Bulletin 1999-3

TO:All companies authorized to transact Medicare Supplement business in the state of Kansas

FROM: Kathleen Sebelius, Commissioner of Insurance

SUBJECT: Revisions to the Kansas Medicare Supplement Regulation K.A.R. 40-4-35

DATE: June 10, 1999

The purpose of this bulletin is to advise all companies authorized to transact Medicare supplement business in the state of Kansas of the changes made to K.A.R. 40-4-35. These changes were first adopted by temporary regulation effective April 29,1999. The hearing for the regulation was held on Wednesday, May 26, 1999, during which testimony was heard.

It is important to note that the language contained in K.A.R. 40-4-35 changed from the language contained in the temporary regulation. A summary of the changes follows: Editing changes were made to make some sections more clear; Section 11(A) is not adopted by reference; The reference to Kansas Administrative Regulations was changed to Kansas Insurance Department Administrative Rules and Regulations; Section 12(B)(2) is not adopted by reference and the phrase "under this part" is deleted. The regulation becomes effective fifteen days after publication in the Kansas Register.

The Federal Balanced Budget Act of 1997 made several changes which are reflected in the July 1998 NAIC Model Medicare Supplement Regulation. Highlighted below are some of those changes. In addition, we have pointed out all the variations the Kansas Insurance Department made to the July 1998 NAIC Model Medicare Supplement Regulation.

Those individuals eligible for guarantee issue and the products to which those individuals are entitled are outlined below:

• The individual is enrolled as an employee, retiree, or dependent covered under an employee welfare benefit plan including federal or state plans that is primary or secondary to Medicare and the plan terminates. The individual is guaranteed Plan A, B, C or F offered by any issuer.

• The individual is enrolled as an employee, retiree, or dependent covered by an employee welfare benefit plan including federal or state plans that is primary or secondary to Medicare and that plan ceases to provide "some or all" health benefits. The individual is guaranteed Plan A,B,C or F offered by any issuer.

• The individual is enrolled with a Medicare+Choice organization under a Medicare+Choice plan and there are circumstances permitting discontinuance of the

• The individual is enrolled with an eligible organization under a contract under Section 1876 and the enrollment ceases under the same circumstances that permit discontinuance of an individual’s election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act. The individual is guaranteed Plan A,B,C or F offered by any issuer.

• The individual is enrolled in a similar organization operating under demonstration project authority, effective for periods before April 1, 1999 and enrollment ceases under the same circumstances that would permit discontinuance of an individual’s election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act. The individual is guaranteed Plan A,B,C or F offered by any issuer.

• The individual is enrolled with an organization under an agreement under Section 1833(a)(1)(A) (health care prepayment plan) and the enrollment ceases under the same circumstances that would permit discontinuance of an individual’s election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act. The individual is guaranteed Plan A,B,C or F offered by any issuer.

• The individual is enrolled with an organization under a Medicare Select policy and the enrollment ceases under the same circumstances that would permit discontinuance of an individual’s election of coverage under the first sentence of Section 1851(e)(4) of the federal Social Security Act. The individual is guaranteed Plan A,B,C or F offered by any issuer.

• The individual is enrolled under a Medicare supplement policy and the enrollment ceases because of insolvency of the issuer or bankruptcy of the non-issuer organization. The individual is guaranteed Plan A, B,C or F offered by any issuer.

• The individual is enrolled under a Medicare supplement policy and the enrollment ceases because of other involuntary termination of coverage or enrollment under the policy. The individual is eligible for Plan A, B,C or F offered by any issuer.

• The individual is enrolled under a Medicare supplement policy and the enrollment ceases because the issuer of the policy substantially violated a material provision of the policy. The individual is guaranteed Plan A, B,C or F offered by any issuer.

• The individual is enrolled under a Medicare supplement policy and the enrollment ceases because the issuer, or an agent or other entity acting on the issuer’s behalf, materially misrepresented the policy’s provisions in marketing the policy to the individual. The individual is guaranteed Plan A, B, C or F offered by any issuer.

• The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare+Choice organization under a Medicare+Choice plan, any eligible organization under a contract under Section 1876, any similar organization operating under demonstration project authority, an organization under an agreement under section 1833(a)(1)(A), or a Medicare Select policy. The individual is guaranteed the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, if not so available, a Medicare supplement policy which is Plan A, B,C or F offered by any issuer.

• The subsequent enrollment under a Medicare+Choice plan is terminated by the enrollee during any period within the first twelve months of such enrollment. The individual is guaranteed the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a Medicare supplement policy which is Plan A, B,C or F offered by any issuer.

• The individual, upon first becoming enrolled in Medicare Part B for benefits, enrolls in a Medicare+Choice plan and disenrolls from the plan by not later than twelve months after the effective date of enrollment. The individual is guaranteed any Medicare supplement offered by any issuer.

• The individual loses eligibility for health benefits under Title XIX of the Social Security Act (Medicaid). The individual is guaranteed any Medicare supplement offered by any issuer.

In addition, two other variations to the NAIC Model Medicare Supplement Regulation are as follows:

• On the insured’s first policy anniversary date on or after April 29, 1999, individuals under age 65 who became eligible for Medicare by reason of disability or End Stage Renal Disease (ESRD) prior to April 28, 1996 and who enrolled in any Medicare supplement plan prior to October 28, 1996, cannot be charged premium rates for any Medicare supplement plan offered by the insurer that exceed the issuer’s premium rates charged for such plan to individuals who are age 80. On the insured’s first policy anniversary date on or after April 29, 2000, individuals under age 65 who became eligible for Medicare by reason of disability or End Stage Renal Disease (ESRD) prior to April 28, 1996 and who enrolled in any Medicare supplement plan prior to October 28, 1996, cannot be charged premium rates for any Medicare supplement plan offered by the insurer that exceed the issuer’s premium rates charged for such plan to individuals who are age 65.

• An issuer shall not apply more stringent underwriting standards to individuals under the age of 65 who are applying for Medicare supplement coverage outside of their open enrollment period than would be applied to individuals over the age of 65 who are applying for coverage outside of their open enrollment period.

Following are a few frequently asked questions and the responses regarding the changes as required by the Federal Balanced Budget Act of 1997.

1. If an individual is covered under an employee welfare benefit plan and the employer has notified employees that the employee contribution level will be increasing does this qualify the person as a guarantee issue individual?

No. The changes to K.A.R. 40-4-35 state that the plan either has to terminate or the plan has to cease providing some or all of the health benefits in order for a person to be guarantee issued a policy. Since the plan is not terminating and the level of health benefits has not changed the person is not an eligible guarantee issue individual.

2. Do the changes to K.A.R. 40-4-35 require the terminating insurance company to issue a notification to the insured outlining their guarantee issue rights?

It is imperative that your company notify the agents certified by your company to write Medicare supplement business in Kansas of these changes. In addition, it is of importance for your company to notify those individuals working internally of these revisions to K.A.R. 40-4-35, including but not limited to the marketing personnel, underwriting personnel, and claims personnel. The Kansas Insurance Department will expedite the review of forms and rates submitted to comply with the revisions.

Any questions regarding this Bulletin may be directed to the Kansas Insurance Department, Accident and Health Division, 420 SW 9^th Street, Topeka, Kansas 66612, (785) 296-7850.