Medicare Supplement COMPLIANCE 101 Presenter: Constance D. Rogers, - - PowerPoint PPT Presentation

2016 Issues & Trends in Medicare Supplement Insurance

Medicare Supplement COMPLIANCE 101

Presenter: Constance D. Rogers, FSA, MAAA

2016 Issues & Trends in Medicare Supplement Insurance

GOALS

• Overview of MedSup compliance issues for

beginners

• Looking at the topic from 4 perspectives:

– Actuarial – Forms – Operations – Marketing

2016 Issues & Trends in Medicare Supplement Insurance

What Coverage Can Be Issued?

• “Cards to Play” in each State

– Plan Level (11 standardized “plans”)

• A, B, C, D, F, F-HD, G, K, L, M, N

– Type Level (4 “types”)

• Individual Standard
• Group Standard
• Individual Select
• Group Select

2016 Issues & Trends in Medicare Supplement Insurance

• Form Level

– Up to 5 forms allowed per Plan / Type for variations in: Innovative Benefits Marketing Method Underwriting Method Covering Disabled Beneficiaries

2016 Issues & Trends in Medicare Supplement Insurance

11 Plans x 4 Types x 5 Variants 220 options theoretically BUT ... very few carriers actually offer more than 2 forms per Plan / Type, and few carriers offer all 11 Plans.

2016 Issues & Trends in Medicare Supplement Insurance

Grandfathered States

• Three states do not use the Standardized Plan

definitions:

• WI
• MA
• MN

2016 Issues & Trends in Medicare Supplement Insurance

What Underwriting is Allowed?

Age 65

• “aging in”
• NO UNDERWRITING during

Open Enrollment (first 6 months after enrollment in Medicare Part B) Ages 66+

• In most states, FULL

UNDERWRITING is allowed unless Guaranteed Issue circumstances (63d window).

• In Anniversary Rule state

(MO) or Birthday Rule states (CA, OR), NO UNDERWRITING for 30 days around annual policy anniversary or birthday

2016 Issues & Trends in Medicare Supplement Insurance

Underwriting (cont’d)

• Under-age 65

– Eligible for Medicare due to Disability or ESRD – Many states mandate Open Enrollment period – States differ regarding whether all Medicare- eligible u65s or just Disabled u65s (excluding ESRDs) – Full Underwriting is allowed outside the Open Enrollment period (or in states with no OE mandate).

2016 Issues & Trends in Medicare Supplement Insurance

What Rates are Allowed?

• Age Rating Structure

– Most states allow Iss Age, Attd Age, or Community – Some states disallow Attd Age (e.g., FL, AZ, GA, MO, ID) – Some states require Community (e.g., AR, CT)

• Gender Rating

– Generally allowed, but some states (e.g., CA) require uni-gender rating

2016 Issues & Trends in Medicare Supplement Insurance

Rating (cont’d)

• Tobacco Rating

– Generally allowed – Some states disallow Tobacco rates for OE / GI issues

• Family Status

– Discounts may be given for individuals living in community or as members of a multi-policy household

2016 Issues & Trends in Medicare Supplement Insurance

Rating (cont’d)

• Underwriting Class

– Preferred / Standard / Substandard may be assigned outside of OE / GI windows. – Inside OE / GI window, Preferred rates must be used if offered.

• Geographic Region

– Allowed within most states and is generally used where allowed.

2016 Issues & Trends in Medicare Supplement Insurance

Rating (cont’d)

• Under-65s

– States vary:

• Some require full subsidization
• Others allow full rate loads
• Many in between

– Some states allow separate rates for Disabled- u65s and ESRD-u65s.

2016 Issues & Trends in Medicare Supplement Insurance

Rating (cont’d)

• Can the rate structure be changed?

– Yes, but need to demonstrate actuarial equivalency between the 2 structures and guarantee that future rate increases will be the same for both structures. – If not, => discontinuance => 5-year blackout.

• Annual Filing

– Required, even if rates are not changing

2016 Issues & Trends in Medicare Supplement Insurance

What MLRs are Required?

• Individual: 65% lifetime and py3+
• Group: 75% lifetime and py3+
• Same for Standard and Select
• Primary enforcement via annual rate filings
• Secondary enforcement via annual refund

filing reports

2016 Issues & Trends in Medicare Supplement Insurance

What Compensation is Allowed?

• Three requirements:

– Commission for py1 <= 200% of py2 – Renewal commission runs for at least 5 years* – Only renewal commissions payable for replacement policies

• Some states have unique requirements

– e.g. IN no variation by plan

• r by age/gender

2016 Issues & Trends in Medicare Supplement Insurance

What’s the Annual Regulatory Burden?

• Rates: Annual rate filings

– Must file each year even if not changing rates – Approval needed in all states

• NAIC MedSup Experience Exhibits

– Annual reporting of experience for the calendar year – Included at the back of the Annual Statement – Filed for each unique State / Plan / Type combination – Combine across 1990 and 2010 product eras – Usually due to accounting department in late January each yr – Easily automated with actuarial review and sign-off

2016 Issues & Trends in Medicare Supplement Insurance

What’s the Annual Regulatory Burden? (cont’d)

• Refund Filings

– Benchmark Loss Ratio and Refund Filing Reports – Compares ITD loss ratio to a calculated benchmark loss ratio – Filed for each State / Plan / Type – Combined across 1990 and 2010 product eras – Credibility adjustments are included – Must be submitted by May 31st of each year – Easily automated with actuarial review and sign-off – Should form a feedback loop to your pricing actuaries