Medicare Supplement Insurance *****

Required provisions (minimum standards)

Medicare supplements and long term care insurance were originally discussed in chapter 21.

With both Medicare supplements and Long-Term Care policies, six months is repeatedly mentioned when discussing preexisting conditions - and you need to remember that time frame.

General concepts: (make sure you understand these)*****

In both cases, the insurance company can look back six months before the application date and if the person received advice or treatment for any preexisting issues then the insurance company can exclude coverage for that issue for up to the first six months of the policy.

The exceptions to the six month exclusion (meaning preexisting issues can not be excluded):

• During Medicare open enrollment (discussed below), and
• When replacing long term care policies, if there's less than sex months between the first and second policy then the new company can not impose a new six-month exclusion.

******Both Medicare supplements and long term care plans have grace periods and free-look provisions of 30 days. Basically, for these two types of health policies (which are usually purchased by seniors), anything having to do with premiums is 30 days.

More specifically:

If an individual had creditable coverage (such as through group insurance before the person retired) for at least six months before applying for a Medicare supplement, then the insurance company selling the supplement can not exclude any preexisting conditions.

Medicare supplements sold in Florida must do the following:

• The supplement has to have a definition of "Medicare eligible expense" that covers at least as much as Medicare,
• The benefits paid by the supplement have to keep pace with changes to deductible and coinsurance amounts in Medicare, and
• Be written in simplified language, to be easily understood by purchasers.

Open enrollment periods *****

If the individual enrolls in a Medicare supplement during the appropriate open enrollment periods, the insurance company may not exclude coverage for preexisting conditions at all. Recall, though, that to qualify for Medicare in the first place, an individual either needs to be at least 65 or, at any age, have kidney disease or be on SSDI benefits.

However, no matter how one qualifies for Medicare, the trigger that begins the open enrollment period is the same. Once an individual is enrolled in both Medicare A and B, the open enrollment window is opened. During that time, the insurance company is not allowed to exclude coverage for any preexisting conditions. If a person buys the supplement after their open enrollment period is closed, the insurance company will consider the individual's health and may exclude coverage for preexisting conditions for up to the first six months, or possibly not even issue the Medicare supplement.

 

Advertising and marketing standards

A little common sense goes a long way here. The advertising rules say the insurance company and agent must basically be nice and be fair. The concepts are what you should understand unless noted with bold or underlining. Here is a rundown:

All advertisements have to clearly state that the purpose of the advertisement is to solicit insurance. Comparisons between two supplements have to be fair and accurate. Don't sell excessive insurance, and definitely don't sell anyone duplicate coverage (more than one supplement policy to the same person). To make sure you don't sell excessive or duplicate coverage you always have to ask the customer if they already have a supplement or other health coverage. If you are replacing a supplement, then reasonable efforts have to be made to determine the appropriateness of the recommended replacement. Also, you are not allowed to sell a supplement to anyone with Medicare C (which makes sense because the supplement is filling in the gaps of Medicare A and B, and if you have C then you no longer have A and B). Finally, you may only sell Medicare supplements to someone on Medicaid if Medicaid will pay for part or all of the premium of the Medicare supplement.

The following must be displayed prominently by type, stamp, or the other appropriate means, on the first page of the outline of coverage and policy:

"Notice to buyer: This policy may not cover all of the costs associated with medical care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."

Just as has been mentioned several times previously, the following acts and practices are prohibited:

• Twisting******: Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies to take out a policy of insurance with another insurer.
• High-pressure tactics: Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.
• Cold lead advertising: Making use directly or indirectly of any method of marketing that fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

 

Permitted compensation arrangements

Commissions for the first-year sale of a Medicare supplement are not allowed to be more than twice the compensation (200%) paid for selling or servicing a policy in the second year. This provision is meant to discourage churning of Medicare supplements. However, if the insurance company pays commission of 15% or less of the policy premium, they may elect not to pay any commission for the renewal or replacement of a Medicare supplement.

The commission rate for the renewal years must be the same as that of the second year and must be provided for at least five renewal years. The insurance company is not allowed to pay compensation for replacements that is greater than the compensation for renewals. This is meant to discourage twisting.

Multiple policies *****

Generally speaking, an agent may not sell a Medicare supplement to someone who already has a Medicare supplement, unless the policy being sold will replace the policy that's already owned. So you can sell a supplement to someone who already has one as long as the person indicates in writing that the policy replaces the other policy and indicates an intent to terminate the policy being replaced when the new policy becomes effective. The insurance company replacing the existing coverage will also have to forward the statement to the insurer whose policy is being replaced.