NAIC Medigap Modernization

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NAIC Medigap Modernization

• 13th Annual SHIP Directors Conference
• Doubletree Hotel - Arlington
• June 12, 2007

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NAIC Medigap Modernization Effort

• Alan Heumann (Louisiana SHIP Director, member of
  NAIC Medigap Modernization Subgroup)
• Jane Sung (NAIC Staff, Senior Issues Task Force
  and Medigap Modernization Subgroup)
• Alethia Jackson (Americas Health Insurance
  Plans, member of NAIC Medigap Modernization
  Subgroup)

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Overview

• Goal of todays panel Preview the NAICs
  Medigap Modernization Proposal.
• 1) Review Medigap Insurance
• 2) Share NAICs proposed changes
• 3) Discuss Implementation

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What is Medigap

• Also known as Medicare Supplement Insurance, over
  10.2 million Medicare beneficiaries have a
  Medigap policy.
• Health insurance policies that cover the gaps
  in traditional Medicare.
• Sold by private insurance companies.
• Medigap plans are Standardized.
• 14 standardized policies A-L, except
  Massachusetts, Minnesota, Wisconsin.

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History of Medigap

• Medigap standardized plans were developed by the
  National Association of Insurance Commissioners
  (NAIC) through a unique delegation by Congress
  under OBRA 90.
• The NAIC developed a model regulation through a
  work group process outlined in federal law. The
  work group included state regulators, industry
  representatives, consumer groups, and other
  interested parties.
• The NAICs model for state law was incorporated
  by reference into federal law and became part of
  the federal minimum standards for Medicare
  Supplement Insurance.
• States (other than WI, MA, MN) are required to
  adopt the NAIC model to retain regulatory
  authority of these plans.
• WI,MA, and MN retained the standardized plans
  that were being sold in those states prior to
  OBRA-90.

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Medigap Coverage

• Currently there are 14 standardized plans.
• This includes the 10 plans (A-J) created in 1990.
  
• Plus two high deductible options (for F and
  J)(1,860 deductible in 2007)
• Plus two new plans mandated by Congress in the
  Medicare Modernization Act (K and L).
• Medicare SELECT

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Medigap Coverage
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Medigap Coverage

• All carriers must offer at least Plan A, which
  contains just the Basic benefits.Currently
  this covers
• Medicare Part A hospital coinsurance(days 61-90
  and 91-150)
• Medicare Part B coinsurance
• Blood deductible (first 3 non-replaced pints)
• 365 Additional inpatient days

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Medigap Coverage

• In addition to the Basic benefits, Plans B-L
  include additional coverage options, such as
• Medicare deductibles and coinsurance
• Preventive Care not covered by Medicare
• Emergency care while traveling outside U.S.
• Excess charges
• Limited at-home recovery
• Skilled Nursing Facility (SNF) coinsurance

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Medigap Coverage

• Until 2005, Plans H, I, and J also included
  limited outpatient prescription drug coverage.
• Plans K and L, as prescribed by the MMA
• Require coverage for Part A and B expenses at 50
  and 75 respectively
• Include an annual Out-of-Pocket limit, indexed
  for inflation (K-4,140 L-2,070 in 2007)
• Cover hospice cost-sharing
• Do not cover the Part B deductible or first 3
  pints of blood.

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NAIC Medigap Modernization

• Why did the NAIC undertake this modernization
  effort?

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NAIC Medigap Modernization

• The Medicare Prescription Drug
• Improvement and Modernization Act of 2003
• (MMA) included conference report language
• to encourage the National Association of
• Insurance Commissioners (NAIC) to
• modernize the Medigap market.

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NAIC Medigap Modernization

• Congressional Request
• The conference report stated that, in
• addition to creating K and L, NAIC should
• consider much broader changes to the
• Medigap market that will effectuate reduced
• premiums and more rational coverage
• policies that create incentives for
• appropriate utilization of services.

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NAIC Medigap Modernization

• Statutory Authority
• Social Security Act Sec. 1882 (p)(1)(E) If
  benefitsunder this title are changed and the
  Secretary determines, in consultation with the
  NAIC, that changes in the 1991 NAIC Model
  Regulation or 1991 Federal Regulation are needed
  to reflect such changes, the preceding provisions
  of this paragraph shall apply to the modification
  of standards previously established in the same
  manner as they applied to the original
  establishment of such standards.
• Since OBRA 1990, Congress and the Social Security
  Act have frequently provided the NAIC with the
  opportunity to use the NAIC Model Medigap
  Regulation as the vehicle for promulgating
  mandatory federal Medigap standards most
  recently with the MMA.

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NAIC Medigap Modernization

• The NAIC decided to review the Medigap plans to
  determine if there were change s that could be
  made to the benefit packages in response to
  changes in the marketplace since standardization.

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NAIC Medigap Modernization

• Congressional Request Apparent Authority NAIC
  began a review of Medigap packages and the NAIC
  Medigap Model Regulation.

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NAIC Medigap Modernization

• Who was part of the Modernization process?
• NAIC (State insurance regulators)
• CMS
• Consumer Advocates (including AARP, Center for
  Medicare Advocacy, California Health Advocates)
• Industry representatives (including AHIP, other
  individual companies)
• Other interested parties

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NAIC Medigap Modernization
Notes Basic for plans A-G, M, and N now
include 100 Part B Coinsurance. Coverage for the
Part B Deductible is not included in plans M and
N. Note that the Basic package for plans K
and L differ from the Basic package for Plans
A-G, M, and N.
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NAIC Medigap Modernization

• The NAIC proposal eliminates Four Medigap Plans
  
• Plans H, I, and J are eliminated. (No more Rx)
• Plan E is eliminated. (Became same as D once
  other benefit changes were made)

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NAIC Medigap Modernization

• Modernization of Benefits
• Eliminates the At-Home Recovery Benefit
• Creates a new Hospice Benefit as part of Basic
• Eliminates Preventive Care Benefit
• Replaces the 80 Part B Excess Charges Benefit to
  a 100 benefit

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NAIC Medigap Modernization

• The Modernization proposal adds new plan options
• New Plan M with increased cost-sharing (50 of
  the Part A Deductible, no coverage for Part B
  Deductible)
• New Plan N with new co-pay structure (10 copay
  for physician visits, 50 copay for ER) and no
  coverage for Part B Deductible

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NAIC Medigap Modernization

• Overall
• Reduces offerings from 14 to 11.
• Adds to Basic Benefits
• Provides additional cost-sharing options with
  reduced premiums
• Eliminates underutilized benefits.
• Retains most popular plan and benefit choices.
• Makes changes needed after the MMA prohibited
  sale of plans with Rx.

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NAIC Process

• Developed by the Medigap Modernization Subgroup
  (included insurance department regulators,
  industry, consumer groups, CMS, etc)
• Exposed for public comment for a 30 day period
  ending February 5, 2007.
• Adopted by the NAIC Senior Issues Task Force
• Adopted by the NAIC Health and Managed Care (B)
  Committee
• Approved by the NAIC Plenary / Executive
  Committee on March 12, 2007.

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Implementation

• Where Do We Go From Here Why
• are the changes to the Model
• Regulation the NAIC Modernization
• Proposal?

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Authority Question

• Authority to Adopt Changes Through the
• Regulatory Process
• CMSs Office of General Counsel Insufficient
  existing authority to implement changes -- Need
  additional Congressional authority.

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Implementation

• Therefore the NAIC approved the proposed
  changes to the Model Regulation, but they will
  not be adopted until federal legislative action
  is taken.
• Once the federal government acts, the Model will
  be automatically adopted by the NAIC, without
  subsequent action by the organization.
• The old NAIC model is still in force. States
  should NOT act to adopt the new changes.

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Implementation

• Once federal action is achieved,
• implementation can begin
• Congress grants the authority to proceed with
  changes.
• The Secretary of HHS determines, in consultation
  with the Association, that changes to the NAIC
  Model Regulation are needed.
• The NAIC adopts the changes.

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Implementation

• Once approved on Federal level, the new benefit
• packages become part of the Federal Minimum
• Standards to be applied in each state
• States will have to consider
• Promulgation of new state regulations
• Whether changes need approval of state
  legislature
• Consider timing of legislative sessions
• Effective dates / timeline and
• Company and Consumer Materials

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Implementation

• Timeframes for State Regulators to Consider
• Timing of the regulatory process to promulgate
  changes
• Timeframe for review and approval of new form
  filings by Medigap Carriers prior to the
  effective date of the changes
• Timeframe for review and approval of new Medigap
  marketing materials
• Possible transition period between the effective
  date and the date that companies have to be in
  compliance with new requirements in order to
  allow time for approval of new filings so that
  there is no gap in the market.

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Implementation

• Companies will have to consider
• Effective dates / timelines
• Filing of new forms and marketing materials and
• Educating agents and brokers about changes to the
  benefit packages

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Implementation

• Consumers / Policyholders
• Once adopted, new purchasers would choose from
  the modernized benefits/plans.
• Existing policyholders would not be affected if
  they want to keep their policies.
• However the proposal does include transition
  standards to permit companies to offer existing
  policyholders the opportunity to leave their
  current policy and purchase a new policy.

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Implementation

• Things for SHIPs to be aware of
• Plan letters no E, H, I, J
• Old plans / New plans
• Old benefits / New benefits
• Implementation dates
• New or Innovative benefits
• No changes in enrollment rules
• No changes in guaranteed issue rules

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Questions Answers