Medicare supplement disclosure, replacement, and standardized benefits

Three ideas in one objective

This lesson covers what a Florida Medicare supplement (Medigap) buyer must be told, what protects the buyer when one policy replaces another, and why Medicare supplement benefits are standardized. The governing law is Part VIII of Chapter 627 of the Florida Statutes: no individual, group, blanket or franchise health policy may be delivered or issued in Florida as a Medicare supplement unless it complies with that part.

Disclosure: what the buyer must receive

A policy filed as a Medicare supplement in Florida must:

• be accompanied by the Medicare Supplement Buyer's Guide, developed jointly by the NAIC and the federal Health Care Financing Administration (now CMS);
• carry a prominently displayed 30-day no-loss cancellation clause (the free look): the applicant may return the policy or certificate within 30 days of receiving it for a full refund of premium, paid in a timely manner directly to the person who paid the premium;
• prominently display a notice of any coordination-of-benefits clause that might restrict payment; and
• be written in simplified language that purchasers can easily understand.

Under the NAIC model rules that states follow, the applicant also receives an outline of coverage summarizing the plan's benefits, so different companies' plans can be compared side by side.

Replacement: protecting the buyer who switches

Replacing one Medicare supplement with another should never cost the insured protection they have already earned.

• When a Medicare supplement policy replaces another Medicare supplement policy or creditable coverage, the replacing insurer must waive any preexisting-condition periods, waiting periods, elimination periods and probationary periods for similar benefits, to the extent that time was already spent under the original policy.
• When a group Medicare supplement policy is replaced by another group policy bought by the same policyholder, the new insurer must offer coverage to everyone covered under the old policy on its termination date, with no preexisting-condition exclusion for conditions the old policy would have covered.

In practice (under the NAIC model), the application asks whether the applicant already has Medicare supplement coverage, and a replacement triggers a written replacement notice the applicant signs and keeps. Sellers may not sell coverage that duplicates coverage the buyer already has. A buyer should keep the old policy until the new one is in force and the free look has passed.

Standardized benefits

Florida will not accept a policy for filing as a Medicare supplement unless it meets or exceeds the federal Medicare supplement law, 42 U.S.C. s. 1395ss, or the most recent NAIC Medicare Supplement Insurance Minimum Standards Model Act.

Because of that federal framework, Medigap plans are standardized by letter (Plans A, B, C, D, F, G, K, L, M and N). Every plan with the same letter has the same benefits, whichever insurer sells it; only the premium and the company differ. Plan A carries the core benefits every plan includes. Plans C and F (which pay the Part B deductible) cannot be sold to people newly eligible for Medicare on or after January 1, 2020. Plans K and L use higher cost-sharing with an annual out-of-pocket limit.

Florida adds two structural requirements: a policy's definition of Medicare eligible expense may be no more restrictive than Medicare's, and benefits designed to cover Medicare cost-sharing must change automatically when Medicare's deductible and copayment amounts change, with any matching premium change needing the Office's prior approval.