99-03: Compliance With Changes To Medicare Supplement Rules
* This bulletin was repealed by 08-05
To: All Medicare Supplement Issuers
From: Keith A. Wenzel, Director, Missouri Department of Insurance
Re: Compliance With Changes To Medicare Supplement Rules
Date: May 11, 1999
Regulation 20 CSR 400-3.650 has been adopted effective June 30, 1999.
Each Medicare supplement policy issuer should be fully aware of the changes to this rule which are required for it to be consistent with changes to the model regulation adopted by the National Association of Insurance Commissioners. These changes are necessary to comply with requirements of the Balanced Budget Act of 1997 (BBA). Your company is dealing with similar BBA changes in all states in which you operate. This Bulletin was prepared to alert you to two significant changes that are to take place in Missouri in addition to the BBA revisions:
1. Revisions to section (10) of this regulation provide that, on and after the effective date of this regulation, all Medicare supplement policyholders who terminate a Medicare supplement policy within 30 days of the annual policy anniversary are entitled to obtain any policy of the same plan from any issuer that markets that plan. These provisions establish an open enrollment right for policyholders which allows them the right to obtain a policy of the same plan (A through J) from any other issuer offering that same plan. These provisions are effective June 30, 1999.
Issuers that reject applicants who or eligible because of these provisions or impose unreasonable requirements for validation of the annual anniversary date will be considered in violation of this regulation. Any one document, such as a renewal notice, billing notice, policy or certificate of coverage that confirms coverage was in force through the latest annual policy period or renewal date will be considered sufficient proof of the existence of qualifying coverage.
2. On and after January 1, 2000, section (13) of this regulation will prohibit Medicare supplement issuers from issuing policies that utilize a rating methodology based on the "attained age" of the insured person. Issuers that must change the rating methodology for any currently approved policy forms or that file for a rate increase after June 1, 1999, should refer to the attached materials for assistance.
Please file any necessary revisions to your forms and rates as soon as possible to assure you will continue to have products to market after these changes take effect. This department will strive to maintain a short turn-around time for review of these filings. Thank you for your cooperation.
STATE OF MISSOURI
Guidelines for Issuers to Change A Medicare Supplement Policy's Rating Methodology
Regulation 20 CSR 400-3.650 does not allow policies issued after 12/31/99 to set rates based on the attained age of the insured person. The following guidelines were developed to assist issuers if it is necessary to change the rating methodology used with currently approved Medicare supplement products. This regulation does not affect the rating methodology of policies issued prior to the effective date of this regulation.
To change from an attained age to an issue age rating methodology you must demonstrate separately for each plan of a given type and form level that the proposed issue age rates are actuarially equivalent to the current attained age rates.
- If the issuer has previously used issue age rating for a given Medicare supplement policy form in Missouri but has since changed to attained age rating, then the most recently approved issue age renewal rates for that policy form should be used for new business.
- If the issuer has only issued attained age rated policies in Missouri it will be necessary to demonstrate that the proposed new issue age rates are actuarially equivalent to the current attained age rates.
- Issuers must also file recalculated rates for persons eligible for Medicare by reason of disability. A sample recalculation is provided in the attached Sample Rate Calculation for Medicare Supplement Disabled form. Include a recalculation based on the proposed issue age rates and the issue-age age distribution for the in-force Missouri aged. Note that section (9) (E) of Missouri's regulation provides that, for each plan, the disabled rate cannot exceed the average aged rate. Disabled rates that are the same as the age 65 open enrollment rate are deemed to comply without the need to file additional calculations.
For future rate increases and reporting purposes issue age and attained age data should be combined for each plan of the same type and form level.
Current issuers of attained age rated policies must file the items listed in Subsection (13)(G) of the regulation, with the exception of the projections. Indicate in the Rate Change Requested section of MO Form 375-0065 (Rev 10/98), "change to issue age rates", unless the filing also includes a concurrent request to change rates. An issuer may combine the filing of a change in rating methodology with a rate change filing. This could be the more efficient approach if a rate change is pending or imminent. Please refer to the accompanying page with the heading: Changes to Rate Filing Requirements for more information.
State of Missouri - Changes To Medicare Supplement Rate Filing Requirements
Missouri Regulation 20 CSR 400-3.650 (13)(G) has been expanded to include provisions that parallel the NAIC's Medicare Supplement Insurance Model Regulations Compliance Manual. Any rate filings received between now and June 30, 1999, may be filed in accordance with either the old or new requirements, but we recommend that you become familiar with the new requirements now. These changes include:
1. The MO Form 375-0065 (Rev 10/98) has been revised. A copy is attached for your convenience.
2. Each filing and subsequent associated correspondence must include an actuarial certification. As a courtesy, we will attempt to include a certification form to be signed with any correspondence we generate on a filing.
3. The use of life-years for both the projections and durational experience exhibits is now required. Samples of these exhibits are attached. (Previously, the use of life-years when reporting durational and projected experience was only recommended.)
DEMONSTRATION OF ACTUARIAL EQUIVALENCY FOR CHANGING MEDICARE SUPPLEMENT RATING METHODOLOGY IN MISSOURI
The actuarial equivalency of the rates will be determined from a comparison of actuarial present value of lifetime premiums by age or age-band. The following illustrates how this should be done.
|Issue Age||Lifetime Premium
Attained Age Premium
Issue Age Premium
to Attained Age
In the case of age-banding the ratio won't be 1.000 for each cell, but should be 1.000 for each band.