Medicare Supplement Insurance Minimum Standards

PURPOSE: This rule provides for the reasonable standardization of coverage and simplification of terms and benefits of Medicare supplement policies; facilitates public understanding and comparison of these policies; eliminates provisions contained in the policies which may be misleading or confusing in connection with the purchase of the policies or with the settlement of claims; and provides for full disclosure in the sale of accident and sickness insurance coverages to persons eligible for Medicare by reason of age. (1) Applicability and Scope. Except as otherwise specifically provided, this rule shall— (A) Apply to all Medicare supplement policies and subscriber contracts delivered or issued for delivery in this state on or after November 1, 1989; (B) Apply to all certificates issued under group Medicare supplement policies or subscriber contracts, which certificates have been delivered or issued for delivery in this state; and (C) Not apply to a policy or contract of one (1) or more employers or labor organizations, or of the trustees of a fund established by one (1) or more employers or labor organizations or combination of them, for employees or former employees or a combination of them, or for members or former members or combination of them of the labor organizations. (2) Definitions. For the purposes of this rule— (A) Applicant means— 1. In the case of an individual Medicare supplement policy or subscriber contract, the person who seeks to contract for insurance benefits; and 2. In the case of a group Medicare supplement policy or subscriber contract, the proposed certificate holder; (B) Certificate means any certificate issued under a group Medicare supplement policy, which certificate had been delivered or issued for delivery in this state; and (C) Medicare supplement policy means a group or individual policy of accident and sickness insurance or a subscriber contract of a health services corporation or health maintenance organization (HMO) 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 by reason of age. (3) Policy Definitions and Terms. No insurance policy or subscriber contract may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy unless that policy or subscriber contract contains definitions or terms which substantially conform to the requirements of this section. (A) Accident or accidental injury shall be defined to employ result language and shall not include words which establish an accidental means test or use words such as external, violent, visible wounds or similar words of description or characterization. 1. The definition shall not be more restrictive than the following: Injury(ies) for which benefits are provided means accidental bodily injury sustained by the insured person which is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while insurance coverage is in force. 2. The definition may provide that injuries shall not include injuries for which benefits are provided or available under any Workers’ Compensation, employer’s liability or similar law or motor vehicle no-fault plan, unless prohibited by law. (B) Benefit period or Medicare benefit period shall not be defined as more restrictive than that defined in the Medicare program. (C) Convalescent nursing home, extended care facility or skilled nursing facility shall be defined in relation to its status, facilities and available services. 1. A definition of such home or facility shall not be more restrictive than one requiring that it— A. Be operated pursuant to law; B. Be primarily engaged in providing, in addition to room and board accommodations, skilled nursing care under the supervision of a duly licensed physician; C. Provide continuous twenty-four (24) hour-a-day nursing service by care under the supervision of a registered graduate professional nurse (RN); and D. Maintain a daily medical record of each patient. 2. The definition of such home or facility may provide that the term not be inclusive of— A. Any home, facility or part of it used primarily for rest; B. A home or facility used for the aged or for the care of drug addicts or alcoholics; or C. A home or facility primarily used for the care and treatment of mental diseases or disorders, or custodial or educational care. (D) Health care expenses means expenses of HMOs associated with the delivery of health care services which are analogous to incurred losses of insurers. These expenses shall not include: 1. Home office or overhead costs; 2. Advertising costs; 3. Commissions and other acquisition costs; 4. Taxes; 5. Capital costs; 6. Administrative costs; or 7. Claims processing costs. (E) Hospital may be defined in relation to its status, facilities and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals. 1. The definition of the term hospital shall not be more restrictive than one requiring that the hospital— A. Be an institution operated pursuant to law; B. Be primarily and continuously engaged in providing or operating, either on its premises or in facilities available to the hospital on a prearranged basis and under the supervision of a staff of duly licensed physicians, medical, diagnostic and major surgical facilities for the medical care and treatment of sick or injured persons on an inpatient basis for which charge is made; and C. Provide twenty-four (24) hour nursing service by or under the supervision of RNs. 2. The definition of the term hospital may state that the term shall not be inclusive of— A. Convalescent homes or convalescent, rest or nursing facilities; B. Facilities primarily affording custodial, educational or rehabilitative care; C. Facilities for the aged, drug addicts or alcoholics; or D. Any military or veterans’ hospital or soldiers’ home or any hospital contracted for or operated by any national government or agency of it for the treatment of members or ex-members of the armed forces, except for services rendered on an emergency basis where a legal liability exists for charges made to the individual for those services. (F) Medicare shall be defined in the policy. Medicare may be substantially defined as The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 or Title I, Part I of P.L. 89-97, as enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, or words of similar import. (G) Medicare-eligible expenses shall mean health care expenses of the kinds covered by Medicare, to the extent recognized as reasonable by Medicare. Payment of benefits by insurers for Medicare-eligible expenses may be conditioned upon the same or less restrictive payment conditions, including determinations of medical necessity as are applicable to Medicare claims. (H) Mental or nervous disorders shall not be defined more restrictively than a definition including neurosis, psychoneurosis, psychopathy, psychosis or mental or emotional disease or disorder of any kind. (I) Nurses may be defined so that the description of nurse is restricted to a type of nurse, such as an RN, a licensed practical nurse (LPN) or a licensed vocational nurse (LVN). If the words nurse, trained nurse or registered nurse are used without specific instruction, then the use of the terms requires the insurer to recognize the services of any individual who qualifies under the terminology in accordance with the applicable statutes or administrative rules of the licensing or registry board of the state. (J) Physician may be defined by including words such as duly qualified physician or duly licensed physician. The use of these terms requires an insurer to recognize and to accept, to the extent of its obligation under the contract, all providers of medical care and treatment when these services are within the scope of the provider’s licensed authority and are provided pursuant to applicable laws. (K) Sickness shall not be defined to be more restrictive than the following: sickness means sickness or disease of an insured person which first manifests itself after the effective date of insurance and while the insurance is in force. The definition may be further modified to exclude sickness or diseases for which benefits are provided under any Workers’ Compensation, occupational disease, employer’s liability or similar law. (4) Prohibited Policy Provisions. (A) No insurance policy or subscriber contract may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy if the policy or subscriber contract limits or excludes coverage by type of illness, accident, treatment or medical condition, except as follows: 1. Foot care in connection with corns, calluses, flat feet, fallen arches, weak feet, chronic foot strain or symptomatic complaints of the feet; 2. Mental or emotional disorders, alcoholism and drug addiction; 3. Illness, treatment or medical condition arising out of— A. War or act of war (whether declared or undeclared); participation in a felony, riot or insurrection; or service in the armed forces or auxiliary units of it; B. Suicide or attempted suicide (while sane) or intentionally self-inflicted injury; and C. Aviation; 4. Cosmetic surgery, except that cosmetic surgery shall not include reconstructive surgery when that service is incidental to or follows surgery resulting from trauma, infection or other diseases of the involved part; 5. Care in connection with the detection and correction by manual or mechanical means of structural imbalance, distortion or subluxation in the human body for purposes of removing nerve interference and the effect of it, where that interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column; 6. Treatment provided in a governmental hospital; benefits provided under Medicare or other governmental program (except Medicaid), any state or federal Workers’ Compensation, employer’s liability or occupational disease law or any motor vehicle no-fault law; services rendered by employees of hospitals, laboratories or other institutions; services performed by a member of the covered person’s immediate family and services for which no charge is normally made in the absence of insurance; 7. Dental care or treatment; 8. Eyeglasses, hearing aids and examination for the prescription or fitting of these; 9. Rest cures, custodial care, transportation and routine physical examinations; and 10. Territorial limitations outside the United States. Provided, however, supplemental policies may not contain, when issued, limitations or exclusions of the type enumerated in paragraph (4)(A)1., 2., 5., 9. or 10. that are more restrictive than those of Medicare. Medicare supplement policies may exclude coverage for any expense to the extent of any benefit available to the insured under Medicare. (B) No Medicare supplement policy may use waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions. (C) The terms Medicare supplement, Medigap and words of similar import shall not be used unless the policy is issued in compliance with this rule. (D) No Medicare supplement insurance policy, contract or certificate in force in the state shall contain benefits which duplicate benefits provided by Medicare. (5) Minimum Benefit Standards. No insurance policy or subscriber contract may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy which does not meet the following minimum standards. These are minimum standards and do not preclude the inclusion of other provisions or benefits which are not inconsistent with these standards: (A) General Standards. The following standards apply to Medicare supplement policies and are in addition to all other requirements of this rule: 1. A Medicare supplement policy may not deny a claim for losses incurred more than six (6) months from the effective date of coverage for a preexisting condition. The policy may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six (6) months before the effective date of coverage; 2. A Medicare supplement policy may not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents; 3. A Medicare supplement policy shall provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with these changes; 4. A noncancelable, guaranteed renewable or noncancelable and guaranteed renewable Medicare supplement policy shall not— A. Provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium; or B. Be cancelled or nonrenewed by the insurer solely on the grounds of deterioration of health; and 5. Termination of a Medicare supplement policy shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicted upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits; (B) Minimum Benefit Standards. 1. Coverage for either all or none of the Medicare Part A inpatient hospital deductible amount. 2. Coverage for the daily copayment amount of Medicare Part A eligible expenses for the first eight (8) days per calendar year incurred for skilled nursing facility care. 3. Coverage for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) under Medicare Part A unless replaced in accordance with federal regulations. 4. Until January 1, 1990, coverage for twenty percent (20%) of the amount of Medicare-eligible expenses under Part B regardless of hospital confinement, subject to a maximum calendar year out-of-pocket deductible of two hundred dollars ($200) of expenses and to a maximum benefit of at least five thousand dollars ($5000) per calendar year. Effective January 1, 1990 coverage for the copayment amount of Medicare-eligible expenses excluding outpatient prescription drugs under Medicare Part B regardless of hospital confinement up to the maximum outof-pocket amount for Medicare Part B after the Medicare deductible amount. 5. Effective January 1, 1990, coverage under Medicare Part B for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells as defined under federal regulations) unless replaced in accordance with federal regulations. 6. Effective January 1, 1990, coverage for the copayment amount of Medicare-eligible expenses for covered home intravenous (I.V.) therapy drugs (as determined by the secretary of Health and Human Services) subject to the Medicare outpatient prescription drug deductible amount, if applicable. 7. Effective January 1, 1990, coverage for the copayment amount of Medicare-eligible expenses for outpatient drugs used in immunosuppressive therapy subject to the Medicare outpatient prescription drug deductible if applicable; and (C) Medicare-Eligible Expenses. Medicare-eligible expenses shall mean health care expenses of the kinds covered by Medicare to the extent recognized as reasonable by Medicare. Payment of benefits by insurers for Medicare-eligible expenses may be conditioned upon the same or less restrictive payment conditions, including determinations of medical necessity as are applicable to Medicare claims. (6) Standards for Claims Payment. (A) Every entity providing Medicare supplement policies or contracts shall comply with all provisions of Section 4081 of the Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203). (B) Compliance with the requirements set forth in subsection (6)(A) must be certified on the Medicare Supplement Insurance Experience exhibit attached to the annual statement. (C) No policy or certificate may contain a provision reducing benefit payments due to the existence of other Medicare supplement coverage. Coverage must provide that insureds are entitled to a return of all premiums paid for duplicate coverage with the same insurer. (7) Loss Ratio Standards. (A) Medicare supplement policies shall return to policyholders in the form of aggregate benefits under the policy, for the entire period for which rates are computed to provide coverage, on the basis of incurred claims experience or incurred health care expenses where coverage is provided by an HMO on a service rather than reimbursement basis and earned premiums for that period and in accordance with accepted actuarial principles and practices— 1. At least seventy-five percent (75%) of the aggregate amount of premiums earned in the case of group policies, or direct response policies issued on or after January 1, 1990; and 2. At least sixty percent (60%) of the aggregate amount of premiums earned in the case of individual policies. (B) All filings of rates and rating schedules shall demonstrate that actual and expected losses in relation to premiums comply with the requirements of this section. (C) Every entity providing Medicare supplement policies in this state annually shall file its rates, rating schedule and any supporting documentation requested by the director, including ratios of incurred losses to earned premiums by number of years of policy duration, demonstrating that it is in compliance with the previously mentioned applicable loss ratio standards and that the period for which the policy is rated is reasonable in accordance with accepted actuarial principles and experience. For the purposes of this section, policy forms shall be deemed to comply with the loss ratio standards if—i) for the most recent year, the ratio of the incurred losses to earned premiums for policies or certificates which have been in force for three (3) years or more is greater than or equal to the applicable percentages contained in this section and ii) the expected losses in relation to premiums over the entire period for which the policy is rated comply with the requirements of this section. An expected third-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three (3) years. (D) In determining compliance with the loss ratio standards in subsections (7)(A)— (C) actual and expected incurred losses shall not include: 1. Loss adjustment expense incurred in settling claims; or 2. Claim reserves that would be found unreasonably excessive or unacceptable by actuarial standards, procedures and practices. (E) As soon as practicable, but no later than sixty (60) days prior to the effective date of Medicare benefit changes required by the Medicare Catastrophic Coverage Act of 1988, every insurer, health care service plan or other entity providing Medicare supplement insurance or contracts in this state (except employers subject to the requirements of Section 421 of the Medicare Catastrophic Coverage Act of 1988) shall file with the director in accordance with the applicable filing procedures of this state— 1. Appropriate premium adjustments necessary to produce loss ratios as originally anticipated for the applicable policies or contracts. These supporting documents, as necessary to justify the adjustment, shall accompany the filing. Every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits to a resident of this state pursuant to Section 2 of the Medicare Supplement Insurance Minimum Standards Model Act shall make whatever premium adjustments are necessary to produce an expected loss ratio under the policy or contract that will conform with minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the insurer, health care service plan or other entity for those Medicare supplement insurance policies or contracts. No premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described in this rule should be made with respect to a policy at any time other than upon its renewal date or anniversary date. Premium adjustments shall be in the form of refunds or premium credits and shall be made no later than upon renewal if a credit is given, or within sixty (60) days of the renewal date or anniversary date if a refund is provided to the premium payer. Premium adjustments shall be calculated for the period commencing with Medicare benefit changes; and 2. Any appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement insurance modifications necessary to eliminate benefit duplications with Medicare. Any such riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or contract. (8) Filing Requirements for Out-of-State Group Policies. Every insurer providing group Medicare supplement insurance benefits to a resident of this state pursuant to Section 2 of the Medicare Supplement Insurance Minimum Standards Model Act shall file a copy of the master policy and any certificate used in this state in accordance with the filing requirements and procedures applicable to group Medicare supplement policies issued in this state; provided, however, that no insurer shall be required to make a filing earlier than thirty (30) days after insurance was provided to a resident of this state under a master policy issued for delivery outside this state. (9) Prohibited Compensation for Replacement with the Same Company. No entity shall provide compensation to its agents or other producers which is greater than the renewal compensation which would have been paid on an existing policy if the existing policy is replaced by another policy with the same company where the new policy benefits are substantially similar to the benefits under the old policy and the old policy was issued by the same insurer or insurer group. (10) Required Disclosure Provisions. (A) General Rules. 1. Medicare supplement policies shall include a renewal, continuation or nonrenewal provision. The language or specifications of the provision must be consistent with the type of contract to be issued. The provision shall be appropriately captioned, shall appear on the first page of the policy and clearly shall state the duration, where limited or renewability and the duration of the term of coverage for which the policy is issued and for which it may be renewed. 2. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured or exercises a specifically reserved right under a Medicare supplement policy, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, all 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 issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured unless the benefits are required by the minimum standards for Medicare supplement insurance policies or if the increased benefits or coverage is required by law. Where 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. A Medicare supplement policy which provides for the payment of benefits based on standards described as usual and customary, reasonable and customary or words of similar import shall include definitions and explanations of the terms in its accompanying outline of coverage. 4. If a Medicare supplement policy contains any limitations with respect to pre-existing conditions, the limitations must appear as a separate paragraph of the policy and be labeled as preexisting condition limitations. 5. Medicare supplement policies or certificates shall have a notice prominently printed on the first page of the policy or certificate, or attached to it stating in substance that the policyholder or certificate holder shall have the right to return the policy or certificate within thirty (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 for any reason. 6. Insurers issuing accident and sickness policies, certificates or subscriber contracts which provide hospital or medical expense coverage on an expense-incurred or indemnity basis, other than incidentally, to a person(s) eligible for Medicare by reason of age shall provide to all applicants a Medicare supplement Buyer’s Guide in the form developed jointly by the National Association of Insurance Commissioners and the Health Care Financing Administration. Delivery of the Buyer’s Guide shall be made whether or not the policies, certificates or subscriber contracts are advertised, solicited or issued as Medicare supplement policies as defined in this regulation. Except in the case of direct response insurers, delivery of the Buyer’s Guide shall be made to the applicant at the time of application and acknowledgment of receipt of the Buyer’s Guide shall be obtained by the insurer. Direct response insurers shall deliver the Buyer’s Guide to the applicant upon request but not later than at the time the policy is delivered. (B) Notice Requirements. 1. As soon as practicable, but no later than thirty (30) days prior to the annual effective date of any Medicare benefit changes, every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits to a resident of this state shall notify its policyholders, contract holders and certificate holders of modifications it has made to Medicare supplement insurance policies or contracts in a format acceptable to the director. For the years 1989 and 1990, and if prescription drugs are covered in 1991, the notice shall be in a format prescribed by the director or in the format prescribed in Appendices A, B and C if no other format is prescribed by the director. In addition, the notice shall— A. Include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement insurance policy or contract; and B. Inform each covered person as to when any premium adjustment is to be made due to changes in Medicare. 2. The notice of benefit modifications and any premium adjustments shall be in outline form and in clear and simple terms to facilitate comprehension. 3. The notices shall not contain or be accompanied by any solicitation. (C) Outline of Coverage Requirements for Medicare Supplement Policies. 1. Insurers issuing Medicare supplement policies or certificates for delivery in this state shall provide an outline of coverage to all applicants at the time application is made and, except for direct response policies, shall obtain an acknowledgment 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 must accompany the policy or certificate when it is delivered, and contain the following statement, in no less than twelve (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. (D) Notice Regarding Policies or Subscriber Contracts Which Are Not Medicare Supplement Policies. Any accident and sickness insurance policy or subscriber contract other than a Medicare supplement policy, disability income policy, basic, catastrophic or major medical expense policy, single premium nonrenewable policy or other policy identified in subsection (1)(B) of this rule, issued for delivery in this state to persons eligible for Medicare by reason of age shall notify insureds under the policy or subscriber contract that the policy or subscriber contract is not a Medicare supplement policy. The notice shall either be printed or attached to the first page of the outline of coverage delivered to insureds under the policy or subscriber contract or, if no outline of coverage is delivered, to the first page of the policy, certificate or subscriber contract delivered to insureds. The notice shall be in no less than twelve (12)- point type and shall contain the following language: “THIS (POLICY, CERTIFICATE OR SUBSCRIBER CONTRACT) IS NOT A MEDICARE SUPPLEMENT (POLICY OR CONTRACT). If you are eligible for Medicare, review the Medicare Supplement Buyer’s Guide available from the company.” (11) Requirements for Replacement. (A) Application forms shall include a question designed to elicit information as to 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 containing such a question may be used. (B) Upon determining that a sale will involve replacement, an insurer, other than a direct response insurer or its agent, shall furnish the applicant, prior to issuance or delivery of the Medicare supplement policy or certificate, a notice regarding replacement of accident and sickness coverage. One (1) copy of the notice shall be provided to the applicant and an additional copy signed by the applicant shall be retained by the insurer. A direct response insurer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of accident and sickness coverage. In no event, however, will this notice be required in the solicitation of accident-only and single premium nonrenewable policies. (C) The notice required by subsection (11)(B) for an insurer, other than a direct response insurer, shall be provided in substantially the form as indicated in Appendix B. (D) The notice required by subsection (11)(B) for a direct response shall be as indicated in Appendix C. (12) Filing Requirements for Advertising. Every insurer, health care service plan or other entity providing Medicare supplement insurance or benefits in this state shall provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio or television medium to the (director) of insurance of this state for review or approval by the (director) to the extent it may be required under state law. (13) Separability. If any provision of this rule or the application of it to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of that provision to other persons or circumstances shall not be affected by it. (14) Effective Date. This rule shall be effective on November 1, 1989. AUTHORITY: sections 376.864, 376.869, 376.874 and 376.879, RSMo (Cum. Supp. 1989). This rule was previously filed as 4 CSR 190-14.113. Emergency rule filed July 18, 1989, effective Sept. 1, 1989, expired Oct. 31, 1989. Original rule filed July 18, 1989, effective Nov. 1, 1989. *Original authority: 376.864, RSMo (1989), amended 1992; 376.869 and 376.874, RSMo (1989); and 376.879, RSMo (1989), amended 1992.