Medicare Program; Recognition of Revised NAIC Model Standards for Regulation of Medicare Supplemental Insurance

SUMMARY: This notice announces the changes made by the Medicare Access and CHIP Reauthorization of 2015 (MACRA) to section 1882 of the Social Security Act (the Act), which governs Medicare supplemental insurance. This notice also recognizes that the Model Regulation adopted by the National Association of Insurance Commissioners (NAIC) on August 29, 2016, is considered to be the applicable NAIC Model Regulation for purposes of section 1882 of the Act, subject to our clarifications that are set forth in this notice.

DATES: Amendments made by section 401 of MACRA apply to issuers of Medigap policies for policies issued on or after January 1, 2020.

FOR FURTHER INFORMATION CONTACT: Derrick Claggett, (410) 786-2113.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Medicare Program

The Medicare program was established by Congress in 1965 with the enactment of title XVIII of the Social Security Act (the Act). The program provides payment for certain medical expenses for persons 65 years of age or older, certain disabled individuals, persons with end-stage renal disease (ESRD), and certain individuals exposed to environmental health hazards.

Medicare has three types of benefits. The Hospital Insurance Program (Part A) covers inpatient care. The Supplementary Medical Insurance Program (Part B) covers a wide range of medical services, including physicians' services and outpatient hospital services, as well as equipment and supplies, such as prosthetic devices. The Voluntary Prescription Drug Benefit Program (Part D) covers outpatient prescription drugs not otherwise covered by Part B.

Beneficiaries can get their Part A and Part B benefits in two ways. Under Original Medicare, beneficiaries get their Part A and Part B benefits directly from the Federal government. Beneficiaries can also choose to get their Part A and Part B benefits through private health plans that contract with Medicare. Most of these contracts are under Part C of Medicare, the Medicare Advantage (MA) Program.

While Medicare provides extensive benefits, it is not designed to cover the total cost of medical care for Medicare beneficiaries. Under Original Medicare, even if the items or services are covered by Medicare, most beneficiaries are responsible for various deductibles, coinsurance, and in some cases copayment amounts.

1. Deductibles

Under Original Medicare, a beneficiary with Part A is generally responsible for the Part A inpatient hospital deductible for each benefit period. A benefit period is the period beginning on the first day of hospitalization and extending until the beneficiary has not been an inpatient of a hospital or skilled nursing facility for 60 consecutive days. The inpatient hospital deductible is updated annually in accordance with a statutory formula. The inpatient hospital deductible for calendar year (CY) 2016 was $1,288.00 and for CY 2017 it is $1,316.00.

A beneficiary with Part B is responsible for the Part B deductible for each calendar year. The deductible is indexed to increase with the average cost of Part B services for aged beneficiaries. The Part B deductible for CY 2016 was $166.00 and for CY 2017 it is $183.00.

2. Coinsurance

As previously stated, beneficiaries are generally responsible for paying coinsurance for covered items and services. For example, the coinsurance applicable to physicians' services under Part B is generally 20 percent of the Medicare-approved amount for the service(s). If a physician or certain other suppliers accept assignment, the beneficiary is only responsible for the coinsurance amount. When beneficiaries receive covered services from physicians or other suppliers who do not accept assignment of their Medicare claims, beneficiaries may also be responsible for some amounts in excess of the Medicare approved amount (excess charges).

3. Non-Covered Services

Some items and services are not covered under either Part A or Part B; for example, custodial nursing home care, most dental care, eyeglasses, and items or services furnished outside the United States. Original Medicare covers many health care services and supplies, but beneficiaries are responsible for the out-of-pocket expenses described previously. As such, most beneficiaries choose to obtain some type of additional coverage to pay some of the costs not covered by Original Medicare. For people who do not have coverage from a current or previous employer that performs this function, or who do not qualify for Medicaid, the most common coverage is Medicare supplemental insurance (also called Medigap). Some beneficiaries may also try to defray some expenses with hospital indemnity insurance, nursing home or long-term care insurance, or specified disease (for example, cancer) insurance.

B. Medicare Supplemental Insurance

A Medicare supplemental (Medigap) policy is a health insurance policy sold by private insurance companies specifically to fill "gaps" in Original Medicare coverage. A Medigap policy typically provides coverage for some or all of the deductible and coinsurance amounts applicable to Medicare-covered services, and sometimes covers items and services that are not covered by Medicare. Section 1882(d)(3)(A)(i) of the Act specifies that a party may not sell a Medigap policy with knowledge that the policy duplicates health benefits which the applicant is otherwise entitled to, including from Medicaid programs that cover Medicare cost-sharing (for example, the Qualified Medicare Beneficiary Program), MA plans, and individual market plans.

Section 1882 of the Act sets forth requirements and standards that govern the sale of Medigap policies. It incorporates by reference, as part of the statutory requirements, certain minimum standards established by the National Association of Insurance Commissioners (NAIC). These minimum standards, known as the NAIC Model Standards are found in the "Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Act" (NAIC Model), initially adopted by the NAIC on June 6, 1979, and revised periodically to reflect subsequent Federal legislative changes. (For additional information, see section 1882(g)(2)(A) of the Act.)

Under section 1882 of the Act, Medigap policies generally may not be sold unless they conform to the standardized benefit packages that have been defined and designated by the NAIC. The 10 original standardized plans were created in accordance with the Omnibus Budget Reconciliation Act of 1990 (OBRA '90), and designated A through J. The Balanced Budget Act of 1997 (BBA) authorized plans F and J to have high deductible options that are counted as separate plans. The Medicare Modernization Act of 2003 (MMA) created new plans K and L, and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) authorized the creation of new plans M and N. Medigap plans E, H, I, and J are no longer available for sale. Three states (Massachusetts, Minnesota, and Wisconsin) are permitted by statute to have different standardized Medigap plans and are sometimes referred to in this context as the "waiver" States. There are also policies issued before the OBRA '90 requirements became applicable in 1992 (pre-standardized policies) that are still in effect.

Effective January 1, 2006, Medigap policies could no longer be sold with a prescription drug benefit. Three of the original standardized Medigap plans, H, I and J, as well as some Medigap policies in the waiver States, may still contain coverage for outpatient prescription drugs if the policies were sold before January 1, 2006. In addition, some pre-standardized plans cover drugs. If a beneficiary holding one of these policies enrolls in Medicare Part D prescription drug coverage, the prescription drug coverage is removed from the individual's Medigap policy.

Section 1882(b)(1) of the Act provides that Medigap policies issued in a State are deemed to meet the Federal requirements if the State's program regulating Medigap policies provides for the application of standards is at least as stringent as those contained in the NAIC Model Regulation, and if the State requirements are equal to or more stringent than those set forth in section 1882 of the Act.

States must amend their regulatory programs to implement all new Federal statutory requirements and applicable changes to the NAIC Model Standards. Thus, States will now be required to implement the statutory changes made by the Medicare Access and CHIP Reauthorization Act of 2015 the (MACRA), and the changes to the NAIC Model Standards made to comport with the requirements of MACRA. The revised NAIC Model is attached to this notice. States generally cannot modify the standardized benefit packages set out in the NAIC Model. However, with respect to other provisions, States retain the authority to enact provisions that are more stringent than those that are incorporated in the NAIC Model Standards or in the Federal statutory requirements. (See section 1882(b)(1)(B) of the Act.) States that have received a waiver under section 1882(p)(6) of the Act may continue to authorize the sale of policies that contain different benefits than the standardized benefit packages. However, those States are also required to amend their regulatory programs to implement the new Federal statutory requirements and changes to the NAIC Model Standards as a result of MACRA. (See section 1882(z)(3) of the Act.)

II. Legislative Changes Affecting Medigap Policies and Clarification

A. Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)

--This is a summary of a Federal Register article originally published on the page number listed below--

Notice.

Citation: "82 FR 41684"

Document Number: "CMS-4177-N"

Federal Register Page Number: "41684"

"Notices"