This chapter covers the subjects of Medicare supplement policies and Medicare options that were not listed in the previous chapter. Medicare supplement insurance provides benefits that are not available through standard Medicare plans. You should be able to describe what benefits are offered and what a person would have to do in order to receive this extra coverage.
TERMS TO KNOW
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Attained age — the insured's age at the time the policy is issued or renewed
Benefit period — a period of time during which benefits are paid under the policy Cost-sharing — sharing of expenses between the insured and the insurance company through deductibles, copays and coinsurance Enrollee — a person enrolled in a health insurance plan, an insured (doesn't include dependents of the insured) HMO — Health Maintenance Organization: a prepaid medical service plan in which specified medical service providers contract with the HMO and which focus on preventive care Network provider — a provider who enters into a contractual arrangement with other providers to provide medical services to the network subscribers Nonforfeiture benefit — a cash or insurance benefit received by a policyholder who no longer wishes to make payments after making premium payments for at least the minimum period Outline of coverage — a document required in all health insurance policies that provides a full coverage disclosure to the applicant | |
A. Medicare Supplements
1. Purpose
Medicare Supplement plans, referred to as Medigap, are policies issued by private insurance companies that are designed to fill in some of the gaps in Medicare. These plans are designed to fill the gap in coverage attributable to Medicare’s deductibles, copayment requirements, and benefit periods. These plans are not administered through the federal Social Security program, as is Medicare, but instead are sold and serviced by private insurers and HMOs. These policies must meet certain requirements and must be approved by the state department of insurance. Medicare Supplement policies pay some or all of Medicare’s deductibles and copayments.
Under the Omnibus Budget Reconciliation Act of 1990 (OBRA), Congress passed a law that authorized the NAIC to develop a standardized model for Medicare supplement policies. This model requires Medigap plans to meet certain requirements as to participant eligibility and the benefits provided. The purpose of this law was to eliminate questionable marketing practices and to provide consumers with a degree of protection and to standardize the protection afforded.
2. Open Enrollment
Anyone who qualifies for Medicare may also purchase a Medicare Supplement and pay the necessary premium for those additional benefits. Under OBRA, Medicare supplement insurance may not discriminate in pricing or be denied on the basis of an applicant’s health status, claims experience, receipt of health care or medical condition. An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigaponce they first sign up for Medicare Part B. In essence, to buy a Medigap policy, the applicant must generally have both Medicare Part A and Part B.
In the state of New York, applicants must be accepted at all times throughout the year for any Medicare supplement insurance benefit plan available from an issuer.
3. Standardized Medicare Supplement Plans
In order to standardize the coverage provided under Medicare supplement policies, the NAIC has developed standard Medicare Supplement benefit plans which are identified with the letters A through N. The core benefits found in Plan A must be offered in all the plans, and the other plans have a variety of additional benefits. Plan A must be offered by any insurer marketing Medigap plans, while the other plans are optional.
Once a person becomes eligible for Medicare supplement plans, and during the open enrollment period, coverage is offered on a guaranteed issue basis. In these situations, an insurance company must do the following:
- Sell the patient a Medicare supplement policy;
- Cover all pre-existing conditions incurred more than 6 months from effective date of coverage; and
- Not charge more for a supplement policy because of past or present health problems.
Core Benefits
Medicare Supplement Plan A provides only the core benefits. The core benefits, also known as basic benefits, cover the following:
- Part A coinsurance/copayment (NOT Part A deductible);
- Part A hospital costs up to an additional 365 days after Medicare benefits are used up;
- Part A hospice care coinsurance/copayment;
- Part B coinsurance/copayment;
- The first 3 pints of blood ("blood deductible" for Parts A and B).
Additional Benefits
In addition to Plan A, which offers only the core benefits, most insurers also offer some or all of the additional plans. Insurers are not allowed to change the benefits offered in these supplemental plans, nor may they change the designation letter of any of the plans.
Plan B – Core benefits plus Medicare Part A deductible.
Plan C – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, Medicare Part B deductible and the foreign travel benefit.
Plan D – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, and the foreign travel benefit.
Plan F – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, Medicare Part B deductible, 100% of Medicare Part B excess charges, and the foreign travel benefit.
Plan G – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, 100% of Medicare Part B excess charges, and the foreign travel benefit. This plan must pay for services of activities of daily living (ADL) that Medicare doesn't cover.
Plans E, H, I and J are no longer available. These plans will remain in force for those insureds who purchased them when they were still available.
Medicare Supplement Plans K and L are lower premium plans with higher out-of-pocket costs. The core benefits are different in these 2 plans as well:
- Approved hospital costs for the copayments for days 61 through 90 in any Medicare benefit period.
- Approved hospital costs for the copayments for lifetime reserve days 91 through 150.
- Approved hospital costs for an additional 365 days after all Medicare benefits are used.
- 50% of charges for the first 3 pints of blood in Plan K, 75% of charges for the first 3 pints of blood in Plan L.
- 50% of Part B coinsurance amount in Plan K, 75% of Part B coinsurance amount in Plan L.
- 50% of hospice cost-sharing and respite care expenses for Part A in Plan K, 75% of hospice cost-sharing and respite care expenses for Part A in Plan L.
Plan K includes 50% of the Medicare Part A deductible and 50% of skilled nursing facility coinsurance.
Plan L includes 75% of the Medicare Part A deductible and 75% of skilled nursing facility coinsurance.
Plans M and N provide benefits similar to Plan D, but the co-pays and deductibles might be different.
This table outlines the benefits provided under each of the Medigap plans available.
4. New York Regulations and Required Provisions
Standards for Marketing
The following are standards for marketing Medicaresupplement policies:
- Every insurance company must establish marketing procedures to assure that any comparison of policies by their agents will be fair and accurate;
- Insurance companies must have marketing guidelines to assure that excessive amounts of insurance are not sold or issued;
- There must be established a formula to determine whether a replacement policy contains benefits clearly and substantially greater than those under the policy being replaced;
- The first page of the policy must contain the "Notice to buyer: This policy may not cover all of your medical expenses."
Insurance companies must make every reasonable effort to determine whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the type and amounts that they currently own. The insurance company must establish procedures to verify that they are complying with these rules.
Twisting, high-pressure tactics and misleading advertising may not be utilized. The terms MedicareSupplement, Medigap, Medicare Wrap-Around and similar words may not be used unless the policy is in full compliance of the law.
Permitted Compensation Arrangements
An insurance company may pay compensation to an agent for the sale of a Medicare Supplement policy. The term compensation includes any kind of monetary and nonmonetary remuneration or payment relating to the sale or renewal of the policy, including but not limited to bonuses, gifts, prizes, awards and finder's fees.
The first year commission may not be more than 200% of the renewal commission for servicing the policy in the second year. The commission provided in renewal years must be the same as the commission in the second year, and must be provided for at least 5 renewal years.
Insurance companies may not pay greater compensation to agents, and agents or producers may not receive compensation greater than the renewal compensation payable by the replacing insurance company if a policy is being replaced unless the benefits of the new policy are clearly and substantially greater than the benefits provided by the policy being replaced.
Appropriateness of Recommended Purchase or Replacement
Any agent selling a Medicare Supplement must make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. The application for Medicare Supplement insurance must include a statement signed by the agent that read as follows: "I have reviewed the current health insurance coverage of the applicant and found that additional coverage of the type and amount applied for is appropriate for the applicant's needs."
Any sale of a Medicare Supplement policy that would give the insured more than one such policy is prohibited.
Replacement
Every insurance company’s application for MedicareSupplement insurance must contain a question designed to determine if the applicant has another Medicare Supplement policy or if this policy will replace any other accident and health policy. The application must also ask if the applicant is eligible for Medicaid and advise the applicant that counseling services may be available. It is the responsibility of the issuers, brokers and agents to ensure that Medicare Supplement policies are not being unnecessarily replaced.
If replacement is involved, the insurance company or its agent must furnish the applicant with the “Notice Regarding Replacement” before issuing or delivering the policy. The insurance company must retain one copy, signed by the applicant and the agent. The “Notice Regarding Replacement” must inform the applicant of the 30-day free-lookprovision of the policy.
If a Medicare supplement policy replaces another, the replacing insurance company must waive any time periods on pre-existing conditions, waiting periods, elimination periods and probationary periods in the new Medicare supplement policy to the extent that these time periods were met under the policy being replaced. If a Medicare Supplement policy replaces another that has been in effect for 6 months or more, the replacing policy may not have any time requirement on pre-existing conditions, waiting periods, elimination periods, or probationary periods for the benefits similar to those contained in the original policy.
Disclosure Statement
Medicare supplement policies must include a renewal or continuation provision that is appropriately captioned and on the first page of the policy. It must include any reservation by the insurance company of the right to change premiums and any automatic renewal premium increases based on the policyholder's age (attained age policies). Issue age policies do not allow an increase in premium based on age; they allow an increase in premiums only because of an increase in benefits.
Insurers must also provide an outline of coverage with each Medicare supplement policy that clearly informs the applicant or insured of the basic nature and provisions of the policy.
Medicare supplement policies must not provide for the payment of benefits based on standards described as usual and customary, reasonable and customary, or similar words.
Insurers that issue Medicare supplement insurance policies in New York are required to provide the disclosure statement to the applicant along with the application. The disclosure statement must be issued in clear language and format, in at least 12-point type, and must consist of 4 parts, all of which must be prominently displayed:
- A cover page;
- Premium information — on the cover page or immediately following it;
- Disclosure pages; and
- Charts displaying the features of each benefit plan offered by the insurer, displayed on the cover page.
Renewability
The guaranteed issue provision stipulates that during the 6-month period after an individual eligible for Medicare coverage because of age signs up for Part B, an insurance company issuing this type of plans cannot
- Deny or condition the issuance or effectiveness of any Medicare Supplement policy available for sale in this state;
- Discriminate in the pricing of that policy because of the health status, claims experience, receipt of health care or medical condition of an applicant;
- Impose an exclusion of benefits based on a pre-existing condition under the policy.
This does not prevent the exclusion of benefits during the first 6 months based upon a pre-existing condition for which the policyholder received treatment or was otherwise diagnosed during the 6 months before it became effective.
Each Medicare supplement policy must be guaranteed renewable, which means that the insured has the right to continue the Medicare supplement insurance coverage in force by paying the premiums. The issuer has no right to make any changes to policy provisions, except for the following:
- Change benefits designed to cover cost-sharing amounts under Medicare to coincide with any changes in the applicable deductibles and copayments;
- Amend the policy to meet the minimum standards for Medicare supplement insurance; or
- Revise premium rates on a class basis.
B. Other Medicare Options for Individuals
1. Disabled Individuals
The Omnibus Budget Reconciliation Act of 1990 requires that large group health plans (100 employees or more) must provide primary coverage for disabled individuals under age 65 who are not retired.
2. Individuals with Kidney Failure
The Omnibus Budget Reconciliation Act of 1990 as amended by the Balanced Budget Act of 1997 requires the employer health plan to provide primary coverage for 30 months for individuals with end-stage renal (kidney) disease before Medicarebecomes primary.
3. Employer Group Health Plans
Employees Age 65 or Older
If an employee is still employed upon reaching age 65, federal laws require allowing the employee to remain on the group health insurance rolls and to defer Medicare coverage until retirement. The employee has the right to reject the company's plan and elect Medicare but the company can offer no incentives for switching to Medicare.
If an employee remains on the group plan and signs up for Medicare, in groups of less than 20 employees, Medicare will be the primary coverage. In groups of 20 or more, the group coverage will be primary over Medicare.
C. Chapter Recap
This chapter explained health insurance available to senior citizens and special needs individuals: Medicare, Medicare Supplements, Medicaid, and Long-term Care. Let's recap some of the key points:
MEDICARE
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Basics
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Part A
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Part B
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Part C
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Part D
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Primary, Secondary Payor
| For individuals eligible for Medicare coverage who continue to work, the employer’s health plan would be primary coverage while Medicare would be secondary coverage |
MEDICARE SUPPLEMENT POLICIES
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Basics
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Coverage
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| OTHER OPTIONS FOR INDIVIDUALS WITH MEDICARE | |
| Employer Group Health Plans |
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| Medicaid |
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LONG-TERM CARE
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Policies
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Levels of Care
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| Coverage and Benefits |
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| Required Provisions |
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Chapter Complete