Senior Market Regulatory Issues for Agents 2005

1
Senior Market Regulatory Issues for
Agents 2005
2

• Disclaimer Persons who did not attend the
  seminar would not have the benefit of the full
  presentation and must be cautious about
  generalizations of the statements in the slides

3
Medicare Comparison of Options
4
Medicare Cost

• Similar to Medicare Advantage HMO but
• Covers more out of network
• 90 day absence from service area requires
  disrenrollment
• Only disputes concerning Medicare services
  subject to grievance process
• No required disclosure for QA or UR
• Medica is only carrier currently offering

5
Medicare Selectmanaged care for Medicare
supplement plans

• Select plans have provider networks
• Avera and Sioux Valley are the Medicare Select
  plans in South Dakota
• No Select plans currently that restrict coverage
  for doctors
• Must go to hospital networks except if emergency
  or network care unavailable

6
Medicare Select RulesExceptions to network
requirements

• Unforeseen medical emergencies
• Not appropriate given special circumstances such
  as time and distance to go to network provider
• Care not available through network providers

7
Medicare Select disenrollment rights

• During 1st 12 months can disenroll and can get
  same plan from carrier on a nonnetwork or
  nonSelect basis

8
Medicare Advantage alternatives

• Coordinated care plans i. e. HMOs with or w/o
  POS, PSOs, PPOs
• Medical Savings account plans
• private fee for service (only ones currently
  marketed)
• Multiple new applications for Medicare
  Advantage pending with CMS

9
Medicare Advantage

• Accept Medicare risk plus can add additional
  benefits
• 3 plans in SD currently
• United Healthcare (FFS)
• Sterling (FFS)
• Humana (FFS)
• Contract with CMS - set benefits and premiums
• Med sup on top of Medicare Advantage would be
  duplication

10
Permitted discontinuance of Medicare Advantage

• Plans certification terminated or no longer
  providing coverage in area
• Moved out of area
• Plan violated material provision of contract
• Material misrepresentation of plan
• Other situations as approved by Secretary of HHS

11
Special Medicare Advantage replacement issues

• Medicare Advantage effective date coincides with
  the 1st of the month depending upon whether apply
  before or after the 10th of the month
• If current Med sup insurer wont adjust paid to
  date, then either duplication or gaps in coverage
  will frequently occur when switch to Med Advantage

12
Medicare supplement open enrollment

• Federal law regarding open enrollment/ guarantee
  issue/portability became effective 7/1/98
• SD state rules also effective 7/1/98
• State rules require open enrollment but go beyond
  minimum federal requirements
• Any termination of coverage under an employer
  group plan triggers open enrollment

13
Portability during open enrollment

• Applicable to persons in open enrollment period
  of 6 months after Part B enrollment
• If continuous creditable coverage
• 6 months or more?no pre x waiting period
• less than 6 months?reduce pre x by length of
  prior creditable coverage

14
Creditable Coverages

• employer plans
• individual plans
• Medicare/Medicaid/Champus/ IHS
• church plans
• Peace Corp plan
• another states risk pool
• other public plans
• college plans

15
Eligible Persons

• If eligible person applies within 63 days of
  loss of coverage
• May require submit evidence of termination with
  the med sup application
• Nondiscrimination in pricing based upon health
  status, claims experience, receipt of health
  care, or medical condition
• May not use a pre x waiting period if have 6
  months of prior creditable coverage

16
Persons eligible for guaranteed issue

• Employee plan terminates or benefits end (broader
  than federal)
• Permitted discontinuance of Medicare Advantage,
  Medicare risk, Medicare Select, and other allowed
  prepayment plans
• Loss of med sup if conditions met
• Opting out of a Medicare Advantage after 12
  months

17
Those entitled to Plan A,B,C or F (and soon K and
L)

• Eligible persons due to
• loss of employee benefits
• opting out of Medicare Advantage
• opting out of Medicare risk or Medicare Select
• plan insolvency
• involuntary loss of med sup coverage
• issuer materially violated policy
• agent materially misrepresented policy

18
Other plans for eligible persons

• 1st enrolled in med sup
• then enrolled in Medicare Advantage or Medicare
  risk
• and disenrolls during 1st 12 months
• ?same plan as before

• When first eligible for Part A, enrolls in
  Medicare Advantage
• And disenrolls during 1st 12 months
• ?Any plan offered by any issuer

19
Disabled Medicare population Medicare
supplements

• Eligible for open enrollment
• Within 6 months of Medicare eligibility
• To any plan offered by any Medicare supplement
  carrier
• At a rate no higher than Medicare supplement rate
  for age 75
• Only for those that became eligible for Medicare
  on or after 7/1/99

20
Major changes in Medicare supplement coming soon
due to Medicare Modernization Act (MMA)

• Medicare Choice becomes Medicare Advantage or
  Part C
• New standardized plan changes 1/1/06
• K and L are new plans
• H, I, and J will delete outpatient prescription
  benefit but they can be sold with it until then
• Medicare prescription drug benefit will be Part D

21
MMA requirements

• Choices for insureds with current policies that
  provide prescription drug benefits
• 1. Keep policy as is but cannot enroll in
  Medicare Part D (Medicare prescription drug
  benefit)
• OR
• 2. Remove outpatient prescription drug benefits
  from current policy and enroll in Part D
• This applies to both standardized and
  pre-standardized plans

22
MMA requirementsBenefit configurations

• Core benefit changes
• With respect to 100 coverage after exhaustion of
  lifetime reserve days for 365 days, payment by
  issuer must be considered by provider as payment
  in full

• Additional benefit changes
• Basic and extended prescription drug benefits may
  continued to be sold only until 1/1/06
• Preventive screening changes
• Would include any innovative benefit plan designs

23
MMA requirementsRenewal

• A med sup policy may not
• terminate 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
• be cancelled or nonrenewed by the insurer solely
  on the grounds of deterioration of health

24
Effects of MMA on existing policies

• A person does not have to give up their existing
  H, I or J or delete the prescription drug
  benefits from those plans provided they do not
  enroll in Part D
• If enrolled in Part D, the enrollee must have an
  amended policy deleting the prescription drug
  benefit from the Medicare supplement policy or
  buy a new policy without that benefit
• Premiums must be adjusted accordingly
• Part D enrollees also have a guaranteed issue
  right into Plans A,B,C, F,K, or L offered by the
  same carrier
• Prestandardized insureds are treated the same as
  standardized if they have prescription drug
  benefits they will be treated the same way as
  those with H, I, or J.

25
MMA requirementsGuaranteed issue

• New eligibles Those that enroll in Part D during
  initial enrollment and were covered under a
  policy with outpatient prescription drug
  coverage, terminates that coverage and applies
  for an A, B,C, F, K or L policy with the same
  insurer
• Those that previously qualified for guaranteed
  issue for A,B,C, or F now also have K and L to
  choose from

26
Medicare supplement duplication prohibited

• No overlap allowed
• Make sure the paid to date of existing matches
  the requested effective date of new policy
• no mid term cancellations required by prior
  carrier

27
Duplication of Medicare Supplements

• Effective date must be designed to coincide with
  paid to or expiration date of prior policy
• Agent must make diligent effort to avoid overlaps
  and gaps in coverage
• Look at existing policy to determine effective
  date and premium notices to determine lapse dates
• If no paperwork, have the insured get the
  information from the company

28
20061343. Overinsurance.

• A health insurance policy issued to a Medicaid
  recipient or to a person who already possesses
  insurance substantially covering the same risk
  and paying the same coverage is overinsurance. If
  the director determines after investigation that
  overinsurance exists, the duplicating insurer is
  liable for a full refund less benefits paid. The
  duplicating policy is void as of the date of
  issue. Any sale of Medicare supplement coverage
  that will provide an individual more than one
  Medicare supplement policy or certificate is
  prohibited.

29
20061343.01. Misrepresentation

• An agent is presumed to have violated SDCL
  58-33-5 when the agent knowingly solicits,
  procures, or sells to any prospective insured who
  has an existing policy in force a Medicare
  supplement policy, long term care policy, or
  other type of health insurance policy designed
  specifically to be marketed to individuals who
  qualify for Medicare because of their age unless
  the agent informs the insured in writing either
  separately or on the face of the application that
  the new policy is intended to replace the
  existing policy. The agent must ensure that the
  prospective insured understands that the policy
  is a replacement of an existing policy.
• An agent who engages in the sale or solicitation
  of such policies when the purchase is not
  reasonable or prudent or is otherwise not in the
  prospective insured's best interest has engaged
  in an unfair or deceptive trade practice in
  violation of SDCL 58-33-2.

30
20061343.02. Determination of suitability

• To determine whether the sale or solicitation of
  policies described in 20061343.01 is
  reasonable, prudent, or in the prospective
  insured's best interest, the agent, if any, shall
  examine the totality of the prospective insured's
  circumstances, including the following
• (1) The prospective insured's financial
  condition, i.e., is the person on a fixed income,
  premium cost
• (2) The prospective insured's need for insurance
  at the time of sale, i.e., existing policies,
  insured's finances and
• (3) The values, benefits, and costs of the
  prospective insured's existing insurance program,
  if any, when compared to the values, benefits,
  and costs of the recommended policy or policies.

31
Suitability of Medicare supplements

• Responsibility on agent to ensure suitable sale
  regardless of circumstance
• Fair comparisons required
• Replacements without significant cost or benefit
  differentials automatically suspect
• Incontestability

32
20061403 The following are general
requirements for health and life insurance
solicitation

• (5)  A solicitation may not directly or
  indirectly make unfair or incomplete comparisons
  of policies or benefits or comparisons of
  noncomparable policies of other insurers may not
  disparage competitors, their policies, services,
  or business methods and may not disparage or
  unfairly minimize competing methods of marketing
  insurance
• (7)  In recommending the purchase of a policy to
  a consumer, an agent must determine at the time
  of sale that the placement of the policy is not
  inappropriate for the consumer. The agent shall
  determine the appropriateness of a recommended
  purchase of insurance by examination of the
  totality of the particular consumer's
  circumstances, including the following
•                (a)  The consumer's financial
  condition, i.e., if a person is on a fixed
  income, premium costs
•                (b)  The consumer's need for
  insurance at the time of sale, i.e., existing
  policies, insured's finances
•                (c)  The values, benefits, and
  costs of the consumer's existing insurance
  program, if any, when compared to the values,
  benefits, and cost of the recommended policy or
  policies.

33
How to avoid Med sup duplication

• Verify the paid-to or expiration date of existing
  policy
• Look at billings/premium payments
• Have customer check with company
• Look at existing policy
• Request an effective date that coincides with the
  prior policy paid to date

• Explain need to match up dates to applicant
• Basis for asking for billings etc.
• Explain there is law against issuing duplicate
  coverage

34
Med sup comparisons

• Fair and accurate comparison of benefits is
  required
• You can not make a legitimate comparison unless
  you look at the existing policy
• This applies to any life or health policy
  solicitation that involves a replacement
• 2 Standardized Med sups may be the only exception
  

• Do not state
• F for an F is better benefits
• A small differential in is the reason of
  reduced premiums when switching rating
  methodologies
• Better benefits just because older is
  pre-standardized
• Better service is increased benefit

35
Proposed Med sup rules

• Clarifies that renewal commission limit on
  replacements also includes loans and advances
• Clarifies that any duplication regardless of the
  number of days is impermissible
• Disallows attained age rating

36
Clean Sheeting Prohibited for any kind of policy

• Omission of health history from an application
• Serious issue that could result in significant
  penalties against an agent who clean sheets an
  application
• Some insurers are having insureds complete, not
  agent

37
Limited Benefit plans

• Can be sold in addition to Med sup but still must
  be suitable
• The more coverage the person has the less
  probability that it is suitable
• Outline of Coverage required
• 12 month pre ex effective for all new plans
  issued after 7/1/97

38
Med Sup Advertising and solicitation taboos

• Scare tactics
• Tendency or capacity to mislead
• Understandability-average person standard
• Misleading statistics

39
Customer loansRequirements applicable to all
insurance customers

• Not absolutely prohibited but
• Must be written agreement
• Must be filed with the Division
• If not filed with Division or re-paid ? licensing
  consequences and could be considered insurance
  fraud, and if so, could be prosecuted

40
Long-Term Care Insurance
41
Types of Plans

• Non-tax qualified plans
• May have tax implications
• Tax qualified plans
• More difficult to collect benefits

42
Tax Qualified Plans Benefit Requirements

• Assessment at least yearly that you are
  chronically ill
• Expected to be unable to perform 2 ADLs for 90
  days
• Activities of daily living (ADL) include bathing,
  eating, toileting, dressing, continence, and
  transferring
• Plan of care
• S.D. rules provide that insured has option to use
  personal physician or allow plan or designated
  care coordinator

43
Tax Qualified Plans - Issues

• Does the plan require a 90 day period of being
  chronically ill?
• HIPAA ?90 days not waiting period
• HIPAA ?expected to be ill versus actually ill
• Does the policy require that the plan or a
  designated care coordinator develop the plan of
  care?
• S.D. requires that it must be at the option of
  the insured and it can be the personal physician
• How are certifications of chronic illness
  handled?
• HIPAA requires that cant be longer than 12
  months
• Assessment of chronic illness by plan or provider
  of patients choice
• DOIs rule requires choice

44
Medical Necessity

• Appropriate consistent cant be omitted
  without adversely affecting patient
• Some level of care plans without ADLs
• Insureds physician may certify
• Old plans with prior hospitalization
• Plans that use ADLs

45
Minimum Benefit Standards

• 2 years of nursing home coverage
• 1 year of assisted living center coverage
  (licensed by Dept of Health)
• 100 day maximum elimination period
• If ADL based, 6 mandatory of which no more than ½
  standard
• Alzheimers and senile dementia
• COLA mandatory offer

46
Optional LTC Benefits to Consider

• Home health care
• Adult day care
• Respite care
• Cost of living adjustments (required to be
  offered)
• Multiple variations typically available
• Minimum nonforfeiture

47
Cost of Living Adjustments (COLAs)

• Mandated offer
• Offered at time of purchase
• Offer must include an alternative to purchase a
  plan that pays a specific of actual or UCR and
  doesnt include a maximum indemnity amount or
  limit

48
COLA Requirements

• Required offer based upon either the medical cost
  component of CPI or at least 5 annually for 10
  years or to age 85 whichever is sooner
• Other intervals allowed (3 years or less)
• Others may also be offered if approved
• No requirement to have benefits exceed 500K

49
Home Health Care (HHC)

• Not a required benefit, but if offered the
  following are not allowed
• Requiring institutional care in lieu of receiving
  HHC
• Limiting services to RN or LPN
• Excluding personal service from HH aide
• Limiting services to Medicare approved HHC
  agencies
• At least 1 year of benefits
• Not the same as alternative care where company
  has option

50
Elderly LTC Applicants

• If age 80 or older, plan must do one of the
  following
• Report of physical examination
• Assessment of functional capability
• Attending physicians statement
• Copies of medical records

51
LTC Lapse Requirements

• Cant be issued unless there is designation of at
  least one person in addition to insured to
  received lapse notices
• Alternative to designation written waiver
• Insurer must notify insured every 2 years of
  option to change designation

52
LTC Applications Questions

• Notice about incorrect answers (disclaimers)
• Clear and unambiguous questions
• If ask about medication, must ask for listing
• If insurer knew or should have known about
  medications, can not rescind
• Replacement questions required

53
LTC Incontestability

• Rescission reporting to DOI
• lt6 months material misrepresentation
• 6-24 months material pertains to condition
  for which benefits sought
• gt24 months insured knowingly intentionally
  misrepresented material facts
• If benefits paid before rescission then benefits
  may not be recovered by company

54
LTC Marketing Standards on Plans Carriers

• Establish marketing procedures to
• Ensure fair comparison
• Ensure excessive insurance isnt sold
• Inquire and make every reasonable effort to
  identify other health insurance
• Establish auditable procedures

55
LTC Rate Stabilization

• Relaxed up front actuarial justifications but
  increased consumer standards for rate increases
• Higher loss ratios required for rate increases
• Encourages adequate pricing at time of sale
• Disclosure of rate increase histories required
  during solicitation of LTC products
• Contingent benefit on lapse

56
LTC Agent Responsibilities

• Suitability requirements similar to Medicare
  supplements
• Ex will save person money, increase benefits by
  a replacement or in need of more coverage through
  additional policy
• Need to question whether person is candidate for
  LTC insurance based upon assets
• Do not use phrase granny goes to jail with
  clients

57
LTC Advertising Solicitation Taboos

• Scare tactics
• Tendency or capacity to mislead
• Understandability average person standard
• Misleading statistics

58
Bed Reservation Benefits

• New law (SB 139) allows temporary leave from LTC
  facility of up to 14 days if policy does not
  otherwise specify
• Applies to waiver of premium provisions as well
• Proposed rule 20062126.01
• Current plans not affected by SB 139
• Carriers must advise whether or not benefits are
  provided within 30 days of notice that LTC
  facility being utilized

59
Overinsurance Proposed ARSD 20062153.05

• Policy issued when insurance substantially
  covering the same risk and paying the same
  coverage
• Any sale of coverage that will result in
  overinsurance is prohibited
• Duplicating insurer must remove the duplication
  and refund or credit premiums toward future
  coverage accordingly
• The duplicating policy is void as of the issue
  date until the prior coverage terminated

60
Other proposed rules

• Signed acknowledgements on life illustrations
  exception to be submitted with application for
  electronic illustrations
• Proposed rules would allow electronic versions to
  be mailed to applicant no later than 3 business
  days after application is submitted to insurer
• This longer time frame will also apply to life
  replacement notices
• Life insurance exclusions can apply to insured
  while committing a felony

61
20061343. Overinsurance.

• A health insurance policy issued to a Medicaid
  recipient or to a person who already possesses
  insurance substantially covering the same risk
  and paying the same coverage is overinsurance. If
  the director determines after investigation that
  overinsurance exists, the duplicating insurer is
  liable for a full refund less benefits paid. The
  duplicating policy is void as of the date of
  issue. Any sale of Medicare supplement coverage
  that will provide an individual more than one
  Medicare supplement policy or certificate is
  prohibited.