A) The policy available from the same issuer but modified to remove outpatient prescription drug coverage.
(B) At the election of the policyholder, an A, B, C, F (including F with a high deductible), K or L policy that is offered by any issuer.
(3) Subsection (b)(6) includes any Medicare supplement policy offered by an issuer.
(4) Subsection (b)(7) is a Medicare supplement policy that has a benefit package classified as Plan A, B, C, F, (including F with a high deductible), K or L, and that is offered and is available for issuance to new enrollees by the same issuer that issued the individual's Medicare supplement policy with outpatient prescription drug coverage.
(f) Notification provisions.
(1) At the time of an event described in subsection (b) because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy or plan, the organization that terminates the contract or agreement, the issuer terminating the policy or the administrator of the plan being terminated, respectively, shall notify individuals of their rights under this section, and of the obligations of issuers of Medicare supplement policies under subsection (a). The notice shall be communicated contemporaneously with the notification of termination.
(2) At the time of an event described in subsection (b) because of which an individual ceases enrollment under a contract or agreement, policy or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, shall notify individuals of their rights under this section, and of the obligations of issuers of Medicare supplement policies under subsection (a). The notice shall be communicated within 10 working days of the issuer receiving notification of disenrollment.
Appendix E. (Reserved)
[Pa.B. Doc. No. 05-885. Filed for public inspection May 6, 2005, 9:00 a.m.]
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