UHAS staff member Constance Rogers, FSA, MAAA produced a session entitled “Medicare Supplement Compliance 101” at the 2016 Issues and Trends in Medicare Supplement Insurance conference. In that session, Ms. Rogers provided detailed descriptions of the regulatory requirements and limitations on Medicare Supplement insurance from an actuarial perspective.
Medicare Supplement (“MedSup”) carriers – that is, each legal entity – may offer a limited number of policy forms in each state. However, the number of allowed offerings is generally large enough to satisfy the marketing intentions of most carriers.
State and Federal regulations limit how carriers can underwrite MedSup applicants, with no underwriting allowed on applicants who apply for MedSup upon “aging in” to Medicare or who qualify for certain Guaranteed Issue circumstances, which are specified by state regulation. In Missouri, these Guaranteed Issue circumstances include the annual anniversary of the applicant’s existing MedSup policy; and in California and Oregon, the Guaranteed Issue circumstances include the applicant’s birthday. Thus, very little underwriting is effectively allowed in Missouri, California, and Oregon.
In most states, MedSup rates are allowed to vary by the policyholder’s attained age, although a few states require that rates be based on the age-at-issue, and a small number of states require community-age rating. MedSup rates are generally allowed to vary by gender, but a few states require uni-gender rating. Rates may also vary by geographic region, underwriting class, and tobacco-use class, although the two latter have limited application to policyholders who were issued coverage during an Open Enrollment or Guaranteed Issue window.
Regulatory minimum loss ratios for MedSup are not impacted by the Affordable Care Act, and the definition of minimum loss ratio is the traditional one: unadjusted incurred claims divided by unadjusted earned premiums. For MedSup policies issued to individuals, the minimum loss ratio is 65%; the minimum for policies issued to groups, the minimum loss ratio is 75%.
MedSup regulations include limitations on first-year commission heaping, and further require that renewal commissions run for at least five years. Some states have additional or slightly modified requirements; for example, Texas requires that renewal commissions run for at least six years, and Indiana allows no variation in commissions by Plan or by age or gender.
The annual regulatory burden on MedSup carriers is significant. Rate filings must be made each year, even if the carrier is not proposing a rate change, and rate approval is required in all states. Experience must be reported annually in the rate filings and also in the NAIC Medicare Supplement Experience Exhibits which are included at the back of the carrier’s Annual Statement. Further, the carrier must file Benchmark Loss Ratio and Refund Filing Reports by May 31st of each year.
UHAS would be glad to provide further information or to assist your company complying with any or all of the regulatory matters discussed above or in the presentation slides, which are available for complimentary internal use by your company. Please feel free to contact Constance Rogers directly for more information or to discuss how UHAS can assist your company to enter the MedSup market or to maintain a profitable block of Medicare Supplement insurance.