Date:June 28, 2005
To:Health Insurance Writers of Medicare Supplement, Medicare Select, and Medicare Cost Coverage
From:Jorge Gomez, Commissioner of Insurance
Subject:Medicare Modernization Act of 2003 and Exclusionary Riders for Outpatient Prescription Drug Benefits

This bulletin applies to all health insurers that have Medicare supplement, Medicare select or Medicare cost coverage in place or that plan to issue or market existing approved policy forms after January 1, 2006.

Background

The Medicare Prescription Drugs, Improvement and Modernization Act of 2003 (MMA) prohibits the sale of outpatient prescription drug coverage under Medicare supplement, Medicare select or Medicare cost policies after December 31, 2005. Wisconsin has amended its Medicare supplement rule, Ins 3.39, Wis. Adm. Code, in order to prohibit the sale of Medicare supplement, Medicare select or Medicare cost policies containing outpatient prescription drug benefits.

The OCI will allow insurers to market existing approved Medicare supplement, Medicare select or Medicare cost policies through December 31, 2006, if these insurers attach to the policy an approved rider eliminating outpatient prescription drug benefits. Additionally, because of the requirements of the MMA, Wisconsin will allow insurers to issue exclusionary riders removing outpatient prescription drug benefits from existing policies if the policyholder chooses Medicare Part D prescription drug coverage.

The amendments to s. Ins 3.39, Wis. Adm. Code, that apply to Medicare supplement, Medicare select and Medicare cost policy forms and exclusionary riders regarding outpatient prescription drug benefits for policies issued or in effect after January 1, 2006, include:

  • Section Ins 3.39 (4) (a) 20. and 21, Wis. Adm. Code, provide that after December 31, 2005, policies with outpatient prescription drugs may not be renewed with the outpatient prescription drug benefit if the policyholders enroll in Medicare Part D. New policies with outpatient prescription drugs may not be issued after December 31, 2005. Policies with outpatient prescription drug benefits may be renewed at the option of the policyholders if these policyholders do not enroll in Medicare Part D.
  • Section Ins 3.39 (5) (c) 13., Wis. Adm. Code, regarding usual and customary expenses for the treatment of diabetes, provides that after December 31, 2005, policies do not cover outpatient prescription medications as mandated under s. 632.895 (6), Stats.
  • Section Ins 3.39 (5) (c) 15., Wis. Adm. Code, regarding the basic benefits for catastrophic coverage for 80% of outpatient prescription drug charges that exceed $6,250 per calendar year, prohibits the inclusion of coverage in policies issued after January 1, 2006.
  • Section Ins 3.39 (5) (i) 7., Wis. Adm. Code, regarding the optional outpatient prescription drug rider, prohibits the sale of optional outpatient prescription drug riders beginning January 1, 2006.
  • Ins 3.39 (29) (b), Wis. Adm. Code, regarding filing and approval requirements, provides that insurers shall file new riders or amendments to policy or certificate forms to delete coverage for outpatient prescription drugs as required by MMA. Beginning January 1, 2007, insurers are required to replace existing amended policies and riders for current and renewing policyholders with filed and approved policy or certificate forms that are compliant with the MMA. Beginning January 1, 2007, insurers are required to use only filed and approved policy or certificate forms that are compliant with the MMA for all new business.

This bulletin describes form filing requirements for riders to Medicare supplement, Medicare select or Medicare cost policies in order to facilitate the policy form and rate approval process.

Applicability

Beginning January 1, 1992, insurers offering Medicare supplement, Medicare select, or Medicare cost policies had the option of offering outpatient prescription drug coverage [s. Ins 3.39 (5) (i) 7., Wis. Adm. Code]. Beginning September 1, 1994, all Medicare supplement, Medicare select and Medicare cost policies issued to Wisconsin policyholders were required to offer mandated catastrophic drug benefits [s. Ins 3.39 (5) (c) 15., Wis. Adm. Code]. Some policies issued prior to 1992 also included outpatient prescription drug benefits.

In addition, all Medicare supplement, Medicare select and Medicare cost policies issued after January 1, 2003, were required to comply with Wisconsin's mandate regarding equipment and supplies for the treatment of diabetes and include coverage of outpatient prescription drugs for the treatment of diabetes.

Beginning September 15, 2005, until November 15, 2005, insurers with policyholders covered by Medicare supplement, Medicare select or Medicare cost policies will be required to provide to their policyholders notice of their right to continue existing outpatient drug coverage or to apply for Medicare Part D outpatient prescription drug coverage. The National Association of Insurance Commissions (NAIC) and the Centers for Medicare and Medicaid Services (CMS) are currently drafting the notice, a copy of which will be available on OCI's website as soon as the notice's language is finalized. Insurers also will be required to have an approved exclusionary rider regarding outpatient prescription drugs for those policy forms that include this coverage for those policyholders who choose to apply for Medicare Part D. Insurers that issue new coverage beginning January 1, 2006, also will be required to have an approved exclusion rider in order to market existing policy forms or will be required to have an approved policy form that does not include this coverage. Beginning January 1, 2007, insurers shall only issue approved policy forms that do not include prescription drug coverage.

Medicare supplement, Medicare select and Medicare cost insurers must file with the OCI riders that include the information identified below.

Explanation and Instructions for Rider Submission and Approval

Form filing transmittal forms and instructions are available on the OCI's website at: http://oci.wi.gov/oci_home.htm. Each product category must be filed separately.

Wisconsin accepts both SERFF and SIRCON electronic form filings.

For exclusionary rider filings for existing Medicare supplement, Medicare select and Medicare cost insurance coverage, the filing should include the following:

submission cover letter to the OCI,
rate transmittal form OCI 26-080,
copy of the exclusionary rider, and
actuarial memorandum and rate filing.

Submission Cover Letter to the OCI

The submission cover letter to the OCI should identify the approved policy form number being amended or if the existing policy form includes a rider covering outpatient prescription drug benefits, should identify the rider form number being amended. The cover letter should state whether the filing is being submitted only to eliminate outpatient prescription drug coverage in order to comply with the MMA and the amendments to s. Ins 3.39, Wis. Adm. Code. It should also identify the provisions in the existing approved policy form or rider form that provide outpatient prescriptions drug coverage.

The cover letter should explain whether the company will rely on direct mailings and/or agents to assist existing policyholders in deciding whether to maintain existing coverage or to enroll in Medicare Part D, and whether it will pay compensation to the agents.

Exclusionary Rider

The exclusionary rider should include the name of the insurance company and the effective date of the rider. The rider should be signed by one or more officers of the insurer as required by s. Ins 3.13 (3) (a), Wis. Adm. Code. An exclusionary rider that affects the premium rate should contain the form number of each policy, rider or endorsement to which the rates apply as required by s. Ins 3.13 (6) (a) 2., Wis. Adm. Code.

The exclusionary riders should indicate that the outpatient prescription drug benefits are being excluded because of the MMA and the policyholder's decision to apply for Medicare Part D, which makes the policyholder ineligible to continue outpatient prescription drug coverage under the policy form.

Exclusionary riders also should indicate that prescription medication, insulin and some supplies mandated in Wisconsin for the treatment of diabetes are excluded in order not to duplicate coverage under Medicare Part D.

Coverage for diabetic supplies and insulin covered under Medicare Part D will no longer be covered under Wisconsin's diabetes mandate for individuals applying for Medigap coverage beginning January 1, 2006, and who choose not to enroll in Medicare Part D.

Actuarial Memorandum and Rate Filing

Rate filings must comply with the provisions of s. Ins 3.13 (6), and s. Ins 3.39 (4) (e) and (16), Wis. Adm. Code. Insurers should include an actuarial memorandum with their submission of the exclusionary riders regarding outpatient prescription drug coverage for their existing Medicare supplement, Medicare select and Medicare cost policy forms.

The rate transmittal form, actuarial memorandum or cover letter should identify the policy form or forms to which the exclusionary rider will apply and the date the policy form was approved. The actuarial memorandum should identify by policy form number the number of Wisconsin insureds covered by each policy form. If renewal premium increases are filed, the actuarial memorandum should identify the renewal premium increase separately from the premium change (if any) that will occur with the implementation of the exclusionary rider.

For exclusionary riders for approved Medicare supplement, Medicare select and Medicare cost policy forms that insurers plan to issue or market beginning January 1, 2006, the filing should include:

submission cover letter to the OCI,
rate transmittal form OCI 26-080,
copy of the exclusionary rider,
actuarial memorandum and rate filing,
outline of coverage, and
advertising materials.

Submission Cover Letter to the OCI

The submission cover letter to the OCI should identify the approved policy form number being amended or if the existing policy form includes a rider covering outpatient prescription drug benefits, should identify the rider form number being amended. The cover letter should state whether the filing is being submitted only to eliminate outpatient prescription drug coverage in order to comply with the MMA and the amendments to s. Ins 3.39, Wis. Adm. Code, and that it is being submitted because the insurer intends to continue issuing and marketing the policy form after January 1, 2006. It should also identify the provisions in the existing approved policy form or rider form that provide outpatient prescriptions drug coverage.

Exclusionary Rider

The exclusionary rider should include the name of the insurance company and the effective date of the rider. The rider should be signed by one or more officers of the insurer as required by s. Ins 3.13 (3) (a), Wis. Adm. Code. An exclusionary rider that affects the premium rate should contain the form number of each policy, rider or endorsement to which the rates apply as required by s. Ins 3.13 (6) (a) 2., Wis. Adm. Code.

The exclusionary riders should indicate that the outpatient prescription drug benefits are being excluded because of the MMA and the policyholder's decision to apply for Medicare Part D, which makes the policyholder ineligible to continue outpatient prescription drug coverage under the policy form.

Exclusionary riders also should indicate that the prescription medication, insulin and some supplies mandated in Wisconsin for the treatment of diabetes are excluded in order not to duplicate coverage under Medicare Part D.

Coverage for diabetic supplies and insulin covered under Medicare Part D will no longer be covered under Wisconsin's diabetes mandate for individuals applying for Medigap coverage beginning January 1, 2006, and who choose not to enroll in Medicare Part D.

For policies issued after January 1, 2006, exclusionary riders shall be attached at the time of original issuance of the policy, shall be affixed on the face and filing back, if any, in contrasting color, in not less than 12-point type, and shall include "notice of attached rider" language required in s. Ins 3.13 (3) (b), Wis. Adm. Code.

Outline of Coverage

Insurers that plan to issue or market existing approved policy forms after January 1, 2006, must submit to the OCI for approval a revised outline of coverage that does not include reference to any outpatient prescription drug benefits.

The outline of coverage should meet the requirements of s. Ins 3.39 (4) (b), Wis. Adm. Code, and be in the format prescribed in s. Ins 3.39, Appendix 1, Wis. Adm. Code.

Actuarial Memorandum and Rate Filing

Rate filings must comply with the provisions of s. Ins 3.13 (6), and s. Ins 3.39 (4) (e) and (16), Wis. Adm. Code. Insurers should include an actuarial memorandum with their submission of the exclusionary riders regarding outpatient prescription drug coverage for their existing Medicare supplement, Medicare select and Medicare cost policy forms.

The rate transmittal form, actuarial memorandum or cover letter should identify the policy form or forms to which the exclusionary rider will apply and the date the policy form was approved. If a renewal premium increase is filed, the actuarial memorandum should identify the renewal premium increase separately from the premium change (if any) that will occur with the implementation of the exclusionary rider.

Advertising Materials

Insurers that plan to issue or market existing approved policy forms in Wisconsin after January 1, 2006, must file with the OCI prior to use all advertising materials, as required by s. Ins 3.39 (15), Wis. Adm. Code. A separate transmittal form for Medicare supplement, Medicare select and Medicare cost policies is available on the OCI's website at: http://oci.wi.gov/company/forms-policy.htm.

Advertising materials that have been filed with the OCI and reference any outpatient prescription drug benefits should be redrafted and filed with the OCI prior to January 1, 2006. Insurers should not use in Wisconsin advertisements that reference Medicare supplement Plans A to L.

For new Medicare supplement, Medicare select and Medicare cost policy forms that insurers plan to issue or market beginning January 1, 2006, the filing should include:

submission cover letter to the OCI,
copy of the policy form and permissible riders
application,
disclosure forms,
actuarial memorandum and rate filing,
commission schedules,
outline of coverage, and
advertising materials.

Beginning January 1, 2007, insurers that issued exclusionary riders for outpatient prescription drug coverage to comply with the MMA, must replace the ridered policies with approved policies without the exclusionary rider [s. Ins 3.39 (29) (b) 1., Wis. Adm. Code.]

Effective Date:
This bulletin takes effect July 1, 2005, the effective date of the rule. The filing requirements explained in this bulletin apply to all Medicare supplement, Medicare select, and Medicare cost policies marketed, issued or in effect beginning January 1, 2006. Approved policies and policies with approved exclusionary riders for outpatient prescription drug coverage may be marketed prior to January 1, 2006, if the date of issue of these policies is January 1, 2006, or after.

The OCI is drafting a comprehensive bulletin regarding the amendments to s. Ins 3.39, Wis. Adm. Code and updating the Medicare policy form checklist.

Contact Information:

Questions regarding information contained in this bulletin should be directed to Diane Dambach at: diane.dambach@wisconsin.gov.

Questions regarding form filing transmittals and advertisement transmittals should be directed to Linda Low at: linda.low@wisconsin.gov or Jerry Zimmer at: jerry.zimmer@wisconsin.gov.

Questions regarding rate filings should be directed to Jamie Key at: jamie.key@wisconsin.gov.