Date:September 23, 2005
To:Insurers Writing Medigap Policies in Wisconsin
From:Jorge Gomez, Commissioner of Insurance
Subject:Creditable and Non-Creditable Coverage Notices

This bulletin applies to all health insurers that have offered and have in effect Medicare supplement, Medicare select, and Medicare cost policies [these three categories of policies are referred to as Medigap policies in this Bulletin].

The Centers for Medicare and Medicaid Services (CMS) and the National Association of Insurance Commissioners (NAIC) have drafted creditable coverage and non-creditable coverage notices that Medigap insurers are required to provide to their policyholders regarding the outpatient prescription drug coverage included in their policies.

Medigap insurers that have policyholders with outpatient prescription drug coverage under existing policies are required to provide notice to these policyholders between September 15 and November 14, 2005, regarding whether the coverage is creditable or non-creditable. The creditable coverage and non-creditable coverage notices are available on CMS's Web site at: http://www.cms.hhs.gov/CreditableCoverage/10_CCafterFeb15.asp#TopOfPage.

Wisconsin is one of the states that received a waiver of the federal standardization requirements required by the Omnibus Budget Reconciliation Act (OBRA) of 1990, which required that Medigap policies comply with standardized benefit packages. Wisconsin as a waived state offers to Medicare beneficiaries Medigap policies with core benefits and optional riders. Wisconsin does not offer the standardized Medicare supplement Plans A - L.

The OCI has determined that Medigap insurers that have existing Wisconsin policyholders with outpatient drug coverage can send the CMS creditable coverage or non-creditable coverage notice to these policyholders, even though Wisconsin is a waived state. These insurers may include in their cover letters to policyholders clarifying information that applies to Wisconsin Medigap policyholders.

Insurers are not required to file for approval a copy of the creditable coverage, the non-creditable coverage notice nor the cover letter sent to existing Medigap policyholders.

The OCI does not have the authority to make the final determination regarding whether Medigap policies provide creditable or non-creditable outpatient prescription drug coverage. However, the information below provides some general guidance regarding the notices that should be sent by insurers to Wisconsin policyholders.

Medigap Notice Regarding Non-Creditable Coverage

All Medigap policies issued to Wisconsin policyholders beginning September 1, 1994, have been required to include a catastrophic outpatient prescription drug benefit. The catastrophic outpatient drug benefit provides coverage for at least 80% of the charges for outpatient prescription drugs after a drug deductible of no more than $6,250 per calendar year. It appears that the catastrophic outpatient prescription drug benefit would not qualify as creditable coverage. Therefore, insurers should send the notice regarding non-creditable coverage to these policyholders.

Wisconsin also requires that Medigap policies provide coverage for equipment and supplies for the treatment of diabetes. [s. 632.895 (6), Wis. Stat., and s. Ins 3.39 (5) (c) 13, Wis. Adm. Code] Coverage under the diabetes mandate includes prescription medication, insulin and medical supplies associated with the injection of insulin. As these items duplicate coverage under Medicare Part D, they may not be covered under Medigap policies for individuals enrolled in Medicare prescription drug plans nor in Medigap policies issued or offered after December 31, 2005. In addition, Wisconsin's home care mandate requires coverage of prescription medication when part of the home care treatment plan. [s. 632.895 (1) and(2) and s. Ins 3.39 (5) (c) 5, Wis. Adm. Code] Medigap policies that only provide prescription drug coverage required by the diabetes and home care mandates would be considered non-creditable coverage. Insurers with Medigap policies that only provide these mandated benefits should send the notice regarding non-creditable coverage to these policyholders.

Beginning January 1, 1992, Medigap insurers were required to offer to Wisconsin applicants an optional outpatient prescription drug rider. The optional outpatient prescription drug benefit provides coverage of at least 50% of the charges for outpatient prescription drugs after a deductible of no greater than $250 per year to a maximum of at least $3,000 in benefits received by the insured per year. Based on CMS's guidance, it does not appear that Medigap policies that include only the optional outpatient prescription drug rider would qualify as creditable coverage. Medigap insurers should send to these applicants the notice regarding non-creditable coverage.

Medigap Notice Regarding Creditable Coverage

Medigap insurers with policyholders who have both optional outpatient prescription drug and catastrophic outpatient drug benefits in their policies would meet CMS's definition of creditable coverage. Medigap insurers should send to these applicants the notice regarding creditable coverage.

Wisconsin Medigap insurers also have in effect policies issued in the 1970s and 1980s that include outpatient prescription drug benefits. These policies include policy forms designated as Medicare supplement 1, 2 or 3, and pre-standardized policies. Policies designated as Medicare supplement 1 policies include outpatient prescription drug coverage at 75% of covered expenses. Some of the pre-standardized policy forms may also include outpatient prescription drug coverage. It appears that Medigap insurers with policyholders covered by Medicare supplement 1 policies would meet CMS's definition of creditable coverage. Some of the pre-standardized policies with prescription drug benefits may meet CMS's definition of creditable coverage. Medigap insurers with Medicare supplement 1 should send the notice regarding creditable coverage to these policyholders.

Insurers may use the CMS Creditable Coverage Guidance included as Attachment A to this Bulletin to assist in determining whether CMS would consider their Medigap policies to be creditable or non-creditable coverage.

Effective Date:
This Bulletin applies to all Medicare supplement, Medicare cost and Medicare select policies issued and in effect as of December 31, 2005.

Contact Information:
Questions regarding information contained in this bulletin should be directed to Diane Dambach at: diane.dambach@wisconsin.gov; Jamie Key at: jamie.key@wisconsin.gov; or Linda Low at: linda.low@wisconsin.gov.


Attachment A

CMS CREDITABLE COVERAGE GUIDANCE

Benefit Designs for Simplified Determination of Creditable Coverage Status

If an entity is not an employer or union that is applying for the retiree drug subsidy, it can determine that its prescription drug plan's coverage is creditable if the plan design meets all four of the following standards. However, the standards listed under 4(a) and 4(b) may not be used if the entity's plan has prescription drug benefits that are integrated with benefits other than prescription drug coverage (i.e. Medical, Dental, etc.). Integrated plans must satisfy the standard in 4(c).

A prescription drug plan is deemed to be creditable if it:

  1. Provides coverage for brand and generic prescriptions;
  2. Provides reasonable access to retail providers and, optionally, for mail order coverage;
  3. The plan is designed to pay on average at least 60% of participants' prescription drug expenses; and
  4. Satisfies at least one of the following:
    1. The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or
    2. The prescription drug coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 per Medicare eligible individual in 2006.
    3. For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000 and has no less than a $1,000,000 lifetime combined benefit maximum.