RULES AND REGULATIONS
Title 31--INSURANCE
INSURANCE DEPARTMENT
[31 PA. CODE CH. 89]
Approval of Life, Accident and Health Insurance Medicare Supplement Insurance Minimum Standards
[26 Pa.B. 2196] The Insurance Department (Department), Accident and Health Bureau, by this order, adopts amendments to Chapter 89, Subchapter K (relating to Medicare Supplement Insurance Minimum Standards) in particular, §§ 89.771, 89.772, 89.775, 89.776, 89.778, 89.780, 89.783 and 89.784 and Appendices E and I as set forth in Annex A. The amendments establish and detail the minimum requirements for the approval of Medicare supplemental policies for issuance and sale in this Commonwealth. The amendments bring the Department's regulations for the approval of Medicare supplemental policies into compliance with the minimum Federal statutory requirements of the Social Security Act (act) (42 U.S.C.A. § 1395ss). Sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412) provides the Insurance Commissioner with the authority and duty to promulgate regulations governing the enforcement of the laws relating to insurance. This is a final rulemaking with proposed rulemaking omitted in accordance with sections 204(2) and (3) of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. § 1204(2) and (3)), known as the Commonwealth Documents Law (CDL) and the regulation thereunder, 1 Pa. Code § 7.4.
Section 204(2) of the CDL provides that notice of proposed rulemaking may be omitted when all persons subject to the administrative regulation are named therein and have been given actual notice. Section 204(3) of the CDL provides that notice of proposed rulemaking may be omitted when the agency for good cause finds that public notice of its intention to amend an administrative regulation is, in the circumstances, impracticable or unnecessary. In order to comply with the Federal statutory minimum requirements for Medicare supplemental policies, and because of both the time constraints associated with the adoption of the Federal minimum standards and the notice given to insurers advising them of the upcoming changes, proposed rulemaking is properly omitted under section 204(2) and (3) of the CDL.
The Social Security Act Amendments of 1994, Pub. L. No. 103-432, Oct. 31, 1994, 108 Stat. 4398 (42 U.S.C.A. § 1395ss(a--t)) (SSAA-94) revised the Federal minimum standards for Medicare supplemental policies. The Department's amendment of its regulations to adopt the changes is mandated by SSAA-94 (42 U.S.C.A. § 1395ss(p)(1)). More specifically, section 171(m) of SSAA-94, sets out as a note titled State Regulatory Programs under the Historical and Statutory Notes (Statutory Notes) following 42 U.S.C.A. § 1395ss(t), which establishes a timetable which requires the Department to adopt the standards by April 28, 1996.
With certain limited exceptions, interested parties have been required to comply with the revised Federal law since its enactment on October 31, 1994. On September 29, 1995, the Department's revised regulations were transmitted to the Insurance Federation of Pennsylvania, Life/Health Steering Committee. Comments were received, considered and responded to by the Department. Insurers providing Medicare supplemental insurance in this Commonwealth also received notice from the Insurance Commissioner of the upcoming changes to the Department's regulations by letter dated March 6, 1996. Public comment will not change the Federal statutory minimum requirements. Accordingly, the Department finds that notice of proposed rulemaking is, under the circumstances, unnecessary and impracticable and may therefore be omitted for this additional reason.
Purpose
In 1980, Congress enacted the first Federal legislation dealing with Medicare supplemental insurance. In that legislation, as well as in each subsequent amendment, Congress gave the National Association of Insurance Commissioners (NAIC) the opportunity to establish standards to be incorporated by statutory reference as Federal requirements. In the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) in particular section 4351, Simplification of Medigap Policies, and section 4353, Enforcement of Standards, 42 U.S.C.A. § 1395ss(p), the previously voluntary Federal certification program was replaced by a mandatory program, and the NAIC model act and regulation became the minimum Federal standards for state laws and regulations related to the issuance and sale of Medicare supplemental insurance policies.
In similar fashion, the present amendments to Subchapter K are required by SSAA-94, which made changes in the Federal minimum statutory requirements regulating Medicare supplemental policies. Further, SSAA-94, 42 U.S.C.A. § 1395ss(p)(1)(A), (C), and section 171(m) of the act required the NAIC to modify its Medicare Supplement Insurance Minimum Standards Model Act and/or Model Regulation (model regulation) within 6 months and required the Department within 1 year to modify its regulations to incorporate the NAIC's revisions. The NAIC membership adopted revisions to its model regulation effective April 28, 1995. Therefore, the Department was required to modify its regulations by April 28, 1996. By this rulemaking, the Department adopts the NAIC's revisions to its model regulations in order to comply with the current minimum requirements of the act.
The fundamental purpose of these amendments is to provide for the reasonable standardization of coverage; to simplify terms and benefits of Medicare supplemental policies; to facilitate public understanding and comparison of such policies; to eliminate provisions contained in such policies which may be misleading or confusing in connection with the purchase of such policies or with the settlement of claims; and to provide for full disclosure in the sale of accident and sickness insurance coverages to persons eligible for Medicare.
Explanation of Regulatory Requirements
Several revisions of the Department's regulations are worthy of special note. Briefly, these are:
1. Section 89.772 (relating to definitions)--After December 31, 1995, new enrollments in Health Care Prepayment Plans (HCPPs) under section 1833 of the act (42 U.S.C.A. § 1395l), will no longer be exempt from the definition of a ''Medicare Supplement Policy'' unless these plans are employer or union based. Thereafter, nonexempt HCPPs are to be held to all Medicare supplement requirements, including standardization and loss ratios.
2. Section 89.776 (relating to benefit standards for policies or certificates issued or delivered on or after July 30, 1992)--The language in paragraph (1)(vii)(A) requiring refund of premiums for retroactively-determined periods of Medicaid eligibility has been stricken. This change ensures that refunds of premiums will not adversely affect beneficiaries' retroactive Medicaid eligibility.
3. Section 89.778 (relating to open enrollment)--Effective January 1, 1995, a 6-month open enrollment period is extended at age 65 to all those individuals who are both 65 and enrolled in Medicare Part B, regardless of previous enrollment.
4. Section 89.780 (relating to loss ratio standards and refund or credit of premium)--The amendment clarifies that insurers will not be required to meet the lifetime loss ratios set forth in § 89.780(a) of 65% for individual business and 75% for group business for policies issued prior to December 1, 1990; instead, the insurers must meet the originally-filed anticipated lifetime loss ratio. Insurers are required to meet the ratio in § 89.780(a) for experience accumulating after December 1, 1990. Insurers whose business does not meet the applicable loss ratio may be required to refund a portion of the premium paid or give a credit toward premium due.
In addition, for any policies issued prior to November 5, 1991, insurers were not previously required to make refund calculations and submit them to the Department. Under the amendment to the regulation, insurers will be required to calculate and submit refund calculations to the Department for policies issued before November 5, 1991.
5. Section 89.783 (relating to required disclosure provisions)--General Rules, subsection (a)(6) removes the ''other than incidentally'' qualifier to hospital or medical expense indemnity products.
In addition, SSAA-94 now permits, with proper disclosure, the sale of health insurance policies that duplicate Medicare benefits. Thus, the notice requirement for non-Medicare supplement products, subsection (d) removes exceptions for basic, catastrophic, major medical and single premium nonrenewable policies. Now, the products must disclose the extent to which they duplicate Medicare through the use of the appropriate disclosure statement. The form disclosure statements in Appendix I disclose the extent to which a policy duplicates any of the beneficiary's Medicare benefits.
6. Section 89.784 (relating to requirements for application forms and replacement coverage)--With respect to applications, both the ''Statements'' and ''Questions'' sections in subsection (a) have been changed to provide sufficient information to companies to assist them in following the SSAA-94 revisions to the anti-duplication provisions.
The statement required on the application form advises consumers to consider whether it would be beneficial to have additional health insurance.
The revised Federal law continues the prohibition of sales of Medicare supplemental policies to Medicaid beneficiaries; however, the revised statute allows the sale of certain policies to persons who meet certain resource criteria. The revised ''Questions'' provide necessary information to insurers regarding an applicant's qualification for Medicaid.
With respect to replacement coverage, the amendment recognizes the continuing prohibition against insurers selling duplicate Medicare supplement policies and the required replacement notice in subsection (e) advises consumers purchasing a replacement policy to terminate present Medicare supplement coverage.
Affected Parties
These amendments apply to insurers who market Medicare supplemental insurance policies.
Fiscal Impact
The Department has determined that the amendments will have no significant adverse fiscal impact on the Commonwealth or the insurers that offer Medicare supplemental policies.
Paperwork
Insurers may experience an increase in paperwork due to the amendment of existing policy forms. The Department is not expected to experience any significant increase in paperwork.
Effective/Sunset Date
These amendments will become effective upon publication in the Pennsylvania Bulletin. Under SSAA-94, the Department was required to incorporate the amendments into its regulations by April 28, 1996. (42 U.S.C.A. § 1395(p)(1)(A), (C) and section 171(m) of the act set forth in the Statutory Notes.)
A sunset date is inapplicable because the requirements of the regulations are mandated by Federal law.
Contact Person
Questions or comments regarding the amendments may be addressed in writing to LeMar Myers, Supervisor, Accident and Health Bureau, 1311 Strawberry Square, Harrisburg, PA 17120, (717) 783-2107.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), the Department submitted a copy of the amendments with proposed rulemaking omitted on March 6, 1996, to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. On the same date, the amendments were submitted to the Office of Attorney General for review and approval under the Commonwealth Attorneys Act (71 P. S. §§ 732-1--732-101). In accordance with section 5(c) of the Regulatory Review Act, the amendments were deemed approved by the House Insurance Committee on March 26, 1996, and deemed approved by the Senate Banking and Insurance Committee on March 26, 1996. IRRC met on April 3, 1996, and approved the amendments.
Findings
The Insurance Commissioner finds that:
(1) There is good cause to forego public notice of the intention to amend Chapter 89, Subchapter K because all persons subject to the administrative regulations are named therein and have been given actual notice and notice is impracticable and unnecessary under section 204(2) and (3) of the CDL.
(2) The amendments to Chapter 89 are required by the SSAA of 1994 to bring the Department's regulations into compliance with Federal minimum requirements for Medicare supplemental policies; interested parties have received notice of the changes to the minimum requirements through the revised Federal law and notice from the Insurance Commissioner and, with certain exceptions, have been required to comply with the revised law since its enactment on October 31, 1994. Public comment cannot change the minimum Federal requirements. Under the timetable established by the SSAA, the Department was required to amend its regulations by April 28, 1996; consequently, it is necessary to amend these regulations as expeditiously as possible.
Order
The Insurance Commissioner, acting under the authority in sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 hereby orders that:
(a) The regulations of the Department, 31 Pa. Code Chapter 89, are amended by amending §§ 89.771, 89.772, 89.775, 89.776, 89.778, 89.780, 89.783 and 89.784, and Appendices E and I to read as set forth in Annex A with ellipses referring to the existing text of the regulations.
(b) The Department shall submit this order and Annex A to the Office of Attorney General and Office of General Counsel for approval as to form and legality as required by law.
(c) The Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon its publication in the Pennsylvania Bulletin.
LINDA S. KAISER,
Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 26 Pa.B. 1885 (April 20, 1996).)
Fiscal Note: 11-133. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART IV. LIFE INSURANCE
CHAPTER 89. APPROVAL OF LIFE, ACCIDENT AND HEALTH INSURANCE
Subchapter K. MEDICARE SUPPLEMENT INSURANCE MINIMUM STANDARDS § 89.771. Applicability and scope.
(a) Except as otherwise specifically provided in §§ 89.775, 89.779, 89.780, 89.783 and 89.788, this subchapter applies to:
(1) Medicare supplement policies delivered or issued for delivery in this Commonwealth on or after July 30, 1992.
(2) Certificates issued under group Medicare supplement policies which certificates have been delivered or issued for delivery in this Commonwealth.
(b) This subchapter does not apply to a policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employes or former employes, or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations.
§ 89.772. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Applicant--
(i) In the case of an individual Medicare supplement policy, the person who seeks to contract for insurance benefits.
(ii) In the case of a group Medicare supplement policy, the proposed certificateholder.
Certificate--A certificate delivered or issued for delivery in this Commonwealth under a group Medicare supplement policy.
Certificate form--The form on which the certificate is delivered or issued for delivery by the issuer.
Commissioner--The Insurance Commissioner of the Commonwealth.
Issuer--The term includes insurance companies, fraternal benefit societies and nonprofit corporations subject to 40 Pa.C.S. Chapters 61 and 63 (relating to hospital plan corporations; and professional health services plan corporations) and other entities delivering or issuing for delivery in this Commonwealth Medicare supplement policies or certificates.
Medicare--The program established by The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 (42 U.S.C.A. §§ 1395--1395b-4) as then constituted or later amended.
Medicare supplement policy--A group or individual policy of accident and sickness insurance or a subscriber contract of hospital and medical service associations or health maintenance organizations, other than a policy issued under a contract under section 1876 of the Social Security Act (42 U.S.C.A. § 1395mm) or an issued policy under a demonstration project specified in 42 U.S.C.A. § 1395ss(g)(1), which is advertised, marketed or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical or surgical expenses of persons eligible for Medicare.
Policy form--The form on which the policy is delivered or issued for delivery by the issuer.
§ 89.775. Minimum benefit standards for policies or certificates issued for delivery prior to July 30, 1992.
A policy or certificate may not be advertised, solicited or issued for delivery in this Commonwealth as a Medicare supplement policy or certificate unless it meets or exceeds the following minimum standards. These are minimum standards and do not preclude the inclusion of other provisions or benefits which are consistent with this subchapter.
(1) General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to the other requirements of this subchapter:
* * * * * (v) Restrictions on termination of policies and certificates.
* * * * * (D) If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new group policy will not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced.
* * * * * § 89.776. Benefits standards for policies or certificates issued or delivered on or after July 30, 1992.
The following standards are applicable to Medicare supplement policies or certificates delivered or issued for delivery in this Commonwealth on or after July 30, 1992. A policy or certificate may not be advertised, solicited, delivered or issued for delivery in this Commonwealth as a Medicare supplement policy or certificate unless it complies with these benefit standards.
(1) General standards. The following standards apply to Medicare supplement policies and certificates and are in addition to other requirements of this subchapter:
* * * * * (v) Cancellation or nonrenewal of policy. Each Medicare supplement policy shall be guaranteed renewable.
* * * * * (E) If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to persons covered under the old group policy on its date of termination. Coverage under the new policy may not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced.
* * * * * (vii) Suspension by policyholder.
(A) A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificateholder for the period (not to exceed 24 months) in which the policyholder or certificateholder has applied for and is determined to be entitled to Medical Assistance under Title XIX of the Social Security Act (42 U.S.C.A. §§ 1396--1396u), but only if the policyholder or certificateholder notifies the issuer of the policy or certificate within 90 days after the date the individual becomes entitled to this assistance.
* * * * * (3) Standards for additional benefits. The following additional benefits shall be included in Medicare Supplement Benefit Plans B, C, D, E, F, G, H, I and J only as provided by § 89.777.
* * * * * (x) At-home recovery benefit. Coverage for services to provide short term, at-home assistance with activities of daily living for those recovering from an illness, injury or surgery.
(A) For purposes of this benefit, the following definitions apply:
* * * * * (II) Care provider. A qualified or licensed home health aid or homemaker, personal care aid or nurse provided through a licensed home health care agency or referred by a licensed home health care agency or referred by a licensed referral agency or licensed nurses registry.
* * * * * § 89.778. Open enrollment.
(a) An issuer may not deny or condition the issuance or effectiveness of a Medicare supplement policy or certificate available for sale in this Commonwealth, nor discriminate in the pricing of a policy or certificate because of the health status, claims experience, receipt of health care or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the 6-month period beginning with the first day of the first month in which an individual is enrolled for benefits under Medicare Part B. Each Medicare supplement policy and certificate currently available from an insurer shall be made available to all applicants who qualify under this subsection without regard to age.
(b) Except as provided in § 89.789, subsection (a) will not be construed as preventing the exclusion of benefits under a policy, during the first 6 months, based on a preexisting condition for which the policyholder or certificateholder received treatment or was otherwise diagnosed during the 6 months before the coverage became effective.
§ 89.780. Loss ratio standards and refund or credit of premium.
(a) Loss ratio standards.
* * * * * (3) 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 and file with the Commissioner on May 31 of each year the data contained in the applicable reporting form contained in Appendix E for each type in a standard Medicare supplement benefit plan.
(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.
* * * * * § 89.783. Required disclosure provisions.
(a) General rules.
* * * * * (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 the Health Care Financing Administration 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 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.
(8) Medicare supplement policies or certificates shall be issued to insureds by direct mailing from the insurer and not issued through an agent or broker to these insureds. Except in the case of a direct response insurer, a copy of the completed application shall be a part of or affixed to the policy or certificate issued to the insured.
* * * * * (d) 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 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, using the applicable statement in Appendix I (relating to Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries that Duplicate Medicare), the extent to which the policy duplicates Medicare. The disclosure statement shall be provided as a part of, or together with, the application for the policy or certificate.
§ 89.784. Requirements for application forms and replacement coverage.
(a) Application forms shall include the following questions designed to elicit information as to whether, as of the date of application, the applicant has another Medicare supplement or other 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 agent containing these questions and statements may be used.
(Statements) (1) You do not need more than one Medicare supplement policy.
(2) If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages.
(3) You may be eligible for benefits under Medicaid and may not need a Medicare supplement policy.
(4) 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 policy will be reinstituted if requested within 90 days of losing Medicaid eligibility.
(5) 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).
(Questions) ''To the best of your knowledge:
(1) Do you have another Medicare supplement policy or certificate in force?
(a) If so, with which company?
(b) If so, do you intend to replace your current Medicare supplement policy with this policy (certificate)?
(2) Do you have any other health insurance coverage that provides benefits similar to this Medicare supplement policy?
(a) If so, with which company?
(b) What kind of policy?
(3) Are you covered for Medical Assistance through the state Medicaid program?
(a) As a Specified Low Income Medicare Beneficiary (SLMB)?
(b) As a Qualified Medicare Beneficiary (QMB)?
(c) For other Medicaid medical benefits?
(d) Agents shall list other health insurance policies they have sold to the applicant.
* * * * * (e) The notice required by subsection (d) for an issuer shall be provided in substantially the following form in no less than twelve (12) point type:
* * * * * 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 coverage. You should evaluate the need for other accident and sickness coverage you have that may duplicate this policy.
* * * * * 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 coverage because you intend to terminate your existing Medicare supplement coverage. The replacement policy is being purchased for the following reason(s) (check one):
* * * * *
APPENDIX E
MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR ______ TYPE1___________________________ SMSBP2__________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Person Completing This Exhibit __________
Title ___________________________ Telephone Number __________
(a) Earned (b) Incurred Premium3 Claims4 line 1 Current Year's Experience a. Total (all policy years) b. Current year's issues5 c. Net (for reporting purposes = 1a - 1b) ______ ______ 2 Past Years' Experience (All Policy Years) ______ ______ 3 Total Experience (Net Current Year + Past Years'
Experience)4 Refunds last year (Excluding Interest) 5 Previous Since Inception (Excluding Interest) 6 Refunds Since Inception (Excluding Interest) 7 Benchmark Ratio Since Inception
(SEE WORKSHEET FOR RATIO 1)8 Experienced Ratio Since Inception 
9 Life Years Exposed Since Inception __________ If the Experienced Ratio is less than the Benchmark Ratio, and there are more than 500 life years exposure, then proceed to calculation of refund. 10 Tolerance Permitted (obtained from credibility table)
MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR ______ TYPE1___________________________ SMSBP2__________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
11 Adjustment to Incurred Claims for Credibility
Ratio 3 = Ratio 2 + ToleranceIf Ratio3 is more than benchmark ratio (ratio 1), a refund or credit to premium is not required.
If Ratio 3 is less than the benchmark ratio, then proceed.
12 Adjusted Incurred Claims =
(Tot. Earned Premiums (line 3, col a ) - Refunds Since Inception (line 6)) × Ratio 3 (line 11)13 Refund = Total Earned Premiums (line 3, col a) - Refunds Since Inception (line 6)
If the amount on line 13 is less than .005 times the annualized premium in force as of December 31 of the reporting year, then no refund is made. Otherwise, the amount on line 13 is to be refunded or credited, and a description of the refund and/or credit against premium to be used must be attached to this form.
Medicare Supplement Credibility Table
Life Years Exposed Since Inception Tolerance 10,000 + 0.0% 5,000--9,999 5.0% 2,500--4,999 7.5% 1,000--2,499 10.0% 500--999 15.0% If less than 500, no credibility.
MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR ______ TYPE1___________________________ SMSBP2__________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
1 Individual and Group only.
2 ''SMSBP'' = Standardized Medicare Supplement Benefit Plan--Use ''P'' for prestandardized plans.
3 Includes model loadings and fees charged.
4 Excludes Active Life Reserves.
5 This is to be used as ''Issue Year Earned Premium'' for Year 1 of next year's ''Worksheet for Calculation of Benchmark Ratios''I certify that the above information and calculations are true and accurate to the best of my knowledge and belief.
__________
Signature
__________
Name--Please Type
__________
Title
__________
Date
REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR
INDIVIDUAL POLICIES FOR CALENDAR YEAR ______TYPE1___________________________ SMSBP2__________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Address __________
Person Completing This Exhibit __________
Title ___________________________ Telephone Number __________
(a)3 (b)4 (c) (d) (e) (f) (g) (h) (i) (j) (o)5 Earned Cumulative Cumulative Policy Year Year Premium Factor (b) × (c) Loss Ratio (d) × (e) Factor (b) × (g) Loss Ratio (h) × (i) Loss Ratio 1 2.770 0.442 0.000 0.000 0.4 2 4.175 0.493 0.000 0.000 0.55 3 4.175 0.493 1.194 0.659 0.65 4 4.175 0.493 2.245 0.669 0.67 5 4.175 0.493 3.170 0.678 0.69 6 1.175 0.493 3.998 0.686 0.71 7 4.175 0.493 4.754 0.695 0.73 8 4.175 0.493 5.445 0.702 0.75 9 4.175 0.493 6.075 0.708 0.76 10 4.175 0.493 6.650 0.713 0.76 11 4.175 0.493 7.176 0.717 0.76 12 4.175 0.493 7.655 0.720 0.77 13 4.175 0.493 8.093 0.723 0.77 14 4.175 0.493 8.493 0.725 0.77 15 4.175 0.493 8.684 0.725 0.77 ______ ______ ______ ______ Total: (k): (l): (m): (n): Benchmark Ratio Since Inception: (l + n)/(k + m):
1: Individual and group only
2: ''SMSBP'' = Standardized Medicare Supplement Benefit Plan.--Use ''P'' for prestandardized plans.
3: Year 1 is the current calendar year - 1
Year 2 is the current calendar year - 2 (etc.)
(Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
4: For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
5: These loss ratios are not explicitly used in computing the benchmark loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown for informational purposes only.
REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR
GROUP POLICIES FOR CALENDAR YEAR ______TYPE1___________________________ SMSBP2__________
For the State of __________
Company Name __________
NAIC Group Code _________________ NAIC Company Code __________
Address __________
Person Completing This Exhibit __________
Title ___________________________ Telephone Number __________
(a)3 (b)4 (c) (d) (e) (f) (g) (h) (i) (j) (o)5 Earned Cumulative Cumulative Policy Year Year Premium Factor (b) × (c) Loss Ratio (d) × (e) Factor (b) × (g) Loss Ratio (h) × (i) Loss Ratio 1 2.770 0.507 0.000 0.000 0.46 2 4.175 0.567 0.000 0.000 0.63 3 4.175 0.567 1.194 0.759 0.75 4 4.175 0.567 2.245 0.771 0.77 5 4.175 0.567 3.170 0.782 0.8 6 4.175 0.567 3.998 0.792 0.82 7 4.175 0.567 4.754 0.802 0.84 8 4.175 0.567 5.445 0.811 0.87 9 4.175 0.567 6.075 0.818 0.88 10 4.175 0.567 6.650 0.824 0.88 11 4.175 0.567 7.176 0.828 0.88 12 4.175 0.567 7.655 0.831 0.88 13 4.175 0.567 8.093 0.834 0.89 14 4.175 0.567 8.493 0.837 0.89 15 4.175 0.567 8.684 0.838 0.89 ______ ______ ______ ______ Total: (k): (l): (m): (n): Benchmark Ratio Since Inception: (l + n)/(k + m):
1: Individual and group only
2: ''SMSBP'' = Standardized Medicare Supplement Benefit Plan.--Use ''P'' for prestandardized plans.
3: Year 1 is the current calendar year - 1
Year 2 is the current calendar year - 2 (etc.)
(Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.)
4: For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
5: These loss ratios are not explicitly used in computing the benchmark loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown for informational purposes only.
APPENDIX I
Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to
Medicare Beneficiaries that Duplicate Medicare1. Federal law, P. L. 103-432, prohibits the sale of health insurance policies (the term policy or policies includes certificates) that duplicate Medicare benefits unless it will pay benefits without regard to other health coverage and it includes the prescribed disclosure statement on or together with the application.
2. All types of health insurance policies that duplicate Medicare shall include one of the attached disclosure statements, according to the particular policy type involved, on the application or together with the application. The disclosure statement may not vary from the attachment statements in terms of language or format (type size, type proportional spacing, bold character, line spacing, and usage of boxes around text).
3. State and Federal law prohibits insurers from selling a Medicare supplement policy to a person that already has a Medicare supplement policy except as a replacement.
4. Property/Casualty and Life insurance policies are not considered health insurance.
5. Disability income policies are not considered to provide benefits that duplicate Medicare.
6. The Federal law does not pre-empt state laws that are more stringent than the Federal requirements.
7. The Federal law does not pre-empt existing state form filing requirements.
[For policies that provide benefits for expenses incurred for an accidental injury only]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses that result from accidental injury. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits when it pays:
* hospital or medical expenses up to the maximum stated in the policy
Medicare generally pays for most or all of these expenses.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies that provide benefits for specified limited services]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for expenses relating to the specific services listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits when:
* any of the services covered by the policy are also covered by Medicare
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies that reimburse expenses incurred for specified disease(s) or other specified impairment(s). This includes expense incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions.]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses only when you are treated for one of the specific diseases or health conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits when it pays:
* hospital or medical expenses up to the maximum stated in the policy
Medicare generally pays for most or all of these expenses.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* hospice
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies that pay fixed dollar amounts for specified diseases or other specified impairments. This includes cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy.]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance pays a fixed amount, regardless of your expenses, if you meet the policy conditions, for one of the specific diseases or health conditions named in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits because Medicare generally pays for most of the expenses for the diagnosis and treatment of the specific conditions or diagnoses named in the policy.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* hospice
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies.]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance pays a fixed dollar amount, regardless of your expenses, for each day you meet the policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits when:
* any expenses or services covered by the policy are also covered by Medicare
Medicare generally pays for most or all of these expenses.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* hospice
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies that provide benefits for both expenses incurred and fixed indemnity basis]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance pays limited reimbursement for expenses if you meet the conditions listed in the policy. It also pays a fixed amount, regardless of your expenses, if you meet other policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medical Supplement insurance.
This insurance duplicates Medicare benefits when:
* any expenses or services covered by the policy are also covered by Medicare; or
* it pays the fixed dollar amount stated in the policy and Medicare covers the same eventMedicare generally pays for most or all of these expenses.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* hospice care
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For long-term care policies providing both nursing home and noninstitutional coverage]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance Federal law requires us to inform you that this insurance duplicates Medicare benefits in some situations.
* This is long term care insurance that provides benefits for covered nursing home and home care services.
* In some situations Medicare pays for short periods of skilled nursing home care, limited home health services and hospice care.
* This insurance does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.Neither Medicare nor Medicare Supplement insurance provides benefits for most long term care expenses.
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about long term care insurance, review the Shopper's Guide to Long Term Care Insurance, available from the insurance company.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies providing nursing home benefits only]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance Federal law requires us to inform you that this insurance duplicates Medicare benefits in some situations.
* This insurance provides benefits primarily for covered nursing home services.
* In some situations Medicare pays for short periods of skilled nursing home care and hospice care.
* This insurance does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.Neither Medicare nor Medicare Supplement insurance provides benefits for most nursing home expenses.
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about long term care insurance, review the Shopper's Guide to Long Term Care Insurance, available from the insurance company.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For policies providing home care benefits only]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance Federal law requires us to inform you that this insurance duplicates Medicare benefits in some situations.
* This insurance provides benefits primarily for covered home care services.
* In some situations, Medicare will cover some health related services in your home and hospice care which may also be covered by this insurance.
* This insurance does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.Neither Medicare nor Medicare Supplement insurance provides benefits for most services in your home.
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about long term care insurance, review the Shopper's Guide to Long Term Care Insurance, available from the insurance company.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[For other health insurance policies not specifically identified in the previous statements]
IMPORTANT NOTICE TO PERSONS ON MEDICARE
THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS
This is not Medicare Supplement Insurance This insurance provides limited benefits if you meet the conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance.
This insurance duplicates Medicare benefits when it pays:
* the benefits stated in the policy and coverage for the same event is provided by Medicare
Medicare generally pays for most or all of these expenses.
Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include:
* hospitalization
* physician services
* hospice
* other approved items and services
Before You Buy This Insurance xx Check the coverage in all health insurance policies you already have.
xx For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company.
xx For help in understanding your health insurance, contact your state insurance department or state senior insurance counseling program.
[Pa.B. Doc. No. 96-760. Filed for public inspection May 10, 1996, 9:00 a.m.]
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