2016 Issues & Trends in Medicare Supplement Insurance

MedicareSupplementCOMPLIANCE101

Presenter:ConstanceD.Rogers,FSA,MAAA

2016 Issues & Trends in Medicare Supplement Insurance

GOALS

• OverviewofMedSup complianceissuesforbeginners

• Lookingatthetopicfrom4perspectives:– Actuarial– Forms– Operations– Marketing

2016 Issues & Trends in Medicare Supplement Insurance

WhatCoverageCanBeIssued?

• “CardstoPlay”ineachState– PlanLevel(11standardized“plans”)

• A,B,C,D,F,F-HD,G,K,L,M,N

– TypeLevel(4“types”)• IndividualStandard• GroupStandard• IndividualSelect• GroupSelect

2016 Issues & Trends in Medicare Supplement Insurance

• FormLevel– Upto5formsallowedperPlan/Typeforvariationsin:

InnovativeBenefitsMarketingMethodUnderwritingMethodCoveringDisabledBeneficiaries

2016 Issues & Trends in Medicare Supplement Insurance

11Plansx 4Typesx 5Variants220optionstheoretically

BUT...veryfewcarriersactuallyoffermorethan2formsperPlan/Type,andfewcarriersofferall11Plans.

2016 Issues & Trends in Medicare Supplement Insurance

GrandfatheredStates

• ThreestatesdonotusetheStandardizedPlandefinitions:

• WI• MA• MN

2016 Issues & Trends in Medicare Supplement Insurance

WhatUnderwritingisAllowed?

Age65• “agingin”• NOUNDERWRITING during

OpenEnrollment(first6monthsafterenrollmentinMedicarePartB)

Ages66+• Inmoststates,FULL

UNDERWRITING isallowedunlessGuaranteedIssuecircumstances(63dwindow).

• InAnniversaryRulestate(MO)orBirthdayRulestates(CA,OR),NOUNDERWRITING for30daysaroundannualpolicyanniversaryorbirthday

2016 Issues & Trends in Medicare Supplement Insurance

Underwriting(cont’d)

• Under-age65– EligibleforMedicareduetoDisabilityorESRD– ManystatesmandateOpenEnrollmentperiod– Statesdifferregardingwhetherall Medicare-eligibleu65sorjustDisabledu65s(excludingESRDs)

– FullUnderwritingisallowedoutsidetheOpenEnrollmentperiod(orinstateswithnoOEmandate).

2016 Issues & Trends in Medicare Supplement Insurance

WhatRatesareAllowed?

• AgeRatingStructure– MoststatesallowIss Age,Attd Age,orCommunity– SomestatesdisallowAttd Age(e.g.,FL,AZ,GA,MO,ID)

– SomestatesrequireCommunity(e.g.,AR,CT)• GenderRating

– Generallyallowed,butsomestates(e.g.,CA)requireuni-genderrating

2016 Issues & Trends in Medicare Supplement Insurance

Rating(cont’d)

• TobaccoRating– Generallyallowed– SomestatesdisallowTobaccoratesforOE/GIissues

• FamilyStatus– Discountsmaybegivenforindividualslivingincommunityorasmembersofamulti-policyhousehold

2016 Issues & Trends in Medicare Supplement Insurance

Rating(cont’d)

• UnderwritingClass– Preferred/Standard/Substandardmaybeassignedoutside ofOE/GIwindows.

– InsideOE/GIwindow,Preferredratesmustbeusedifoffered.

• GeographicRegion– Allowedwithinmoststatesandisgenerallyusedwhereallowed.

2016 Issues & Trends in Medicare Supplement Insurance

Rating(cont’d)

• Under-65s– Statesvary:

• Somerequirefullsubsidization• Othersallowfullrateloads• Manyinbetween

– SomestatesallowseparateratesforDisabled-u65sandESRD-u65s.

2016 Issues & Trends in Medicare Supplement Insurance

Rating(cont’d)

• Cantheratestructurebechanged?– Yes,butneedtodemonstrateactuarialequivalencybetweenthe2structuresandguaranteethatfuturerateincreaseswillbethesameforbothstructures.

– Ifnot,=>discontinuance=>5-yearblackout.

• AnnualFiling– Required,evenifratesarenotchanging

2016 Issues & Trends in Medicare Supplement Insurance

WhatMLRsareRequired?

• Individual:65%lifetimeandpy3+

• Group:75%lifetimeandpy3+

• SameforStandardandSelect

• Primaryenforcementviaannualratefilings

• Secondaryenforcementviaannualrefundfilingreports

2016 Issues & Trends in Medicare Supplement Insurance

WhatCompensationisAllowed?

• Threerequirements:– Commissionforpy1<=200%ofpy2– Renewalcommissionrunsforatleast5years*– Onlyrenewalcommissionspayableforreplacementpolicies

• Somestateshaveuniquerequirements– e.g.INnovariationbyplan

orbyage/gender

2016 Issues & Trends in Medicare Supplement Insurance

What’stheAnnualRegulatoryBurden?

• Rates:Annualratefilings– Mustfileeachyearevenifnotchangingrates– Approvalneededinallstates

• NAICMedSup ExperienceExhibits– Annualreportingofexperienceforthecalendaryear– IncludedatthebackoftheAnnualStatement– FiledforeachuniqueState/Plan/Typecombination– Combineacross1990and2010producteras– UsuallyduetoaccountingdepartmentinlateJanuaryeachyr– Easilyautomatedwithactuarialreviewandsign-off

2016 Issues & Trends in Medicare Supplement Insurance

What’stheAnnualRegulatoryBurden?(cont’d)

• RefundFilings– BenchmarkLossRatioandRefundFilingReports– ComparesITDlossratiotoacalculatedbenchmarklossratio– FiledforeachState/Plan/Type– Combinedacross1990and2010producteras– Credibilityadjustmentsareincluded– MustbesubmittedbyMay31st ofeachyear– Easilyautomatedwithactuarialreviewandsign-off– Shouldformafeedbacklooptoyourpricingactuaries