[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Notices]
[Pages 67078-67121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32103]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[HCFA-2025-N]
RIN 0938-AJ07


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

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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SUMMARY: This notice describes changes made by the Balanced Budget Act 
of 1997 to section 1882 of the Social Security Act, which governs 
Medicare supplemental insurance. It also recognizes that the Model 
Regulation adopted by the National Association of Insurance 
Commissioners (NAIC) on April 29, 1998, as corrected and clarified by 
HCFA, is considered to be the applicable NAIC Model Regulation for 
purposes of section 1882 of the Social Security Act. The changes made 
by HCFA (1) correct a drafting error in section 12.B(2) of the Model 
that is inconsistent with Federal law, and (2) add a clarification that 
copayments for hospital outpatient department services under Part B of 
Medicare must be covered under the ``core benefits'' of a Medicare 
supplemental insurance policy in the same manner as coinsurance for 
those services. Finally, this notice prints as an addendum the full 
text of the NAIC Model Regulation, as corrected and clarified by HCFA.

DATES: Medicare supplemental insurance policies issued in any State 
must conform to the requirements of section 1882(s)(3) of the Social 
Security Act as of July 1, 1998, and to the standards contained in the 
revised NAIC Model Regulation as of the date the State adopts the 
revised standards, which generally must be no later than April 29, 
1999.

FOR FURTHER INFORMATION CONTACT: Terese Klitenic (410) 786-1565.

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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 services for persons 65 
years of age or older, disabled beneficiaries, and persons with end-
stage renal disease. The Medicare program consists of two separate but 
complementary insurance programs, a hospital insurance program (Part 
A), which covers services furnished by hospitals, skilled nursing 
facilities, home health agencies and hospices; and a supplementary 
medical insurance program (Part B), which covers a wide range of 
medical services and supplies, including physicians' services, 
outpatient hospital services, outpatient physical and occupational 
therapy services, and home health services. Part B also covers certain 
drugs and biologicals that cannot be self-administered, diagnostic x-
ray and laboratory tests, purchase or rental of durable medical 
equipment, ambulance services, prosthetic devices, and certain medical 
supplies.
    While the Medicare program provides extensive hospital insurance 
benefits and supplementary medical insurance, it was not designed to 
cover the total cost of medical care for Medicare beneficiaries. 
Amounts payable under both Parts A and B are reduced by certain 
deductible and coinsurance amounts for which the beneficiary is 
responsible.
    In 1998, the Part A inpatient hospital deductible is $764 ($768 for 
1999) for each ``benefit period'' (the period beginning on the first 
day of hospitalization and extending until the beneficiary is no longer 
an inpatient of a hospital or skilled nursing facility for 60 
consecutive days).
    The Part B deductible is $100 for calendar years 1998 and 1999. 
Beneficiaries are also responsible for paying certain coinsurance 
amounts 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. When beneficiaries 
receive covered services from physicians who do not accept assignment 
of their Medicare claims, the beneficiaries may also be required to pay 
amounts in excess of the Medicare approved amount (``excess charges''), 
up to a limit established under the Act.
    There are a number of items and services that are not covered under 
either Part A or Part B; for example, custodial nursing home care, most 
dental care, eyeglasses, and most prescription drugs are not covered. 
Beneficiaries must pay the full cost of these items and services out-
of-pocket or may purchase additional private insurance to help pay the 
costs.
    Because Medicare does not cover the total cost of providing medical 
care, a

[[Page 67079]]

substantial number of Medicare beneficiaries have some type of private 
health coverage. This coverage may include Medicare supplemental 
insurance, employer group health plans, hospital indemnity insurance, 
nursing home or long term care insurance, and specified disease 
insurance.

B. Medicare Supplemental Insurance

    Medicare supplemental insurance policies, also known as ``Medigap'' 
policies, are designed to fill specific gaps in the original Medicare 
``fee-for-service'' benefit structure. (They are not needed, and would 
not be usable, if Medicare benefits are obtained through an HMO or 
other type of managed care arrangement.) Medigap policies typically 
provide coverage for some or all of the deductible and coinsurance 
amounts applicable to Medicare-covered services, and sometimes cover 
items or services that are not covered by Medicare.
    Section 1882 of the Act prohibits the sale of Medigap policies that 
do not conform to Federal statutory requirements. The statute also 
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 ``NAIC Model Regulation to 
Implement the Individual Accident and Sickness Insurance Minimum 
Standards Act,'' initially adopted by the NAIC on June 6, 1979. See 
section 1882(g)(2)(A) of the Act. In particular, the Model Standards, 
as revised in 1992 under the Omnibus Budget Reconciliation Act of 1990, 
prescribed 10 benefit packages. Under section 1882, Medigap policies 
generally may not be sold unless they conform to one of the 10 benefit 
packages, which are designated as plans ``A'' through ``J.''
    Section 1882(b)(1) of the Act also provided that Medigap policies 
issued in a State would be deemed to meet the Federal requirements if 
the State's program regulating Medicare supplemental policies provided 
for the application of standards at least as stringent as those 
contained in the NAIC Model Regulation, and requirements equal to or 
more stringent than those set forth in section 1882 of the Act.
    States must amend their regulatory programs to implement all of the 
new Federal statutory requirements, and applicable changes to the Model 
standards. However, States maintain the authority to enact provisions 
that are more stringent than those that are incorporated in the NAIC 
Model Regulation or in the statutory requirements. See section 
1882(b)(1)(A) of the Act. States that have received a waiver under 
section 1882(p)(6) may continue to authorize the sale of policies that 
contain different benefits than the 10 standardized benefit packages. 
Massachusetts, Minnesota, and Wisconsin have received waivers; however, 
the three waiver States must still make the Balanced Budget Act of 1997 
(BBA) conforming amendments. In particular, these States are subject to 
the statutory guaranteed issue requirements with respect to all 
Medicare beneficiaries who meet the criteria in section 1882(s)(3) for 
guaranteed issue. The only difference in the waiver States is that 
section 1882(3)(C)(iv) specifies that the statutory references to 
benefit packages (that is, in most cases, benefit packages designated 
``A'', ``B'', ``C'' or ``F'') are deemed to be references to comparable 
benefit packages offered in the State with the waiver.
    As provided in section 1882(p)(4)(B) of the Act, any State may 
continue to approve the addition of new or innovative benefits to an 
otherwise approved standardized plan.
    Under section 1882(p)(5) of the Act, while a State must approve the 
core Plan ``A'' for sale in the State, it does not have to permit any 
or all of the other nine plans to be sold in the State. Therefore, the 
State need not permit the sale of each type of standardized plan, so 
long as the core plan is offered. Moreover, a State need not approve 
the sale of high deductible Plans ``F'' and ``J'' simply because it 
also permits sale of the standard deductible versions of either of 
these two plans.
    In addition, section 1882(d) makes it unlawful in some 
circumstances for Medigap and certain other health insurance policies 
to be sold to a Medicare beneficiary if the sale results in duplicate 
coverage.
    Section 1882(g)(1) of the Act defines Medicare supplemental 
policies. This definition excludes policies offered by an employer to 
employees or former employees and policies or plans offered by a labor 
organization to members or former members. HMOs, and other managed care 
plans that contract with Medicare under section 1876 of the Act or 
under a demonstration authority, as well as Medicare+Choice plans 
offered by organizations that contract under Part C of Medicare (see 
following discussion) are also excluded from the definition of a 
Medicare supplemental policy.

II. Legislative Changes

    BBA created a new Part C of Medicare, commonly known as 
Medicare+Choice. This allows Medicare eligible individuals to avail 
themselves of a wide range of managed care options. Under the new 
Medicare+Choice program, every individual entitled to Medicare Part A 
and enrolled under Part B, except for individuals with end-stage renal 
disease, may elect to receive benefits through either the existing 
Medicare fee-for-service program or a Part C Medicare+Choice plan. 
However, individuals choosing Medicare+Choice will not require the 
protections afforded under Medigap policies because their needs will be 
met under the Medicare+Choice program. Regulations for the new Part C 
Medicare+Choice program were published in a separate document on June 
26, 1998 (63 FR 52610).
    Section 4003(a)(1) of the BBA amended section 1882(d)(3)(A)(i) of 
the Act to provide that it is unlawful for a Medigap policy to be sold 
or issued to an individual who has elected to be enrolled in a 
Medicare+Choice plan when the seller has knowledge that the policy 
duplicates health benefits to which the individual is already entitled 
under Medicare+Choice or under another Medigap policy.
    Section 4003(a)(3) of BBA also states that a Medicare+Choice plan 
is excluded from the definition of a Medicare supplemental policy.
    Section 4031 of the BBA amended section 1882(s) of the Act, which 
governs guaranteed issue of Medigap policies. When an individual seeks 
to enroll in a specified Medigap policy within 63 days of the events 
described below, the issuer may not (1) deny or condition the issuance 
of a Medigap policy that is offered or available; (2) discriminate in 
the pricing of such a policy because of health status, claims 
experience, receipt of health care, or medical condition; or (3) impose 
a preexisting condition exclusion.

Involuntary Terminations of Coverage

    For the following four classes of individuals, the specific 
policies subject to the guaranteed issue requirements are Medigap plans 
``A'', ``B'', ``C'', or ``F'':
    (a) Individuals enrolled under an employee welfare benefit plan 
that provides health benefits that supplement Medicare, if the plan 
terminates or ceases to provide all those benefits.
    (b) Persons enrolled with a Medicare+Choice organization under a 
Medicare+Choice plan whose enrollment is discontinued under the 
following circumstances: (1) the organization's or plan's certification 
is terminated, or the organization has

[[Page 67080]]

discontinued providing the plan in the area where the person resides; 
(2) the individual is no longer eligible to remain in the plan because 
of a change in circumstances, including a move outside of the entity's 
service area, but not including nonpayment of premiums or disruptive 
behavior; or (3) the individual demonstrates that the organization 
substantially violated a material contract provision or materially 
misrepresented the plan's provisions in marketing the plan to the 
individual.
    (c) Persons enrolled with an HMO or other organization that has a 
risk or cost contract under section 1876 of the Act; with a health care 
prepayment plan under section 1833 of the Act; with a similar 
organization operating under a demonstration project authority; or 
under a Medicare SELECT policy (a type of Medigap policy in which an 
individual's choice of providers is restricted in return for a lower 
Medigap insurance premium). However, this only applies if enrollment 
ceases for the reasons set forth in (b) above and, in the case of a 
SELECT policy, there is no applicable provision under State law for 
continuation of the coverage.
    (d) Individuals enrolled under a Medigap policy if enrollment 
ceases because of: (1) Bankruptcy or insolvency of the issuer or 
because of other involuntary termination of coverage and there is no 
provision under applicable State law for the continuation of the 
coverage; (2) the issuer of the policy substantially violated a 
material provision of the policy; or (3) the issue materially 
misrepresented the policy's provisions in marketing the policy to the 
individual. See section 4031(a)(3) of BBA.

Free Look at Managed Care

    For the following class of individuals, the specific policies 
subject to the guaranteed issue requirements are the Medicare 
supplemental policy under which the individual was most recently 
enrolled if it is still available, or if this policy is not available 
from the previous issuer, Medigap plans ``A,'' ``B,'' ``C,'' or ``F.'' 
The following criteria must be met for the individual to qualify for 
guaranteed issue under this category: The individual (1) was covered 
under a Medigap policy; (2) subsequently terminated the policy and 
enrolled with a Medicare+Choice organization, with an HMO or other 
organization that has a contract under section 1876 of the Act, with a 
similar organization operating under a demonstration project authority, 
or purchased a Medicare SELECT policy; and (3) terminates enrollment in 
the Medicare+Choice or other organization, or the Medicare SELECT 
policy, described in (2) within 12 months after enrolling. However, 
this provision applies only if the individual had never previously been 
enrolled with any organization or policy mentioned in (2) above.
    For the five classes of Medicare beneficiaries described above, the 
guaranteed issue requirements protect ``individuals'' whose previous 
coverage has been terminated. Before the enactment of the BBA, 
beneficiaries had only one opportunity to purchase a Medigap policy on 
a ``guaranteed issue'' basis. This opportunity was only available to 
beneficiaries who were age 65 or over, and was available during the 6-
month period following the date that they were both age 65 or over and 
enrolled in Medicare Part B. There was no guaranteed open enrollment 
provision for individuals under age 65. However, in contrast to both 
the general open enrollment provision of section 1882(s)(2)(A) and the 
new guaranteed issue provision in section 1882(s)(3)(B)(vi) (discussed 
below), which specifically state that the protected ``individual'' must 
be at least age 65, the guaranteed issue provisions in section 
1882(s)(3)(B) (i) through (v) do not contain an age restriction. 
Therefore, the latter provisions apply by their terms both to 
individuals eligible for Medicare based on age, and those whose 
eligibility is based on disability or ESRD. All of these individuals 
who meet the requirements set forth in the BBA qualify for its 
guaranteed issue protections with respect to policies that are offered 
and available to new enrollees. (In some situations policies may not be 
available to beneficiaries under 65. In other situations, a policy 
designated ``B'', ``C,'' or ``F'' may not be available in a particular 
State.)
    There is one additional class of beneficiaries who are entitled by 
the BBA amendments to a guaranteed issue Medigap policy. An individual 
who upon first becoming eligible for Medicare at age 65 enrolls in a 
Medicare+Choice plan, and later disenrolls from the plan within 12 
months of the effective date of that enrollment, is entitled to 
guaranteed issue of any Medigap plan ``A'' through ``J'' under the same 
conditions described above (including that the individual must apply 
for the Medigap policy within 63 days of dropping the Medicare+Choice 
coverage, and may not be subject to a preexisting condition exclusion, 
or be subject to price discrimination based on health status).

Preexisting Condition Exclusion

    Section 4031(b) of the BBA also limits the application of a 
preexisting condition exclusion for Medigap policies during the initial 
6-month open-enrollment period for aged beneficiaries. Such an 
exclusion cannot be imposed on an individual who, on the date of 
application, had a continuous period of at least 6 months of health 
coverage defined as ``creditable coverage'' under title XXVII of the 
Public Health Service (PHS) Act, as added by title I of the Health 
Insurance Portability and Accountability Act of 1996 (HIPAA). If the 
individual has less than 6 months coverage, the issuer must reduce the 
period of any preexisting condition exclusion by the aggregate of 
periods of ``creditable coverage'' applicable to the individual as of 
the enrollment date. The rules used to determine the reduction are 
based on rules used under section 2701 of the PHS Act.
    The following information is provided for the convenience of the 
reader. A complete description of requirements under title XXVII of the 
PHS Act can be found at 45 CFR parts 144, 146, and 148. Under section 
2701, a policy can only exclude coverage for a preexisting condition if 
medical advice, diagnosis, care, or treatment was recommended or 
received for the condition within the six months before the effective 
date of the Medigap policy.
    HIPAA also added section 2701(c) of title XXVII of the PHS Act to 
define creditable coverage as coverage of the individual under any of 
the following: group health plan; health insurance coverage; Part A or 
B of Medicare; Medicaid; a medical care program of the Indian Health 
Service or a tribal organization; a State health benefits risk pool; a 
public health plan; the health care program for active military 
personnel; the Federal employees health benefit plan; and a health 
benefit plan under the Peace Corps Act. However, creditable coverage 
does not include policies consisting solely of coverage of excepted 
benefits, as described below. Creditable coverage must be continuous. 
This means the individual must have no breaks in coverage of greater 
than 63 days. If the break is greater than 63 days, a new period begins 
after the individual reacquires creditable coverage. See section 
2701(c)(2) of the PHS Act.
    An individual may demonstrate creditable coverage in several ways. 
First, group health plans, health insurance issuers, and certain other 
entities must furnish a certificate of creditable coverage after the 
coverage terminates. In some cases this will be when employment ends; 
in other cases it will be after exhaustion of ``continuation coverage'' 
under the Consolidated Omnibus Budget

[[Page 67081]]

Reconciliation Act of 1985 (Public Law 99-272) or under a similar State 
program. A certificate may also be obtained upon request by the 
individual. See section 2701(c) of the PHS Act. Creditable coverage can 
also be demonstrated if the individual attests to the existence of 
creditable coverage, and presents corroborating evidence (such as pay 
stubs with insurance deduction or explanation of benefits, or 
verification by a physician or former health care provider that the 
individual had health care coverage). The individual must cooperate in 
verifying the information.
    Excepted benefits as defined in section 2791(c) of the PHS Act 
means benefits under one or more of the following: accident or 
disability income insurance; a supplement to liability insurance; 
workers' compensation insurance; liability insurance such as automobile 
medical payment insurance or general liability insurance; credit-only 
insurance; on-site medical clinics and other similar insurance 
coverage, under which benefits for medical care are secondary or 
incidental to other insurance benefits.
    Other excepted benefits, if offered separately, include: Limited 
scope dental or vision benefits, long-term care, nursing home care, 
home health care, community-based care, or any combination of these. 
Other excepted benefits, if offered as independent, noncoordinated 
benefits, include specified disease or illness coverage and hospital 
indemnity, or other fixed indemnity insurance. Medicare supplemental 
insurance is also classified as an excepted benefit.

Long Term Care Insurance Policies

    Section 4031(c) of the BBA also clarifies, through a technical 
amendment, that certain disclosure requirements apply only to long-term 
care insurance policies that do not coordinate with Medicare and 
Medicaid.

High Deductible Medigap Standard Policies

    Section 4032 of the BBA adds two additional high deductible Medigap 
standard policies with benefit packages that are the same as Plans 
``F'' and ``J.'' The high deductible amount is $1,500 in 1998 and 1999. 
Out-of-pocket expenses, in this instance, are expenses that would 
ordinarily be paid by a Medigap policy. These expenses include the 
Medicare deductibles for Parts ``A'' and ``B'' but do not include, in 
Plan ``J'', the plan's separate prescription drug deductible of $250 
or, in Plans ``F'' and ``J,'' the plans'' separate foreign travel 
emergency deductible of $250.
    For subsequent years, the high deductible amount will be increased 
by the percentage increase in the Consumer Price Index for all urban 
consumers (all items; U.S. city average) for the 12-month period ending 
with August of the preceding year, rounded to the nearest multiple of 
$10. The beneficiary is responsible for payment of all expenses up to 
this amount.

Treatment of Hospital Outpatient Department Copayment

    Section 4031(f) of the BBA also specifies that ``copayment'' 
amounts provided for under section 1833(t)(5) of the Act with respect 
to hospital outpatient department services shall be treated under 
Medigap policies ``in the same manner as coinsurance with respect to 
such services.'' We have therefore clarified the Model by including a 
reference to coverage for copayments for hospital outpatient department 
services in section 8.B(5) of the Model, and in the cover page of the 
outline of coverage that immediately follows section 17.C(4) of the 
Model. For purposes of complying with Federal law, States must use this 
revised language.

III. Dates

    The provisions added by section 4031 of the BBA have a number of 
different effective dates, as established in section 4031(d). There has 
also been confusion about the effective date of the guaranteed issue 
provisions related to Medicare+Choice plans.

Guaranteed Issue Provisions

    Section 4031(a) of the BBA expanded the number of opportunities in 
which an individual can enroll in a Medigap policy on a ``guaranteed 
issue'' basis. It added section 1882(s)(3)(B), clauses (i) through 
(vi), to the Act to require that certain Medigap policies be offered to 
six categories of beneficiaries in specific circumstances. Section 
4031(d)(1) of the BBA makes these provisions effective July 1, 1998.
    Clause (ii) assures that individuals enrolled in Medicare+Choice 
plans are entitled to guaranteed issue of Medigap policies ``A,'' 
``B,'' ``C,'' and ``F'' if ``there are circumstances permitting 
discontinuance of the individual's election of the [Medicare+Choice] 
plan under the first sentence of section 1851(e)(4).'' This language 
caused confusion because of its cross-reference to the Medicare+Choice 
provisions in section 1851(e)(4). The latter provision is a 
Medicare+Choice provision, not a Medigap provision. Under the 
Medicare+Choice rules, starting in the year 2002, beneficiaries who 
elect to enroll in a Medicare+Choice plan will be subject to a ``lock-
in'' provision. This means that they will only be able to change their 
Medicare+Choice election under certain circumstances. With certain 
exceptions, other than during an annual open enrollment period, 
individuals will not be able to change to other Medicare+Choice plans, 
or return to original, fee-for-service Medicare, except as described in 
section 1851(e)(4). Therefore, a beneficiary will not need a Medigap 
policy unless he or she is permitted to return to original Medicare. It 
is our understanding that the NAIC drafting note following section 
12.B(2) of the Model was simply trying to explain to a ``Medigap 
audience'' why the Medigap requirement in clause (ii) cross-references 
a Medicare+Choice provision that will not itself be effective until 
2002.
    However, as a matter of Federal law, the guaranteed issue provision 
of clause (ii) takes effect July 1, 1998; continues in effect through 
and beyond 2002, and applies to any individual whose Medicare+Choice 
election terminates under the ``circumstances'' specified in 
subparagraphs (A) through (D) of section 1851(e)(4).
    Clause (ii) of section 1882(s)(3)(B) conditions the right to a 
guaranteed issue Medigap policy on the ``circumstances'' that would 
(beginning in 2002) permit a beneficiary to change a Medicare+Choice 
election. These circumstances are contained in subparagraphs (A) 
through (D) of the first sentence of paragraph (e)(4). The clearest 
indication that this refers to the ``circumstances'' described in 
subparagraphs (A) through (D) of section 1851(e)(4), without 
incorporating the date that appears in the introductory clause of 
section 1851(e)(4), is that clause (iii) contains a virtually identical 
reference to ``the circumstances that would permit discontinuance of an 
individual's election of coverage under the first sentence of section 
1851(e)(4).'' Clause (iii) applies to termination of Medicare managed 
care contracts under section 1876 of the Act. These contracts include 
``risk'' contracts under section 1876, which cease to exist as of 
December 31, 1998, because they will be replaced by Medicare+Choice 
contracts. Therefore, clause (iii) only makes sense if it is 
interpreted to refer to the ``circumstances'' described in 
subparagraphs (A) through (D) of section 1851(e)(4), without the 
incorporation of the 2002 date.
    On October 16, 1998, the NAIC's Medicare Supplement Working Group 
issued a Memorandum to all NAIC

[[Page 67082]]

members stating that it had recognized an inconsistency in the Model 
Regulation. The drafting note that follows subsection 12B(2), as 
adopted on April 29, 1998, stated that the guaranteed issue provisions 
do not become effective until January 1, 2002, for a person in a 
Medicare+Choice organization whose contract terminates. As discussed 
above, HCFA has determined, subsequent to the adoption of the Model 
Regulation by the NAIC, that this was a drafting inconsistency in the 
Model and that the provision became effective on July 1, 1998 along 
with the rest of the provisions. The NAIC has begun the process of 
amending the Model Regulation to eliminate the drafting error. 
Therefore, the Model Regulation, as set forth below, contains the 
corrected language as it has been proposed by the NAIC. For purposes of 
complying with Federal law, States must use this corrected language.

Other Provisions

Preexisting Condition Exclusions
    The limit on preexisting condition exclusions added by section 
4031(b) applies to policies issued on or after July 1, 1998. See 
section 4031(d) of the BBA.
Long-Term Care Provision
    The long-term care policy disclosure provision (section 4031(c) of 
the BBA) is effective July 1, 1997, as if included in HIPAA. See 
section 4031(d)(3) of the BBA. For purposes of disclosure, policies 
that coordinate with Medicare and other health insurance are not 
considered to provide benefits that duplicate Medicare.
Changes to Conform to Medicare+Choice
    The changes made by section 4003 of the BBA became effective on 
August 8, 1997, the date of enactment of the BBA.

Dates Applicable to Action by the NAIC

    Section 4031(e)(2) of the BBA specified that if, within 9 months of 
enactment of the BBA, the NAIC modified its ``Model Regulation'' to 
conform to the BBA amendments, then the revised regulation would apply 
for purposes of section 1882. The NAIC adopted the revised standards on 
April 29, 1998.

Dates Applicable to Actions by the States

    Each State is required to change its statutes or regulations to 
conform its regulatory program to the revised standards set forth in 
the NAIC Model Regulation, in order for Medigap policies to continue to 
be sold in that State. This action generally must be taken within 1 
year after the date of adoption of the revised NAIC standards, that is, 
by April 29, 1999. In general, a State will not be deemed out of 
compliance solely due to failure to make changes before that date. See 
section 4031(e)(1) of the BBA. The statute provides an exception for 
States that we identify as requiring new legislation to implement the 
standards but whose legislatures are not scheduled to meet in 1999 in a 
session at which these matters may be considered. See section 
4031(e)(4)(B) of the BBA.
    For States that fall within this exception, section 4031(e)(4)(B) 
of the BBA provides that a State will not be deemed out of compliance 
until the first day of the first quarter following the end of the first 
legislative session that begins on or after July 1, 1999. This section 
also provides that, in the case of a State that has a 2-year 
legislative session, each year of the session is deemed to be a 
separate regular session of the State legislature.
    Accordingly, the standards in the Model Regulation apply to 
Medicare supplemental policies issued in a State on or after April 29, 
1999, or an earlier date on which a State adopts the standards, unless 
the State of issuance has a legislature that does not meet during that 
timeframe.
    Separate notification letters were sent to the States by HCFA 
regional offices. States should notify the regional offices by letter 
when the State law conforms to the NAIC model.

IV. Publication of List for Standardized Benefit Packages

    We are publishing the list of standardized benefit packages, 
including Plans ``F'' and ``J,'' which will now be available in 
standard as well as high deductible forms. The following is a summary 
of the coverages available. This list of standardized Medicare 
supplemental benefit packages is contained in section 9.E of the 
revised Model Regulation adopted by the NAIC on April 29, 1998, which 
is reprinted at the end of this notice. Section 16 of the Model 
Regulation includes a chart that outlines the benefits covered in each 
of the 10 standardized Plans ``A'' through ``J.''
    Because it is necessary to refer to more than one section of the 
NAIC Model Regulation to determine the content of each standardized 
benefit package, we are providing the following summary of the 10 
packages.

Plan ``A'' (Core Benefit Plan) (NAIC Model Section 9.E.(1))

    The Core Benefit Plan includes the following:
     Coverage for the Part A coinsurance amount for day 61 
through day 90 of hospitalization in each Medicare benefit period.
     Coverage for the Part A coinsurance amount for each of 
Medicare's 60 non-renewable lifetime hospital inpatient reserve days 
used.
     After all Medicare hospital benefits are exhausted, 
coverage for 100 percent of the Medicare Part A eligible hospital 
expenses. Coverage is limited to a maximum of 365 days of additional 
inpatient hospital care during the policyholder's lifetime.
     Coverage under Medicare Parts A and B for the reasonable 
cost of the first three pints of blood per calendar year.
     Coverage for the coinsurance amount for Part B services, 
or, in the case of hospital outpatient department services, the 
applicable copayment, (generally 20 percent of the approved amount) 
after the $100 deductible is met. (Note that Plan A provides no 
coverage for benefits described in paragraphs (1) through (11) of NAIC 
Model Section 8.C.: the Part A inpatient hospital deductible (in 1998, 
$764 for each Medicare benefit period; $768 in 1999); the Part B 
deductible ($100 each year); Part A coinsurance for post-hospital 
skilled nursing facility care; Part B charges in excess of Medicare-
approved amounts; non-Medicare-covered prescription drugs, preventive 
services, at-home recovery services, or services received in a foreign 
country; or new or innovative benefits approved by the State insurance 
commissioner or by HCFA.)

Plan ``B'' (NAIC Model Section 9.E.(2))

     The core benefits; and
     The Part A inpatient hospital deductible.

Plan ``C'' (NAIC Model Section 9.E.(3))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     The Part B annual deductible; and
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000.

Plan ``D'' (NAIC Model Section 9.E.(4))

     The core benefits;

[[Page 67083]]

     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000; and
     Services that are not covered by Medicare to provide 
short-term, at-home assistance with activities of daily living for 
those recovering from an illness, injury or surgery, subject to 
limitations described in the NAIC Model.

Plan ``E'' (NAIC Model Section 9.E.(5))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000; and
     Preventive health services not covered by Medicare, 
subject to a $120 maximum annual benefit.

Plan ``F'' (NAIC Model Section 9.E.(6))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     The Part B annual deductible;
     One hundred percent of Part B excess charges (the 
difference between the actual Medicare Part B charge as billed, not to 
exceed any charge limitation established by the Medicare program or 
State law, and the Medicare-approved Part B charge); and
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000.

Plan ``F'' High Deductible (NAIC Model Section 9.E.(7))

    The high deductible plan pays the same or offers the same benefits 
as Plan ``F'' after the beneficiary has paid a calendar year deductible 
($1,500 in 1998 and 1999). Benefits from the high deductible Plan ``F'' 
will not begin until out-of-pocket expenses are equal to the deductible 
($1,500). Out-of-pocket expenses for this deductible are expenses that 
would ordinarily be paid by the policy. This includes the Medicare 
deductibles for Part A and Part B but does not include the plan's 
separate foreign travel emergency deductible.

Plan ``G'' (NAIC Model Section 9.E.(8))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     Eighty percent of Part B excess charges (80 percent of the 
difference between the actual Medicare Part B charge as billed, not to 
exceed any charge limitation established by the Medicare program or 
State law, and the Medicare-approved Part B charge);
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000; and
     Services that are not covered by Medicare to provide 
short-term, at-home assistance with activities of daily living for 
those recovering from an illness, injury or surgery, subject to 
limitations described in the NAIC Model Regulation.

Plan ``H'' (NAIC Model Section 9.E.(9))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000; and
     Fifty percent of outpatient prescription drug charges not 
covered by Medicare, subject to a $250 calendar year deductible and a 
maximum $1,250 in benefits per calendar year.

Plan ``I'' (NAIC Model Section 9.E.(10))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     One hundred percent of Part B excess charges (the 
difference between the actual Medicare Part B charge as billed, not to 
exceed any charge limitation established by the Medicare program or 
State law, and the Medicare-approved Part B charge);
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum 
benefit of $50,000;
     Services that are not covered by Medicare to provide 
short-term, at-home assistance with activities of daily living for 
those recovering from an illness, injury or surgery, subject to 
limitations described in the NAIC Model Regulation; and
     Fifty percent of outpatient prescription drug charges not 
covered by Medicare, subject to a $250 calendar year deductible and a 
maximum $1,250 in benefits per calendar year.

Plan ``J'' (NAIC Model Section 9.E.(11))

     The core benefits;
     The Part A inpatient hospital deductible;
     The Part A coinsurance for post-hospital skilled nursing 
facility care for days 21 through 100 in a Medicare benefit period;
     The Part B annual deductible;
     One hundred percent of Part B excess charges (the 
difference between the actual Medicare Part B charge as billed, not to 
exceed any charge limitation established by the Medicare program or 
State law, and the Medicare-approved Part B charge);
     Eighty percent of charges for emergency care received in a 
foreign country during the first 60 days of a trip outside the U.S., 
subject to a $250 calendar year deductible and a lifetime maximum of 
$50,000;
     Services that are not covered by Medicare to provide 
short-term, at-home assistance with activities of daily living for 
those recovering from an illness, injury or surgery, subject to 
limitations described in the NAIC Model Regulation;
     Fifty percent of outpatient prescription drug charges not 
covered by Medicare, subject to a $250 calendar year deductible and a 
maximum $3,000 in benefits per calendar year; and
     Preventive health services not covered by Medicare, 
subject to a $120 maximum annual benefit.

Plan ``J''-High Deductible (NAIC Model Section 9.E.(12)

    The high deductible plan pays the same or offers the same benefits 
as Plan ``J'' after a beneficiary has paid a calendar year deductible 
($1,500 in 1998 and 1999). Benefits from the high deductible Plan ``J'' 
will not begin until

[[Page 67084]]

out-of-pocket expenses are equal to the deductible ($1,500). Out-of-
pocket expenses for this deductible are expenses that would ordinarily 
be paid by the policy. This includes the Medicare deductibles for Part 
A and Part B, but does not include the plan's separate prescription 
drug deductible, or the plan's separate foreign travel emergency 
deductible.

V. Regulatory Impact Statement

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare a regulatory flexibility analysis unless we 
certify that a notice will not have a significant economic impact on a 
substantial number of small entities. For purposes of the RFA, some 
insurance companies are considered to be small entities. Small entities 
are nonprofit organizations, local and municipal government entities, 
and entities defined by the Small Business Administration as small 
businesses (firms with fewer than 500 employees). Individuals and 
States are not included in the definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a notice may have a significant impact on 
the operations of a substantial number of small rural hospitals. Such 
an analysis must conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    Approximately 360 insurance companies offer Medigap policies. About 
half of the 360 insurance companies might be considered small entities.
    All 50 States and the 360 insurance companies are affected by the 
revised standards described in this notice. Under these changes, 
insurers will now have to accept people in poorer health that the 
insurers could have rejected before. If there are delays before the 
insurance companies can raise rates to accommodate this change, or if 
the State does not let the insurance companies raise rates, there will 
be a cost to those companies. However, of the beneficiaries in poor 
health and meeting the criteria in the statute, we do not know how many 
of those who could have been rejected before will apply for Medigap 
insurance. As a result, we do not know the financial impact this may 
have on insurance companies selling Medigap insurance.
    The costs of implementing the new NAIC standards will include the 
codifying of changes in State insurance law or regulation to comply 
with the changes, and the modifying of insurance policies and notifying 
of the insured of the additional protections included in the changes to 
the NAIC Model Regulation. Any costs attributable to the NAIC 
regulatory changes are essentially mandated by the States, the 
Congress, and insurance companies.
    There are benefits from the revised standards for Medicare 
beneficiaries. The additional protections will afford them increased 
access to Medigap insurance while providing separate opportunities to 
take advantage of the new Medicare+Choice program. Additionally, 
Medicare beneficiaries who enroll in the Medicare+Choice program but 
wish to leave the program, in many instances, will have the opportunity 
to reenroll in a Medigap policy if they choose to return to the 
traditional Medicare fee-for-service program.
    This notice itself does not impose any requirements or result in 
costs or benefits. The purpose of the notice is to merely inform the 
public of the revised standards.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined, and we 
certify, that this notice and the standards will not have a significant 
economic impact on a substantial number of small entities or a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    In addition, this notice and the standards have been reviewed in 
accordance with the Unfunded Mandates Reform Act of 1995 (UMRA) (2 
U.S.C. 1501 et seq.) and Executive Order 12875. We estimate that 
implementation of the new NAIC standards will not require the 
expenditure of more than $100 million by the private sector. Therefore, 
we are not required to prepare a cost-benefit analysis of private 
sector expenditures, since this notice is not a significant regulatory 
action within the meaning of the UMRA.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Authority: Section 1882 of the Social Security Act (42 U.S.C. 
1395(ss)).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: November 24, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

Model Regulation To Implement the NAIC Medicare Supplement 
Insurance Minimum Standards Model Act

Table of Contents

Section 1.  Purpose
Section 2.  Authority
Section 3.  Applicability and Scope
Section 4.  Definitions
Section 5.  Policy Definitions and Terms
Section 6.  Policy Provisions
Section 7.  Minimum Benefit Standards for Policies or Certificates 
Issued for Delivery Prior to [insert effective date adopted by 
state]
Section 8.  Benefit Standards for Policies or Certificates Issued 
for Delivery After [insert effective date adopted by state]
Section 9.  Standard Medicare Supplement Benefit Plans
Section 10.  Medicare Select Policies and Certificates
Section 11.  Open Enrollment
Section 12.  Guaranteed Issue for Eligible Persons
Section 13.  Standards for Claims Payment
Section 14.  Loss Ratio Standards and Refund or Credit of Premium
Section 15.  Filing and Approval of Policies and Certificates and 
Premium Rates
Section 16.  Permitted Compensation Arrangements
Section 17.  Required Disclosure Provisions
Section 18.  Requirements for Application Forms and Replacement 
Coverage
Section 19.  Filing Requirements for Advertising
Section 20.  Standards for Marketing
Section 21.  Appropriateness of Recommended Purchase and Excessive 
Insurance
Section 22.  Reporting of Multiple Policies
Section 23.  Prohibition Against Preexisting Conditions, Waiting 
Periods, Elimination Periods and Probationary Periods in Replacement 
Policies or Certificates
Section 24.  Separability
Section 25.  Effective Date
Appendix A  Reporting Form for Calculation of Loss Ratios
Appendix B  Form for Reporting Duplicate Policies
Appendix C  Disclosure Statements

Section 1. Purpose

    The purpose of this regulation is to provide for the reasonable 
standardization of coverage and simplification of terms and benefits of 
Medicare supplement policies; to facilitate public understanding and 
comparison of such policies; to eliminate provisions contained in such 
policies which may be misleading or confusing in connection with the 
purchase of such policies or with the settlement of claims; and to 
provide for full disclosures in the sale of accident

[[Page 67085]]

and sickness insurance coverages to persons eligible for Medicare.

Section 2. Authority

    This regulation is issued pursuant to the authority vested in the 
commissioner under [cite appropriate section of state law providing 
authority for minimum benefit standards regulations or the NAIC 
Medicare Supplement Insurance Minimum Standards Model Act].

    Editor's Note: Wherever the term ``commissioner'' appears, the 
title of the chief insurance regulatory official of the state should 
be inserted.

Section 3. Applicability and Scope

    A. Except as otherwise specifically provided in Sections 7, 12, 13, 
16 and 21, this regulation shall apply to:
    (1) All Medicare supplement policies delivered or issued for 
delivery in this state on or after the effective date of this 
regulation; and
    (2) All certificates issued under group Medicare supplement 
policies which certificates have been delivered or issued for delivery 
in this state.
    B. This regulation shall not apply to a policy or contract of one 
or more employers or labor organizations, or of the trustees of a fund 
established by one or more employers or labor organizations, or 
combination thereof, for employees or former employees, or a 
combination thereof, or for members or former members, or a combination 
thereof, of the labor organizations.

Section 4. Definitions

    For purposes of this regulation:
    A. Applicant means:
    (1) In the case of an individual Medicare supplement policy, the 
person who seeks to contract for insurance benefits, and
    (2) In the case of a group Medicare supplement policy, the proposed 
certificateholder.
    B. Bankruptcy means when a Medicare+Choice organization that is not 
an issuer has filed, or has had filed against it, a petition for 
declaration of bankruptcy and has ceased doing business in the state.
    C. Certificate means any certificate delivered or issued for 
delivery in this state under a group Medicare supplement policy.
    D. Certificate form means the form on which the certificate is 
delivered or issued for delivery by the issuer.
    E. Continuous period of creditable coverage means the period during 
which an individual was covered by creditable coverage, if during the 
period of the coverage the individual had no breaks in coverage greater 
than sixty-three (63) days.
    F. (1) Creditable coverage means, with respect to an individual, 
coverage of the individual provided under any of the following:
    (a) A group health plan;
    (b) Health insurance coverage;
    (c) Part A or Part B of Title XVIII of the Social Security Act 
(Medicare);
    (d) Title XIX of the Social Security Act (Medicaid), other than 
coverage consisting solely of benefits under section 1928;
    (e) Chapter 55 of Title 10 United States Code (CHAMPUS);
    (f) A medical care program of the Indian Health Service or of a 
tribal organization;
    (g) A State health benefits risk pool;
    (h) A health plan offered under chapter 89 of Title 5 United States 
Code (Federal Employees Health Benefits Program);
    (i) A public health plan as defined in federal regulation; and
    (j) A health benefit plan under Section 5(e) of the Peace Corps Act 
(22 United States Code 2504(e)).
    (2) Creditable coverage shall not include one or more, or any 
combination of, the following:
    (a) Coverage only for accident or disability income insurance, or 
any combination thereof;
    (b) Coverage issued as a supplement to liability insurance;
    (c) Liability insurance, including general liability insurance and 
automobile liability insurance;
    (d) Workers' compensation or similar insurance;
    (e) Automobile medical payment insurance;
    (f) Credit-only insurance;
    (g) Coverage for on-site medical clinics; and
    (h) Other similar insurance coverage, specified in federal 
regulations, under which benefits for medical care are secondary or 
incidental to other insurance benefits.
    (3) Creditable coverage shall not include the following benefits if 
they are provided under a separate policy, certificate or contract of 
insurance or are otherwise not an integral part of the plan:
    (a) Limited scope dental or vision benefits;
    (b) Benefits for long-term care, nursing home care, home health 
care, community-based care, or any combination thereof; and
    (c) Such other similar, limited benefits as are specified in 
federal regulations.
    (4) Creditable coverage shall not include the following benefits if 
offered as independent, noncoordinated benefits:
    (a) Coverage only for a specified disease or illness; and
    (b) Hospital indemnity or other fixed indemnity insurance.
    (5) Creditable coverage shall not include the following if it is 
offered as a separate policy, certificate or contract of insurance:
    (a) Medicare supplemental health insurance as defined under section 
1882(g)(1) of the Social Security Act;
    (b) Coverage supplemental to the coverage provided under chapter 55 
of title 10, United States Code; and
    (c) Similar supplemental coverage provided to coverage under a 
group health plan.

    Drafting Note: The Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) specifically addresses separate, 
noncoordinated benefits in the group market at PHSA Sec. 2721(d)(2) 
and the individual market at Sec. 2791(c)(3). HIPAA also references 
excepted benefits at PHSA Secs. 2701(c)(1), 2721(d), 2763(b) and 
2791(c). In addition, creditable coverage will be addressed in 
regulations issued by the Secretary pursuant to HIPAA.

    G. Employee welfare benefit plan means a plan, fund or program of 
employee benefits as defined in 29 U.S.C. Section 1002 (Employee 
Retirement Income Security Act).
    H. Insolvency means when an issuer, licensed to transact the 
business of insurance in this state, has had a final order of 
liquidation entered against it with a finding of insolvency by a court 
of competent jurisdiction in the issuer's state of domicile.

    Drafting Note: If the state law definition of insolvency differs 
from the above definition, please insert the state law definition.

    I. Issuer includes insurance companies, fraternal benefit 
societies, health care service plans, health maintenance organizations, 
and any other entity delivering or issuing for delivery in this state 
Medicare supplement policies or certificates.
    J. Medicare means the ``Health Insurance for the Aged Act,'' Title 
XVIII of the Social Security Amendments of 1965, as then constituted or 
later amended.
    K. Medicare+Choice plan means a plan of coverage for health 
benefits under Medicare Part C as defined in [refer to definition of 
Medicare+Choice plan in Section 1859 found in Title IV, Subtitle A, 
Chapter 1 of P.L. 105-33], and includes:
    (1) Coordinated care plans which provide health care services, 
including but not limited to health maintenance organization plans 
(with or without a point-of-service option), plans offered by provider-
sponsored organizations,

[[Page 67086]]

and preferred provider organization plans;
    (2) Medical savings account plans coupled with a contribution into 
a Medicare+Choice medical savings account; and
    (3) Medicare+Choice private fee-for-service plans.
    L. Medicare supplement policy means a group or individual policy of 
[accident and sickness] insurance or a subscriber contract [of hospital 
and medical service associations or health maintenance organizations], 
other than a policy issued pursuant to a contract under Section 1876 of 
the federal Social Security Act (42 U.S.C. Section 1395 et. seq.) or an 
issued policy under a demonstration project specified in 42 U.S.C. 
Sec. 1395ss(g)(1), which is advertised, marketed or designed primarily 
as a supplement to reimbursements under Medicare for the hospital, 
medical or surgical expenses of persons eligible for Medicare.

    Drafting Note: OBRA 1990 contained an exception from this 
definition for policies issued pursuant to an agreement under 
Section 1833 (42 U.S.C. 1395l) of the federal Social Security Act. 
The Social Security Act Amendments of 1994 eliminated the exemption 
for Section 1833 plans effective December 31, 1995. These plans, 
commonly known as health care prepayment plans (HCPPs), arrange for 
certain Part B services on a pre-paid basis. The federal law 
continues to authorize HCPP agreements. However, since they are now 
included in the federal definition of a Medicare supplement policy, 
HCPPs are subject to the requirements of this model, unless they are 
exempt under Section 3B. In states authorized for the Medicare 
Select program, these plans may be able to comply with Medicare 
supplement requirements.

    M. Policy form means the form on which the policy is delivered or 
issued for delivery by the issuer.
    N. Secretary means the Secretary of the United States Department of 
Health and Human Services.

Section 5. Policy Definitions and Terms

    No policy or certificate may be advertised, solicited or issued for 
delivery in this state as a Medicare supplement policy or certificate 
unless the policy or certificate contains definitions or terms which 
conform to the requirements of this section.
    A. Accident, accidental injury, or accidental means shall be 
defined to employ ``result'' language and shall not include words which 
establish an accidental means test or use words such as ``external, 
violent, visible wounds'' or similar words of description or 
characterization.
    (1) The definition shall not be more restrictive than the 
following: ``Injury or injuries for which benefits are provided means 
accidental bodily injury sustained by the insured person which is the 
direct result of an accident, independent of disease or bodily 
infirmity or any other cause, and occurs while insurance coverage is in 
force.''
    (2) The definition may provide that injuries shall not include 
injuries for which benefits are provided or available under any 
workers' compensation, employer's liability or similar law, or motor 
vehicle no-fault plan, unless prohibited by law.
    B. Benefit period or Medicare benefit period shall not be defined 
more restrictively than as defined in the Medicare program.
    C. Convalescent nursing home, extended care facility, or skilled 
nursing facility shall not be defined more restrictively than as 
defined in the Medicare program.
    D. Health care expenses means expenses of health maintenance 
organizations associated with the delivery of health care services, 
which expenses are analogous to incurred losses of insurers.
    Expenses shall not include:
    (1) Home office and overhead costs;
    (2) Advertising costs;
    (3) Commissions and other acquisition costs;
    (4) Taxes;
    (5) Capital costs;
    (6) Administrative costs; and
    (7) Claims processing costs.
    E. Hospital may be defined in relation to its status, facilities 
and available services or to reflect its accreditation by the Joint 
Commission on Accreditation of Hospitals, but not more restrictively 
than as defined in the Medicare program.
    F. Medicare shall be defined in the policy and certificate. 
Medicare may be substantially defined as ``The Health Insurance for the 
Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then 
Constituted or Later Amended,'' or ``Title I, Part I of Public Law 89-
97, as Enacted by the Eighty-Ninth Congress of the United States of 
America and popularly known as the Health Insurance for the Aged Act, 
as then constituted and any later amendments or substitutes thereof,'' 
or words of similar import.
    G. Medicare eligible expenses shall mean expenses of the kinds 
covered by Medicare, to the extent recognized as reasonable and 
medically necessary by Medicare.
    H. Physician shall not be defined more restrictively than as 
defined in the Medicare program.

I. Sickness shall not be defined to be more restrictive than the 
following:

    ``Sickness means illness or disease of an insured person which 
first manifests itself after the effective date of insurance and while 
the insurance is in force.''
    The definition may be further modified to exclude sicknesses or 
diseases for which benefits are provided under any workers' 
compensation, occupational disease, employer's liability or similar 
law.

Section 6. Policy Provisions

    A. Except for permitted preexisting condition clauses as described 
in Section 7A(1) and Section 8A(1) of this regulation, no policy or 
certificate may be advertised, solicited or issued for delivery in this 
state as a Medicare supplement policy if the policy or certificate 
contains limitations or exclusions on coverage that are more 
restrictive than those of Medicare.
    B. No Medicare supplement policy or certificate may use waivers to 
exclude, limit or reduce coverage or benefits for specifically named or 
described preexisting diseases or physical conditions.
    C. No Medicare supplement policy or certificate in force in the 
state shall contain benefits which duplicate benefits provided by 
Medicare.

Section 7. Minimum Benefit Standards for Policies or Certificates 
Issued for Delivery Prior to [insert effective date adopted by 
state]

    No policy or certificate may be advertised, solicited or issued for 
delivery in this state as a Medicare supplement policy or certificate 
unless it meets or exceeds the following minimum standards. These are 
minimum standards and do not preclude the inclusion of other provisions 
or benefits which are not inconsistent with these standards.

    Drafting Note: This section has been retained for transitional 
purposes. The purpose of this section is to govern all policies 
issued prior to the date a state makes its revisions to conform to 
the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508).

    A. General Standards. The following standards apply to Medicare 
supplement policies and certificates and are in addition to all other 
requirements of this regulation.
    (1) A Medicare supplement policy or certificate shall not exclude 
or limit benefits for losses incurred more than six (6) months from the 
effective date of coverage because it involved a preexisting condition. 
The policy or certificate shall not define a preexisting

[[Page 67087]]

condition more restrictively than a condition for which medical advice 
was given or treatment was recommended by or received from a physician 
within six (6) months before the effective date of coverage.

    Drafting Note: States that have adopted the NAIC Individual 
Accident and Sickness Insurance Minimum Standards Model Act should 
recognize a conflict between Section 6B of that Act and this 
subsection. It may be necessary to include additional language in 
the Minimum Standards Model Act that recognizes the applicability of 
this preexisting condition rule to Medicare supplement policies and 
certificates.

    (2) A Medicare supplement policy or certificate shall not indemnify 
against losses resulting from sickness on a different basis than losses 
resulting from accidents.
    (3) A Medicare supplement policy or certificate shall provide that 
benefits designed to cover cost sharing amounts under Medicare will be 
changed automatically to coincide with any changes in the applicable 
Medicare deductible amount and copayment percentage factors. Premiums 
may be modified to correspond with such changes.

    Drafting Note: This provision was prepared so that premium 
changes can be made based upon the changes in policy benefits that 
will be necessary because of changes in Medicare benefits. States 
may wish to redraft this provision so as to coincide with their 
particular authority.

    (4) A ``noncancellable, ``guaranteed renewable,'' or 
``noncancellable and guaranteed renewable'' Medicare supplement policy 
shall not:
    (a) Provide for termination of coverage of a spouse solely because 
of the occurrence of an event specified for termination of coverage of 
the insured, other than the nonpayment of premium; or
    (b) Be cancelled or nonrenewed by the issuer solely on the grounds 
of deterioration of health.
    (5) (a) Except as authorized by the commissioner of this state, an 
issuer shall neither cancel nor nonrenew a Medicare supplement policy 
or certificate for any reason other than nonpayment of premium or 
material misrepresentation.
    (b) If a group Medicare supplement insurance policy is terminated 
by the group policyholder and not replaced as provided in Paragraph 
(5)(d), the issuer shall offer certificateholders an individual 
Medicare supplement policy. The issuer shall offer the 
certificateholder at least the following choices:
    (i) An individual Medicare supplement policy currently offered by 
the issuer having comparable benefits to those contained in the 
terminated group Medicare supplement policy; and
    (ii) An individual Medicare supplement policy which provides only 
such benefits as are required to meet the minimum standards as defined 
in Section 8B of this regulation.

    Drafting Note: Group contracts in force prior to the effective 
date of the Omnibus Budget Reconciliation Act (OBRA) of 1990 may 
have existing contractual obligations to continue benefits contained 
in the group contract. This section is not intended to impair such 
obligations.

    (c) If membership in a group is terminated, the issuer shall:
    (i) Offer the certificateholder the conversion opportunities 
described in Subparagraph (b); or
    (ii) At the option of the group policyholder, offer the 
certificateholder continuation of coverage under the group policy.
    (d) If a group Medicare supplement policy is replaced by another 
group Medicare supplement policy purchased by the same policyholder, 
the issuer of the replacement policy shall offer coverage to all 
persons covered under the old group policy on its date of termination. 
Coverage under the new group policy shall not result in any exclusion 
for preexisting conditions that would have been covered under the group 
policy being replaced.

    Drafting Note: Rate increases otherwise authorized by law are 
not prohibited by this Paragraph (5).

    (6) Termination of a Medicare supplement policy or certificate 
shall be without prejudice to any continuous loss which commenced while 
the policy was in force, but the extension of benefits beyond the 
period during which the policy was in force may be predicated upon the 
continuous total disability of the insured, limited to the duration of 
the policy benefit period, if any, or to payment of the maximum 
benefits.
    B. Minimum Benefit Standards.
    (1) Coverage of Part A Medicare eligible expenses for 
hospitalization to the extent not covered by Medicare from the 61st day 
through the 90th day in any Medicare benefit period;
    (2) Coverage for either all or none of the Medicare Part A 
inpatient hospital deductible amount;
    (3) Coverage of Part A Medicare eligible expenses incurred as daily 
hospital charges during use of Medicare's lifetime hospital inpatient 
reserve days;
    (4) Upon exhaustion of all Medicare hospital inpatient coverage 
including the lifetime reserve days, coverage of ninety percent (90%) 
of all Medicare Part A eligible expenses for hospitalization not 
covered by Medicare subject to a lifetime maximum benefit of an 
additional 365 days;
    (5) Coverage under Medicare Part A for the reasonable cost of the 
first three (3) pints of blood (or equivalent quantities of packed red 
blood cells, as defined under federal regulations) unless replaced in 
accordance with federal regulations or already paid for under Part B;
    (6) Coverage for the coinsurance amount of Medicare eligible 
expenses under Part B regardless of hospital confinement, subject to a 
maximum calendar year out-of-pocket amount equal to the Medicare Part B 
deductible [$100];
    (7) Effective January 1, 1990, coverage under Medicare Part B for 
the reasonable cost of the first three (3) pints of blood (or 
equivalent quantities of packed red blood cells, as defined under 
federal regulations), unless replaced in accordance with federal 
regulations or already paid for under Part A, subject to the Medicare 
deductible amount.

Section 8. Benefit Standards for Policies or Certificates Issued or 
Delivered on or After [insert effective date adopted by state]

    The following standards are applicable to all Medicare supplement 
policies or certificates delivered or issued for delivery in this state 
on or after [insert effective date]. No policy or certificate may be 
advertised, solicited, delivered or issued for delivery in this state 
as a Medicare supplement policy or certificate unless it complies with 
these benefit standards.
    A. General Standards. The following standards apply to Medicare 
supplement policies and certificates and are in addition to all other 
requirements of this regulation.
    (1) A Medicare supplement policy or certificate shall not exclude 
or limit benefits for losses incurred more than six (6) months from the 
effective date of coverage because it involved a preexisting condition. 
The policy or certificate may not define a preexisting condition more 
restrictively than a condition for which medical advice was given or 
treatment was recommended by or received from a physician within six 
(6) months before the effective date of coverage.

    Drafting Note: States that have adopted the NAIC Individual 
Accident and Sickness Insurance Minimum Standards Model Act should 
recognize a conflict between Section 6B of that Act and this 
subsection. It may be necessary to include additional language in

[[Page 67088]]

the Minimum Standards Model Act that recognizes the applicability of 
this preexisting condition rule to Medicare supplement policies and 
certificates.

    (2) A Medicare supplement policy or certificate shall not indemnify 
against losses resulting from sickness on a different basis than losses 
resulting from accidents.
    (3) A Medicare supplement policy or certificate shall provide that 
benefits designed to cover cost sharing amounts under Medicare will be 
changed automatically to coincide with any changes in the applicable 
Medicare deductible amount and copayment percentage factors. Premiums 
may be modified to correspond with such changes.

    Drafting Note: This provision was prepared so that premium 
changes can be made based on the changes in policy benefits that 
will be necessary because of changes in Medicare benefits. States 
may wish to redraft this provision to conform with their particular 
authority.

    (4) No Medicare supplement policy or certificate shall provide for 
termination of coverage of a spouse solely because of the occurrence of 
an event specified for termination of coverage of the insured, other 
than the nonpayment of premium.
    (5) Each Medicare supplement policy shall be guaranteed renewable.
    (a) The issuer shall not cancel or nonrenew the policy solely on 
the ground of health status of the individual.
    (b) The issuer shall not cancel or nonrenew the policy for any 
reason other than nonpayment of premium or material misrepresentation.
    (c) If the Medicare supplement policy is terminated by the group 
policyholder and is not replaced as provided under Section 8A(5)(e), 
the issuer shall offer certificateholders an individual Medicare 
supplement policy which (at the option of the certificateholder)
    (i) Provides for continuation of the benefits contained in the 
group policy, or
    (ii) Provides for benefits that otherwise meet the requirements of 
this subsection.
    (d) If an individual is a certificateholder in a group Medicare 
supplement policy and the individual terminates membership in the 
group, the issuer shall:
    (i) Offer the certificateholder the conversion opportunity 
described in Section 8A(5)(c), or
    (ii) At the option of the group policyholder, offer the 
certificateholder continuation of coverage under the group policy.
    (e) If a group Medicare supplement policy is replaced by another 
group Medicare supplement policy purchased by the same policyholder, 
the issuer of the replacement policy shall offer coverage to all 
persons covered under the old group policy on its date of termination. 
Coverage under the new policy shall not result in any exclusion for 
preexisting conditions that would have been covered under the group 
policy being replaced.

    Drafting Note: Rate increases otherwise authorized by law are 
not prohibited by this Paragraph (5).

    (6) Termination of a Medicare supplement policy or certificate 
shall be without prejudice to any continuous loss which commenced while 
the policy was in force, but the extension of benefits beyond the 
period during which the policy was in force may be conditioned upon the 
continuous total disability of the insured, limited to the duration of 
the policy benefit period, if any, or payment of the maximum benefits.
    (7) (a) A Medicare supplement policy or certificate shall provide 
that benefits and premiums under the policy or certificate shall be 
suspended at the request of the policyholder or certificateholder for 
the period (not to exceed twenty-four (24) months) in which the 
policyholder or certificateholder has applied for and is determined to 
be entitled to medical assistance under Title XIX of the Social 
Security Act, but only if the policyholder or certificateholder 
notifies the issuer of the policy or certificate within ninety (90) 
days after the date the individual becomes entitled to assistance.
    (b) If suspension occurs and if the policyholder or 
certificateholder loses entitlement to medical assistance, the policy 
or certificate shall be automatically reinstituted (effective as of the 
date of termination of entitlement) as of the termination of 
entitlement if the policyholder or certificateholder provides notice of 
loss of entitlement within ninety (90) days after the date of loss and 
pays the premium attributable to the period, effective as of the date 
of termination of entitlement.
    (c) Reinstitution of coverages:
    (i) Shall not provide for any waiting period with respect to 
treatment of preexisting conditions;
    (ii) Shall provide for coverage which is substantially equivalent 
to coverage in effect before the date of suspension; and
    (iii) Shall provide for classification of premiums on terms at 
least as favorable to the policyholder or certificateholder as the 
premium classification terms that would have applied to the 
policyholder or certificateholder had the coverage not been suspended.
    B. Standards for Basic (Core) Benefits Common to All Benefit Plans.
    Every issuer shall make available a policy or certificate including 
only the following basic ``core'' package of benefits to each 
prospective insured. An issuer may make available to prospective 
insureds any of the other Medicare Supplement Insurance Benefit Plans 
in addition to the basic core package, but not in lieu of it.
    (1) Coverage of Part A Medicare eligible expenses for 
hospitalization to the extent not covered by Medicare from the 61st day 
through the 90th day in any Medicare benefit period;
    (2) Coverage of Part A Medicare eligible expenses incurred for 
hospitalization to the extent not covered by Medicare for each Medicare 
lifetime inpatient reserve day used;
    (3) Upon exhaustion of the Medicare hospital inpatient coverage 
including the lifetime reserve days, coverage of the Medicare Part A 
eligible expenses for hospitalization paid at the diagnostic related 
group (DRG) day outlier per diem or other appropriate standard of 
payment, subject to a lifetime maximum benefit of an additional 365 
days;
    (4) Coverage under Medicare Parts A and B for the reasonable cost 
of the first three (3) pints of blood (or equivalent quantities of 
packed red blood cells, as defined under federal regulations) unless 
replaced in accordance with federal regulations;
    (5) Coverage for the coinsurance amount (or, in the case of 
hospital outpatient department services, the copayment amount) of 
Medicare eligible expenses under Part B regardless of hospital 
confinement, subject to the Medicare Part B deductible;
    C. Standards for Additional Benefits. The following additional 
benefits shall be included in Medicare Supplement Benefit Plans ``B'' 
through ``J'' only as provided by Section 9 of this regulation.
    (1) Medicare Part A Deductible: Coverage for all of the Medicare 
Part A inpatient hospital deductible amount per benefit period.
    (2) Skilled Nursing Facility Care: Coverage for the actual billed 
charges up to the coinsurance amount from the 21st day through the 
100th day in a Medicare benefit period for posthospital skilled nursing 
facility care eligible under Medicare Part A.
    (3) Medicare Part B Deductible: Coverage for all of the Medicare 
Part B deductible amount per calendar year regardless of hospital 
confinement.

[[Page 67089]]

    (4) Eighty Percent (80%) of the Medicare Part B Excess Charges: 
Coverage for eighty percent (80%) of the difference between the actual 
Medicare Part B charge as billed, not to exceed any charge limitation 
established by the Medicare program or state law, and the Medicare-
approved Part B charge.
    (5) One Hundred Percent (100%) of the Medicare Part B Excess 
Charges: Coverage for all of the difference between the actual Medicare 
Part B charge as billed, not to exceed any charge limitation 
established by the Medicare program or state law, and the Medicare-
approved Part B charge.
    (6) Basic Outpatient Prescription Drug Benefit: Coverage for fifty 
percent (50%) of outpatient prescription drug charges, after a $250 
calendar year deductible, to a maximum of $1,250 in benefits received 
by the insured per calendar year, to the extent not covered by 
Medicare.
    (7) Extended Outpatient Prescription Drug Benefit: Coverage for 
fifty percent (50%) of outpatient prescription drug charges, after a 
$250 calendar year deductible to a maximum of $3,000 in benefits 
received by the insured per calendar year, to the extent not covered by 
Medicare.
    (8) Medically Necessary Emergency Care in a Foreign Country: 
Coverage to the extent not covered by Medicare for eighty percent (80%) 
of the billed charges for Medicare-eligible expenses for medically 
necessary emergency hospital, physician and medical care received in a 
foreign country, which care would have been covered by Medicare if 
provided in the United States and which care began during the first 
sixty (60) consecutive days of each trip outside the United States, 
subject to a calendar year deductible of $250, and a lifetime maximum 
benefit of $50,000. For purposes of this benefit, ``emergency care'' 
shall mean care needed immediately because of an injury or an illness 
of sudden and unexpected onset.
    (9) Preventive Medical Care Benefit: Coverage for the following 
preventive health services:
    (a) An annual clinical preventive medical history and physical 
examination that may include tests and services from Subparagraph (b) 
and patient education to address preventive health care measures.
    (b) Any one or a combination of the following preventive screening 
tests or preventive services, the frequency of which is considered 
medically appropriate:
    (1) Fecal occult blood test or digital rectal examination, or both;
    (2) Mammogram;
    (3) Dipstick urinalysis for hematuria, bacteriuria and proteinuria;
    (4) Pure tone (air only) hearing screening test, administered or 
ordered by a physician;
    (5) Serum cholesterol screening (every five (5) years);
    (6) Thyroid function test;
    (7) Diabetes screening.
    (c) Influenza vaccine administered at any appropriate time during 
the year and tetanus and diphtheria booster (every ten (10) years).
    (d) Any other tests or preventive measures determined appropriate 
by the attending physician.
    Reimbursement shall be for the actual charges up to one hundred 
percent (100%) of the Medicare-approved amount for each service, as if 
Medicare were to cover the service as identified in American Medical 
Association Current Procedural Terminology (AMA CPT) codes, to a 
maximum of $120 annually under this benefit. This benefit shall not 
include payment for any procedure covered by Medicare.
    (10) At-Home Recovery Benefit: Coverage for services to provide 
short term, at-home assistance with activities of daily living for 
those recovering from an illness, injury or surgery.
    (a) For purposes of this benefit, the following definitions shall 
apply:
    (i) ``Activities of daily living'' include, but are not limited to 
bathing, dressing, personal hygiene, transferring, eating, ambulating, 
assistance with drugs that are normally self-administered, and changing 
bandages or other dressings.
    (ii) ``Care provider'' means a duly qualified or licensed home 
health aide or homemaker, personal care aide or nurse provided through 
a licensed home health care agency or referred by a licensed referral 
agency or licensed nurses registry.
    (iii) ``Home'' shall mean any place used by the insured as a place 
of residence, provided that the place would qualify as a residence for 
home health care services covered by Medicare. A hospital or skilled 
nursing facility shall not be considered the insured's place of 
residence.
    (iv) ``At-home recovery visit'' means the period of a visit 
required to provide at home recovery care, without limit on the 
duration of the visit, except each consecutive four (4) hours in a 
twenty-four-hour period of services provided by a care provider is one 
visit.
    (b) Coverage Requirements and Limitations.
    (i) At-home recovery services provided must be primarily services 
which assist in activities of daily living.
    (ii) The insured's attending physician must certify that the 
specific type and frequency of at-home recovery services are necessary 
because of a condition for which a home care plan of treatment was 
approved by Medicare.
    (iii) Coverage is limited to:
    (I) No more than the number and type of at-home recovery visits 
certified as necessary by the insured's attending physician. The total 
number of at-home recovery visits shall not exceed the number of 
Medicare approved home health care visits under a Medicare approved 
home care plan of treatment;
    (II) The actual charges for each visit up to a maximum 
reimbursement of $40 per visit;
    (III) $1,600 per calendar year;
    (IV) Seven (7) visits in any one week;
    (V) Care furnished on a visiting basis in the insured's home;
    (VI) Services provided by a care provider as defined in this 
section;
    (VII) At-home recovery visits while the insured is covered under 
the policy or certificate and not otherwise excluded;
    (VIII) At-home recovery visits received during the period the 
insured is receiving Medicare approved home care services or no more 
than eight (8) weeks after the service date of the last Medicare 
approved home health care visit.
    (c) Coverage is excluded for:
    (i) Home care visits paid for by Medicare or other government 
programs; and
    (ii) Care provided by family members, unpaid volunteers or 
providers who are not care providers.
    (11) New or Innovative Benefits: An issuer may, with the prior 
approval of the commissioner, offer policies or certificates with new 
or innovative benefits in addition to the benefits provided in a policy 
or certificate that otherwise complies with the applicable standards. 
The new or innovative benefits may include benefits that are 
appropriate to Medicare supplement insurance, new or innovative, not 
otherwise available, cost-effective, and offered in a manner which is 
consistent with the goal of simplification of Medicare supplement 
policies.

    Drafting Note: The Omnibus Budget Reconciliation Act 1990, 42 
U.S.C. Sec. 1395ss(p)(7), does not prohibit the issuers of Medicare 
supplement policies, through an arrangement with a vendor for 
discounts from the vendor, from making available discounts from the 
vendor to the policyholder or certificateholder for the purchase of 
items or services not covered under its Medicare supplement policies 
(for example: discounts on hearing aids or eyeglasses).

    Drafting Note: Use of new or innovative benefits may be 
appropriate to add coverage

[[Page 67090]]

or access to such benefits as prescription drugs, at-home recovery 
services and preventive medical care. Any such innovative benefit, 
however, should offer uniquely different or significantly expanded 
coverage.

    Drafting Note: The NAIC discussed including inflation protection 
for prescription drugs, at-home recovery benefits, and preventive 
care benefits. However, because of the lack of an appropriate 
mechanism for indexing these benefits, NAIC has not included 
indexing at this point in time. However, NAIC is committed to 
evaluating the effectiveness of these benefits without inflation 
protection, and will revisit the issue. NAIC has determined that 
OBRA does not authorize NAIC to delegate the authority for indexing 
these benefits to a federal agency without an amendment to federal 
law.

Section 9. Standard Medicare Supplement Benefit Plans

    A. An issuer shall make available to each prospective policyholder 
and certificateholder a policy form or certificate form containing only 
the basic core benefits, as defined in Section 8B of this regulation.
    B. No groups, packages or combinations of Medicare supplement 
benefits other than those listed in this section shall be offered for 
sale in this state, except as may be permitted in Section 8C(11) and in 
Section 10 of this regulation.
    C. Benefit plans shall be uniform in structure, language, 
designation and format to the standard benefit plans ``A'' through 
``J'' listed in this subsection and conform to the definitions in 
Section 4 of this regulation. Each benefit shall be structured in 
accordance with the format provided in Sections 8B and 8C and list the 
benefits in the order shown in this subsection. For purposes of this 
section, ``structure, language, and format'' means style, arrangement 
and overall content of a benefit.
    D. An issuer may use, in addition to the benefit plan designations 
required in Subsection C, other designations to the extent permitted by 
law.

    Drafting Note: It is anticipated that if a state determines that 
it will authorize the sale of only some of these benefit plans, the 
letter codes used in this regulation will be preserved. The Guide to 
Health Insurance for People with Medicare'' published jointly by the 
NAIC and the Health Care Financing Administration will contain a 
chart comparing the ten possible combinations. In order for 
consumers to compare specific policy choices, it will be important 
that a uniform ``naming'' system be used. Thus, if only plans ``A,'' 
``B,'' ``D,'' ``F'' and ``H'' (for example) are authorized in a 
state, these plans should retain these alphabetical designations. 
However, an issuer may use, in addition to these alphabetical 
designations, other designations as provided in Section 9D of this 
regulation.

    E. Make-up of benefit plans:
    (1) Standardized Medicare supplement benefit plan ``A'' shall be 
limited to the basic (core) benefits common to all benefit plans, as 
defined in Section 8B of this regulation.
    (2) Standardized Medicare supplement benefit plan ``B'' shall 
include only the following: The core benefit as defined in Section 8B 
of this regulation, plus the Medicare Part A deductible as defined in 
Section 8C(1).
    (3) Standardized Medicare supplement benefit plan ``C'' shall 
include only the following: The core benefit as defined in Section 8B 
of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, Medicare Part B deductible and medically 
necessary emergency care in a foreign country as defined in Sections 8C 
(1), (2), (3) and (8) respectively.
    (4) Standardized Medicare supplement benefit plan ``D'' shall 
include only the following: The core benefit (as defined in Section 8B 
of this regulation), plus the Medicare Part A deductible, skilled 
nursing facility care, medically necessary emergency care in an foreign 
country and the at-home recovery benefit as defined in Sections 8C (1), 
(2), (8) and (10) respectively.
    (5) Standardized Medicare supplement benefit plan ``E'' shall 
include only the following: The core benefit as defined in Section 8B 
of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, medically necessary emergency care in a foreign 
country and preventive medical care as defined in Sections 8C (1), (2), 
(8) and (9) respectively.
    (6) Standardized Medicare supplement benefit plan ``F'' shall 
include only the following: The core benefit as defined in Section 8B 
of this regulation, plus the Medicare Part A deductible, the skilled 
nursing facility care, the Part B deductible, one hundred percent 
(100%) of the Medicare Part B excess charges, and medically necessary 
emergency care in a foreign country as defined in Sections 8C (1), (2), 
(3), (5) and (8) respectively.
    (7) Standardized Medicare supplement benefit high deductible plan 
``F'' shall include only the following: 100% of covered expenses 
following the payment of the annual high deductible plan ``F'' 
deductible. The covered expenses include the core benefit as defined in 
Section 8B of this regulation, plus the Medicare Part A deductible, 
skilled nursing facility care, the Medicare Part B deductible, one 
hundred percent (100%) of the Medicare Part B excess charges, and 
medically necessary emergency care in a foreign country as defined in 
Sections 8C (1), (2), (3), (5) and (8) respectively. The annual high 
deductible plan ``F'' deductible shall consist of out-of-pocket 
expenses, other than premiums, for services covered by the Medicare 
supplement plan ``F'' policy, and shall be in addition to any other 
specific benefit deductibles. The annual high deductible Plan ``F'' 
deductible shall be $1500 for 1998 and 1999, and shall be based on the 
calendar year. It shall be adjusted annually thereafter by the 
Secretary to reflect the change in the Consumer Price Index for all 
urban consumers for the twelve-month period ending with August of the 
preceding year, and rounded to the nearest multiple of $10.
    (8) Standardized Medicare supplement benefit plan ``G'' shall 
include only the following: The core benefit as defined in Section 8B 
of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, eighty percent (80%) of the Medicare Part B 
excess charges, medically necessary emergency care in a foreign 
country, and the at-home recovery benefit as defined in Sections 8C 
(1), (2), (4), (8) and (10) respectively.
    (9) Standardized Medicare supplement benefit plan ``H'' shall 
consist of only the following: The core benefit as defined in Section 
8B of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, basic prescription drug benefit and medically 
necessary emergency care in a foreign country as defined in Sections 8C 
(1), (2), (6) and (8) respectively.
    (10) Standardized Medicare supplement benefit plan ``I'' shall 
consist of only the following: The core benefit as defined in Section 
8B of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, one hundred percent (100%) of the Medicare Part 
B excess charges, basic prescription drug benefit, medically necessary 
emergency care in a foreign country and at-home recovery benefit as 
defined in Sections 8C (1), (2), (5), (6), (8) and (10) respectively.
    (11) Standardized Medicare supplement benefit plan ``J'' shall 
consist of only the following: The core benefit as defined in Section 
8B of this regulation, plus the Medicare Part A deductible, skilled 
nursing facility care, Medicare Part B deductible, one hundred percent 
(100%) of the Medicare Part B excess charges, extended prescription 
drug benefit, medically necessary emergency care in a foreign country, 
preventive medical care and at-home recovery benefit as defined in 
Sections 8C (1), (2), (3), (5), (7), (8), (9) and (10) respectively.

[[Page 67091]]

    (12) Standardized Medicare supplement benefit high deductible plan 
``J'' shall consist of only the following: 100% of covered expenses 
following the payment of the annual high deductible plan ``J'' 
deductible. The covered expenses include the core benefit as defined in 
Section 8B of this regulation, plus the Medicare Part A deductible, 
skilled nursing facility care, Medicare Part B deductible, one hundred 
percent (100%) of the Medicare Part B excess charges, extended 
outpatient prescription drug benefit, medically necessary emergency 
care in a foreign country, preventive medical care benefit and at-home 
recovery benefit as defined in Sections 8C (1), (2), (3), (5), (7), 
(8), (9) and (10) respectively. The annual high deductible plan ``J'' 
deductible shall consist of out-of-pocket expenses, other than 
premiums, for services covered by the Medicare supplement plan ``J'' 
policy, and shall be in addition to any other specific benefit 
deductibles. The annual deductible shall be $1500 for 1998 and 1999, 
and shall be based on a calendar year. It shall be adjusted annually 
thereafter by the Secretary to reflect the change in the Consumer Price 
Index for all urban consumers for the twelve-month period ending with 
August of the preceding year, and rounded to the nearest multiple of 
$10.

    Drafting Note: A state may determine by statute or regulation 
which of the above benefit plans may be sold in that state. The core 
benefit plan must be made available by all issuers. Therefore, the 
core benefit plan must be one of the authorized benefit plans 
adopted by a state. In no event, however, may a state authorize the 
sale of more than 10 standardized Medicare supplement benefit plans 
(that is, 9 plus the core policy), plus the two (2) high deductible 
plans, at the same time.

    Drafting Note: The Omnibus Budget Reconciliation Act of 1990 
preempts state mandated benefits in Medicare supplement policies or 
certificates, except for those states which have been granted a 
waiver for nonstandardized plans.

Section 10. Medicare Select Policies and Certificates

    A. (1) This section shall apply to Medicare Select policies and 
certificates, as defined in this section.

    Drafting Note: This section should be adopted by states 
designated by the Secretary of Health and Human Services to 
participate in the Medicare Select Program. Section 4358 of the 
Omnibus Budget Reconciliation Act (OBRA) of 1990 (section 1882(t) of 
Title XVIII of the Social Security Act) authorized a three-year, 
fifteen-state program with states to be designated by the Secretary. 
Additional states may be authorized by future changes to federal law 
to apply the Medicare Select Program requirements to existing 
preferred provider arrangements.

    (2) No policy or certificate may be advertised as a Medicare Select 
policy or certificate unless it meets the requirements of this section.
    B. For the purposes of this section:
    (1) Complaint means any dissatisfaction expressed by an individual 
concerning a Medicare Select issuer or its network providers.
    (2) Grievance means dissatisfaction expressed in writing by an 
individual insured under a Medicare Select policy or certificate with 
the administration, claims practices, or provision of services 
concerning a Medicare Select issuer or its network providers.
    (3) Medicare Select issuer means an issuer offering, or seeking to 
offer, a Medicare Select policy or certificate.
    (4) Medicare Select policy or Medicare Select certificate mean 
respectively a Medicare supplement policy or certificate that contains 
restricted network provisions.
    (5) Network provider means a provider of health care, or a group of 
providers of health care, which has entered into a written agreement 
with the issuer to provide benefits insured under a Medicare Select 
policy.
    (6) Restricted network provision means any provision which 
conditions the payment of benefits, in whole or in part, on the use of 
network providers.
    (7) Service area means the geographic area approved by the 
commissioner within which an issuer is authorized to offer a Medicare 
Select policy.
    C. The commissioner may authorize an issuer to offer a Medicare 
Select policy or certificate, pursuant to this section and Section 4358 
of the Omnibus Budget Reconciliation Act (OBRA) of 1990 if the 
commissioner finds that the issuer has satisfied all of the 
requirements of this regulation.
    D. A Medicare Select issuer shall not issue a Medicare Select 
policy or certificate in this state until its plan of operation has 
been approved by the commissioner.
    E. A Medicare Select issuer shall file a proposed plan of operation 
with the commissioner in a format prescribed by the commissioner. The 
plan of operation shall contain at least the following information:
    (1) Evidence that all covered services that are subject to 
restricted network provisions are available and accessible through 
network providers, including a demonstration that:
    (a) Services can be provided by network providers with reasonable 
promptness with respect to geographic location, hours of operation and 
after-hour care. The hours of operation and availability of after-hour 
care shall reflect usual practice in the local area. Geographic 
availability shall reflect the usual travel times within the community.
    (b) The number of network providers in the service area is 
sufficient, with respect to current and expected policyholders, either:
    (i) To deliver adequately all services that are subject to a 
restricted network provision; or
    (ii) To make appropriate referrals.
    (c) There are written agreements with network providers describing 
specific responsibilities.
    (d) Emergency care is available twenty-four (24) hours per day and 
seven (7) days per week.
    (e) In the case of covered services that are subject to a 
restricted network provision and are provided on a prepaid basis, there 
are written agreements with network providers prohibiting the providers 
from billing or otherwise seeking reimbursement from or recourse 
against any individual insured under a Medicare Select policy or 
certificate. This paragraph shall not apply to supplemental charges or 
coinsurance amounts as stated in the Medicare Select policy or 
certificate.
    (2) A statement or map providing a clear description of the service 
area.
    (3) A description of the grievance procedure to be utilized.
    (4) A description of the quality assurance program, including:
    (a) The formal organizational structure;
    (b) The written criteria for selection, retention and removal of 
network providers; and
    (c) The procedures for evaluating quality of care provided by 
network providers, and the process to initiate corrective action when 
warranted.
    (5) A list and description, by specialty, of the network providers.
    (6) Copies of the written information proposed to be used by the 
issuer to comply with Subsection I.
    (7) Any other information requested by the commissioner.
    F. (1) A Medicare Select issuer shall file any proposed changes to 
the plan of operation, except for changes to the list of network 
providers, with the commissioner prior to implementing the changes. 
Changes shall be considered approved by the commissioner after thirty 
(30) days unless specifically disapproved.
    (2) An updated list of network providers shall be filed with the 
commissioner at least quarterly.
    G. A Medicare Select policy or certificate shall not restrict 
payment for

[[Page 67092]]

covered services provided by non-network providers if:
    (1) The services are for symptoms requiring emergency care or are 
immediately required for an unforeseen illness, injury or a condition; 
and
    (2) It is not reasonable to obtain services through a network 
provider.
    H. A Medicare Select policy or certificate shall provide payment 
for full coverage under the policy for covered services that are not 
available through network providers.
    I. A Medicare Select issuer shall make full and fair disclosure in 
writing of the provisions, restrictions and limitations of the Medicare 
Select policy or certificate to each applicant. This disclosure shall 
include at least the following:
    (1) An outline of coverage sufficient to permit the applicant to 
compare the coverage and premiums of the Medicare Select policy or 
certificate with:
    (a) Other Medicare supplement policies or certificates offered by 
the issuer; and
    (b) Other Medicare Select policies or certificates.
    (2) A description (including address, phone number and hours of 
operation) of the network providers, including primary care physicians, 
specialty physicians, hospitals and other providers.
    (3) A description of the restricted network provisions, including 
payments for coinsurance and deductibles when providers other than 
network providers are utilized.
    (4) A description of coverage for emergency and urgently needed 
care and other out-of-service area coverage.
    (5) A description of limitations on referrals to restricted network 
providers and to other providers.
    (6) A description of the policyholder's rights to purchase any 
other Medicare supplement policy or certificate otherwise offered by 
the issuer.
    (7) A description of the Medicare Select issuer's quality assurance 
program and grievance procedure.
    J. Prior to the sale of a Medicare Select policy or certificate, a 
Medicare Select issuer shall obtain from the applicant a signed and 
dated form stating that the applicant has received the information 
provided pursuant to Subsection I of this section and that the 
applicant understands the restrictions of the Medicare Select policy or 
certificate.
    K. A Medicare Select issuer shall have and use procedures for 
hearing complaints and resolving written grievances from the 
subscribers. The procedures shall be aimed at mutual agreement for 
settlement and may include arbitration procedures.
    (1) The grievance procedure shall be described in the policy and 
certificates and in the outline of coverage.
    (2) At the time the policy or certificate is issued, the issuer 
shall provide detailed information to the policyholder describing how a 
grievance may be registered with the issuer.
    (3) Grievances shall be considered in a timely manner and shall be 
transmitted to appropriate decision-makers who have authority to fully 
investigate the issue and take corrective action.
    (4) If a grievance is found to be valid, corrective action shall be 
taken promptly.
    (5) All concerned parties shall be notified about the results of a 
grievance.
    (6) The issuer shall report no later than each March 31st to the 
commissioner regarding its grievance procedure. The report shall be in 
a format prescribed by the commissioner and shall contain the number of 
grievances filed in the past year and a summary of the subject, nature 
and resolution of such grievances.
    L. At the time of initial purchase, a Medicare Select issuer shall 
make available to each applicant for a Medicare Select policy or 
certificate the opportunity to purchase any Medicare supplement policy 
or certificate otherwise offered by the issuer.
    M. (1) At the request of an individual insured under a Medicare 
Select policy or certificate, a Medicare Select issuer shall make 
available to the individual insured the opportunity to purchase a 
Medicare supplement policy or certificate offered by the issuer which 
has comparable or lesser benefits and which does not contain a 
restricted network provision. The issuer shall make the policies or 
certificates available without requiring evidence of insurability after 
the Medicare Select policy or certificate has been in force for six (6) 
months.
    (2) For the purposes of this subsection, a Medicare supplement 
policy or certificate will be considered to have comparable or lesser 
benefits unless it contains one or more significant benefits not 
included in the Medicare Select policy or certificate being replaced. 
For the purposes of this paragraph, a significant benefit means 
coverage for the Medicare Part A deductible, coverage for prescription 
drugs, coverage for at-home recovery services or coverage for Part B 
excess charges.
    N. Medicare Select policies and certificates shall provide for 
continuation of coverage in the event the Secretary of Health and Human 
Services determines that Medicare Select policies and certificates 
issued pursuant to this section should be discontinued due to either 
the failure of the Medicare Select Program to be reauthorized under law 
or its substantial amendment.
    (1) Each Medicare Select issuer shall make available to each 
individual insured under a Medicare Select policy or certificate the 
opportunity to purchase any Medicare supplement policy or certificate 
offered by the issuer which has comparable or lesser benefits and which 
does not contain a restricted network provision. The issuer shall make 
the policies and certificates available without requiring evidence of 
insurability.
    (2) For the purposes of this subsection, a Medicare supplement 
policy or certificate will be considered to have comparable or lesser 
benefits unless it contains one or more significant benefits not 
included in the Medicare Select policy or certificate being replaced. 
For the purposes of this paragraph, a significant benefit means 
coverage for the Medicare Part A deductible, coverage for prescription 
drugs, coverage for at-home recovery services or coverage for Part B 
excess charges.
    O. A Medicare Select issuer shall comply with reasonable requests 
for data made by state or federal agencies, including the United States 
Department of Health and Human Services, for the purpose of evaluating 
the Medicare Select Program.

Section 11. Open Enrollment

    A. An issuer shall not deny or condition the issuance or 
effectiveness of any Medicare supplement policy or certificate 
available for sale in this state, nor discriminate in the pricing of a 
policy or certificate because of the health status, claims experience, 
receipt of health care, or medical condition of an applicant in the 
case of an application for a policy or certificate that is submitted 
prior to or during the six (6) month period beginning with the first 
day of the first month in which an individual is both 65 years of age 
or older and is enrolled for benefits under Medicare Part B. Each 
Medicare supplement policy and certificate currently available from an 
insurer shall be made available to all applicants who qualify under 
this subsection without regard to age.
    B. (1) If an applicant qualifies under Subsection A and submits an 
application during the time period referenced in Subsection A and, as 
of the date of application, has had a continuous period of creditable 
coverage of at least six (6) months, the

[[Page 67093]]

issuer shall not exclude benefits based on a preexisting condition.
    (2) If the applicant qualifies under Subsection A and submits an 
application during the time period referenced in Subsection A and, as 
of the date of application, has had a continuous period of creditable 
coverage that is less than six (6) months, the issuer shall reduce the 
period of any preexisting condition exclusion by the aggregate of the 
period of creditable coverage applicable to the applicant as of the 
enrollment date. The Secretary shall specify the manner of the 
reduction under this subsection.

    Drafting Note: The Secretary has developed regulations pursuant 
to HIPAA regarding methods of counting creditable coverage, which 
govern the way the reduction is to be applied in Section 11B(2).

    C. Except as provided in Subsection B and Section 23, Subsection A 
shall not be construed as preventing the exclusion of benefits under a 
policy, during the first six (6) months, based on a preexisting 
condition for which the policyholder or certificateholder received 
treatment or was otherwise diagnosed during the six (6) months before 
the coverage became effective.

Section 12. Guaranteed Issue for Eligible Persons

    A. Guaranteed Issue--(1) Eligible persons are those individuals 
described in subsection B who apply to enroll under the policy not 
later than sixty-three (63) days after the date of the termination of 
enrollment described in subsection B, and who submit evidence of the 
date of termination or disenrollment with the application for a 
Medicare supplement policy.
    (2) With respect to eligible persons, an issuer shall not deny or 
condition the issuance or effectiveness of a Medicare supplement policy 
described in subsection C that is offered and is available for issuance 
to new enrollees by the issuer, shall not discriminate in the pricing 
of such a Medicare supplement policy because of health status, claims 
experience, receipt of health care, or medical condition, and shall not 
impose an exclusion of benefits based on a preexisting condition under 
such a Medicare supplement policy.
    B. Eligible Persons--An eligible person is an individual described 
in any of the following paragraphs:
    (1) The individual is enrolled under an employee welfare benefit 
plan that provides health benefits that supplement the benefits under 
Medicare; and the plan terminates, or the plan ceases to provide all 
such supplemental health benefits to the individual;

    Drafting Note: Paragraph (1) above uses the federal legislative 
language from the Balanced Budget Act of 1997 (P.L. 105-33) that 
defines an eligible person as an individual with respect to whom an 
employee welfare benefit plan terminates, or ceases to provide 
``all'' health benefits that supplement Medicare. There was 
protracted discussion among the drafters about the interpretation of 
``all'' in this context: if the employer drops some supplemental 
benefits, but not all such benefits, from its welfare plan, should 
the individual be eligible for a guaranteed issue Medicare 
supplement product? This question may become crucial to certain 
individuals depending on the benefits dropped by the employer. 
Federal legislative history appears to indicate the intention that 
the word ``all'' be strictly construed so as to require termination 
or cessation of all supplemental health benefits. States, however, 
can provide greater protections to beneficiaries and may wish to 
include, as eligible persons, individuals who have lost ``some or 
all'' or ``substantially all'' of their supplemental health 
benefits, to encompass situations where a change is made in an 
employee welfare benefit plan that reduces the amount of 
supplemental health benefits available to the individual. States 
that consider alternative language are reminded to consider the 
impact of issues such as plan changes that result in adverse 
selection, duplicate coverage, triggering the requirement for plan 
administrator notice (see Section 12D) and other issues.

    (2) The individual is enrolled with a Medicare+Choice organization 
under a Medicare+Choice plan under part C of Medicare, and any of the 
following circumstances apply:
    (i) The organization's or plan's certification [under this part] 
has been terminated or the organization has terminated or otherwise 
discontinued providing the plan in the area in which the individual 
resides;
    (ii) The individual is no longer eligible to elect the plan because 
of a change in the individual's place of residence or other change in 
circumstances specified by the Secretary, but not including termination 
of the individual's enrollment on the basis described in section 
1851(g)(3)(B) of the federal Social Security Act (where the individual 
has not paid premiums on a timely basis or has engaged in disruptive 
behavior as specified in standards under section 1856), or the plan is 
terminated for all individuals within a residence area;
    (iii) The individual demonstrates, in accordance with guidelines 
established by the Secretary, that:
    (I) The organization offering the plan substantially violated a 
material provision of the organization's contract under this part in 
relation to the individual, including the failure to provide an 
enrollee on a timely basis medically necessary care for which benefits 
are available under the plan or the failure to provide such covered 
care in accordance with applicable quality standards; or
    (II) The organization, or agent or other entity acting on the 
organization's behalf, materially misrepresented the plan's provisions 
in marketing the plan to the individual; or
    (iv) The individual meets such other exceptional conditions as the 
Secretary may provide.''
    (3) (a) The individual is enrolled with:
    (i) An eligible organization under a contract under Section 1876 
(Medicare risk or cost);
    (ii) A similar organization operating under demonstration project 
authority, effective for periods before April 1, 1999;
    (iii) An organization under an agreement under Section 
1833(a)(1)(A) (health care prepayment plan); or
    (iv) An organization under a Medicare Select policy; and
    (b) The enrollment ceases under the same circumstances that would 
permit discontinuance of an individual's election of coverage under 
Section 12B(2).

    Drafting Note: Section 3(a)(iv) above is not required if there 
is a provision in state law or regulation that provides for the 
continuation or conversion of Medicare Select policies or 
certificates.

    (4) The individual is enrolled under a Medicare supplement policy 
and the enrollment ceases because:
    (a) (i) Of the insolvency of the issuer or bankruptcy of the 
nonissuer organization; or
    (ii) Of other involuntary termination of coverage or enrollment 
under the policy;
    (b) The issuer of the policy substantially violated a material 
provision of the policy; or
    (c) The issuer, or an agent or other entity acting on the issuer's 
behalf, materially misrepresented the policy's provisions in marketing 
the policy to the individual;

    Drafting Note: The reference to ``insolvency of the issuer'' in 
Paragraph 4(a) above is not required if there is a provision in 
state law or regulation that provides for the continuation or 
conversion of Medicare supplement policies or certificates. The 
reference to ``substantially violated a material provision of the 
policy'' in Paragraph 4(b) above is expected to be amplified by the 
Secretary when federal regulations are issued pursuant to the 
Balanced Budget Act of 1997 (P.L. 105-33).

    (5) (a) The individual was enrolled under a Medicare supplement 
policy

[[Page 67094]]

and terminates enrollment and subsequently enrolls, for the first time, 
with any Medicare+Choice organization under a Medicare+Choice plan 
under part C of Medicare, any eligible organization under a contract 
under Section 1876 (Medicare risk or cost), any similar organization 
operating under demonstration project authority, an organization under 
an agreement under section 1833(a)(1)(A) (health care prepayment plan), 
or a Medicare Select policy; and
    (b) The subsequent enrollment under subparagraph (a) is terminated 
by the enrollee during any period within the first twelve (12) months 
of such subsequent enrollment (during which the enrollee is permitted 
to terminate such subsequent enrollment under section 1851(e) of the 
federal Social Security Act); or
    (6) The individual, upon first becoming eligible for benefits under 
part A of Medicare at age 65, enrolls in a Medicare+Choice plan under 
part C of Medicare, and disenrolls from the plan by not later than 
twelve (12) months after the effective date of enrollment.

    Drafting Note: Federal law provides a guaranteed issue right to 
a Medicare supplement insurance product to individuals who enroll in 
Medicare Part B at age 65. States may wish to consider extending 
this right to other classes of individuals, such as those who 
postpone enrollment in Medicare Part B until after age 65 because 
they are working and are enrolled in a group health insurance plan.

    C. Products to Which Eligible Persons are Entitled--The Medicare 
supplement policy to which eligible persons are entitled under:
    (1) Section 12B(1), (2), (3) and (4) is a Medicare supplement 
policy which has a benefit package classified as Plan A, B, C, or F 
offered by any issuer.
    (2) Section 12B(5) is the same Medicare supplement policy in which 
the individual was most recently previously enrolled, if available from 
the same issuer, or, if not so available, a policy described in 
Subsection C(1).
    (3) Section 12B(6) shall include any Medicare supplement policy 
offered by any issuer.

    Drafting Note: Under federal law, for states that are exempted 
from standardization and offer benefit packages other than Plans A 
through J, the references to benefit packages above are deemed 
references to comparable benefit packages offered in that state. 
Those states should amend the language accordingly.

    D. Notification provisions--(1) At the time of an event described 
in Subsection B of this section because of which an individual loses 
coverage or benefits due to the termination of a contract or agreement, 
policy, or plan, the organization that terminates the contract or 
agreement, the issuer terminating the policy, or the administrator of 
the plan being terminated, respectively, shall notify the individual of 
his or her rights under this section, and of the obligations of issuers 
of Medicare supplement policies under Subsection A. Such notice shall 
be communicated contemporaneously with the notification of termination.
    (2) At the time of an event described in Subsection B of this 
section because of which an individual ceases enrollment under a 
contract or agreement, policy, or plan, the organization that offers 
the contract or agreement, regardless of the basis for the cessation of 
enrollment, the issuer offering the policy, or the administrator of the 
plan, respectively, shall notify the individual of his or her rights 
under this section, and of the obligations of issuers of Medicare 
supplement policies under Section 12A. Such notice shall be 
communicated within ten working days of the issuer receiving 
notification of disenrollment.

    Drafting Note: States should ensure that educational and public 
information materials it develops related to Medicare includes a 
thorough description of the rights outlined in Section 12D.

Section 13. Standards for Claims Payment

    A. An issuer shall comply with section 1882(c)(3) of the Social 
Security Act (as enacted by section 4081(b)(2)(C) of the Omnibus Budget 
Reconciliation Act of 1987 (OBRA) 1987, Pub. L. No. 100-203) by:
    (1) Accepting a notice from a Medicare carrier on dually assigned 
claims submitted by participating physicians and suppliers as a claim 
for benefits in place of any other claim form otherwise required and 
making a payment determination on the basis of the information 
contained in that notice;
    (2) Notifying the participating physician or supplier and the 
beneficiary of the payment determination;
    (3) Paying the participating physician or supplier directly;
    (4) Furnishing, at the time of enrollment, each enrollee with a 
card listing the policy name, number and a central mailing address to 
which notices from a Medicare carrier may be sent;
    (5) Paying user fees for claim notices that are transmitted 
electronically or otherwise; and
    (6) Providing to the Secretary of Health and Human Services, at 
least annually, a central mailing address to which all claims may be 
sent by Medicare carriers.
    B. Compliance with the requirements set forth in Subsection A above 
shall be certified on the Medicare supplement insurance experience 
reporting form.

Section 14. Loss Ratio Standards and Refund or Credit of Premium

    A. Loss Ratio Standards--(1)(a) A Medicare Supplement policy form 
or certificate form shall not be delivered or issued for delivery 
unless the policy form or certificate form can be expected, as 
estimated for the entire period for which rates are computed to provide 
coverage, to return to policyholders and certificate holders in the 
form of aggregate benefits (not including anticipated refunds or 
credits) provided under the policy form or certificate form:
    (i) At least seventy-five percent (75%) of the aggregate amount of 
premiums earned in the case of group policies; or
    (ii) At least sixty-five percent (65%) of the aggregate amount of 
premiums earned in the case of individual policies;
    (b) Calculated on the basis of incurred claims experience or 
incurred health care expenses where coverage is provided by a health 
maintenance organization on a service rather than reimbursement basis 
and earned premiums for the period and in accordance with accepted 
actuarial principles and practices.
    (2) All filings of rates and rating schedules shall demonstrate 
that expected claims in relation to premiums comply with the 
requirements of this section when combined with actual experience to 
date. Filings of rate revisions shall also demonstrate that the 
anticipated loss ratio over the entire future period for which the 
revised rates are computed to provide coverage can be expected to meet 
the appropriate loss ratio standards.
    (3) For purposes of applying Subsection A(1) of this section and 
Subsection C(3) of Section 15 only, policies issued as a result of 
solicitations of individuals through the mails or by mass media 
advertising (including both print and broadcast advertising) shall be 
deemed to be individual policies.

    Drafting Note: Subsection A(3) replicates language contained in 
the Omnibus Budget Reconciliation Act of 1990 (Pub. L. No. 101-508). 
It allows direct mail group policies sold on an individual basis to 
meet the minimum loss ratio required of individual business (65%) 
rather than that required of group business (75%). The NAIC 
eliminated this concept from this regulation in 1987 (I Proceedings 
of the NAIC, pp. 651, 673

[[Page 67095]]

(1988)). At that time, NAIC required direct mail group business to 
meet the same loss ratio requirement as other group business, 
regardless of whether the business was sold on an individual basis. 
The NAIC encourages states to apply the 75% loss ratio to all group 
business. Although NAIC is restricted from making revisions to its 
models that are not in conformance with OBRA 1990, states are free 
to impose more stringent requirements than OBRA.

    (4) For policies issued prior to [insert effective date from 
Section 24 of this model, the effective date of the states regulation 
implementing the requirements of OBRA 1990], expected claims in 
relation to premiums shall meet:
    (a) The originally filed anticipated loss ratio when combined with 
the actual experience since inception;
    (b) The appropriate loss ratio requirement from Subsection 
A(1)(a)(i) and (ii) when combined with actual experience beginning with 
[insert effective date of this revision] to date; and
    (c) The appropriate loss ratio requirement from Subsection 
A(1)(a)(i) and (ii) over the entire future period for which the rates 
are computed to provide coverage.

    Drafting Note: The appropriate loss ratio requirement from 
Subsection A(1)(a)(i) and (ii) for all group policies subject to an 
individual loss ratio standard when issued is 65 percent. States may 
amend Section 13A(4) to permit or require aggregation of closed 
blocks of business upon approval of the Health Care Financing 
Administration.

    B. Refund or Credit Calculation--(1) An issuer shall collect and 
file with the commissioner by May 31 of each year the data contained in 
the applicable reporting form contained in Appendix A for each type in 
a standard Medicare supplement benefit plan.
    (2) If on the basis of the experience as reported the benchmark 
ratio since inception (ratio 1) exceeds the adjusted experience ratio 
since inception (ratio 3), then a refund or credit calculation is 
required. The refund calculation shall be done on a statewide basis for 
each type in a standard Medicare supplement benefit plan. For purposes 
of the refund or credit calculation, experience on policies issued 
within the reporting year shall be excluded.
    (3) For the purposes of this section, policies or certificates 
issued prior to [insert effective date from Section 24 of this model, 
the effective date of the states regulation implementing the 
requirements of OBRA 1990], the issuer shall make the refund or credit 
calculation separately for all individual policies (including all group 
policies subject to an individual loss ratio standard when issued) 
combined and all other group policies combined for experience after the 
[insert effective date of this amendment]. The first report shall be 
due by May 31, [insert (effective year + 2) of this amendment].

    Drafting Note: Subsection B(3) implements the requirements of 
Section 171 of the Social Security Act Amendments of 1994 that 
require a refund or credit calculation for pre-standardized Medicare 
supplement policies, but only for experience subsequent to the date 
the state amends its regulation.

    (4) A refund or credit shall be made only when the benchmark loss 
ratio exceeds the adjusted experience loss ratio and the amount to be 
refunded or credited exceeds a de minimis level. The refund shall 
include interest from the end of the calendar year to the date of the 
refund or credit at a rate specified by the Secretary of Health and 
Human Services, but in no event shall it be less than the average rate 
of interest for thirteen-week Treasury notes. A refund or credit 
against premiums due shall be made by September 30 following the 
experience year upon which the refund or credit is based.
    C. Annual filing of Premium Rates--An issuer of Medicare supplement 
policies and certificates issued before or after the effective date of 
[insert citation to state's regulation] in this state shall file 
annually its rates, rating schedule and supporting documentation 
including ratios of incurred losses to earned premiums by policy 
duration for approval by the commissioner in accordance with the filing 
requirements and procedures prescribed by the commissioner. The 
supporting documentation shall also demonstrate in accordance with 
actuarial standards of practice using reasonable assumptions that the 
appropriate loss ratio standards can be expected to be met over the 
entire period for which rates are computed. The demonstration shall 
exclude active life reserves. An expected third-year loss ratio which 
is greater than or equal to the applicable percentage shall be 
demonstrated for policies or certificates in force less than three (3) 
years.
    As soon as practicable, but prior to the effective date of 
enhancements in Medicare benefits, every issuer of Medicare supplement 
policies or certificates in this state shall file with the 
commissioner, in accordance with the applicable filing procedures of 
this state:
    (1)(a) Appropriate premium adjustments necessary to produce loss 
ratios as anticipated for the current premium for the applicable 
policies or certificates. The supporting documents necessary to justify 
the adjustment shall accompany the filing.
    (b) An issuer shall make premium adjustments necessary to produce 
an expected loss ratio under the policy or certificate to conform to 
minimum loss ratio standards for Medicare supplement policies and which 
are expected to result in a loss ratio at least as great as that 
originally anticipated in the rates used to produce current premiums by 
the issuer for the Medicare supplement policies or certificates. No 
premium adjustment which would modify the loss ratio experience under 
the policy other than the adjustments described herein shall be made 
with respect to a policy at any time other than upon its renewal date 
or anniversary date.
    (c) If an issuer fails to make premium adjustments acceptable to 
the commissioner, the commissioner may order premium adjustments, 
refunds or premium credits deemed necessary to achieve the loss ratio 
required by this section.
    (2) Any appropriate riders, endorsements or policy forms needed to 
accomplish the Medicare supplement policy or certificate modifications 
necessary to eliminate benefit duplications with Medicare. The riders, 
endorsements or policy forms shall provide a clear description of the 
Medicare supplement benefits provided by the policy or certificate.
    D. Public Hearings--The commissioner may conduct a public hearing 
to gather information concerning a request by an issuer for an increase 
in a rate for a policy form or certificate form issued before or after 
the effective date of [insert citation to state's regulation] if the 
experience of the form for the previous reporting period is not in 
compliance with the applicable loss ratio standard. The determination 
of compliance is made without consideration of any refund or credit for 
the reporting period. Public notice of the hearing shall be furnished 
in a manner deemed appropriate by the commissioner.

    Drafting Note: This section does not in any way restrict a 
commissioner's statutory authority, elsewhere granted, to approve or 
disapprove rates.

Section 15. Filing and Approval of Policies and Certificates and 
Premium Rates

    A. An issuer shall not deliver or issue for delivery a policy or 
certificate to a resident of this state unless the policy form or 
certificate form has been filed with and approved by the commissioner 
in accordance with filing requirements and procedures prescribed by the 
commissioner.

[[Page 67096]]

    B. An issuer shall not use or change premium rates for a Medicare 
supplement policy or certificate unless the rates, rating schedule and 
supporting documentation have been filed with and approved by the 
commissioner in accordance with the filing requirements and procedures 
prescribed by the commissioner.
    C. (1) Except as provided in Paragraph (2) of this subsection, an 
issuer shall not file for approval more than one form of a policy or 
certificate of each type for each standard Medicare supplement benefit 
plan.
    (2) An issuer may offer, with the approval of the commissioner, up 
to four (4) additional policy forms or certificate forms of the same 
type for the same standard Medicare supplement benefit plan, one for 
each of the following cases:
    (a) The inclusion of new or innovative benefits;
    (b) The addition of either direct response or agent marketing 
methods;
    (c) The addition of either guaranteed issue or underwritten 
coverage;
    (d) The offering of coverage to individuals eligible for Medicare 
by reason of disability.
    (3) For the purposes of this section, a ``type'' means an 
individual policy, a group policy, an individual Medicare Select 
policy, or a group Medicare Select policy.
    D. (1) Except as provided in Paragraph (1)(a), an issuer shall 
continue to make available for purchase any policy form or certificate 
form issued after the effective date of this regulation that has been 
approved by the commissioner. A policy form or certificate form shall 
not be considered to be available for purchase unless the issuer has 
actively offered it for sale in the previous twelve (12) months.
    (a) An issuer may discontinue the availability of a policy form or 
certificate form if the issuer provides to the commissioner in writing 
its decision at least thirty (30) days prior to discontinuing the 
availability of the form of the policy or certificate. After receipt of 
the notice by the commissioner, the issuer shall no longer offer for 
sale the policy form or certificate form in this state.
    (b) An issuer that discontinues the availability of a policy form 
or certificate form pursuant to Subparagraph (a) shall not file for 
approval a new policy form or certificate form of the same type for the 
same standard Medicare supplement benefit plan as the discontinued form 
for a period of five (5) years after the issuer provides notice to the 
commissioner of the discontinuance. The period of discontinuance may be 
reduced if the commissioner determines that a shorter period is 
appropriate.
    (2) The sale or other transfer of Medicare supplement business to 
another issuer shall be considered a discontinuance for the purposes of 
this subsection.
    (3) A change in the rating structure or methodology shall be 
considered a discontinuance under Paragraph (1) unless the issuer 
complies with the following requirements:
    (a) The issuer provides an actuarial memorandum, in a form and 
manner prescribed by the commissioner, describing the manner in which 
the revised rating methodology and resultant rates differ from the 
existing rating methodology and existing rates.
    (b) The issuer does not subsequently put into effect a change of 
rates or rating factors that would cause the percentage differential 
between the discontinued and subsequent rates as described in the 
actuarial memorandum to change. The commissioner may approve a change 
to the differential which is in the public interest.
    E. (1) Except as provided in Paragraph (2), the experience of all 
policy forms or certificate forms of the same type in a standard 
Medicare supplement benefit plan shall be combined for purposes of the 
refund or credit calculation prescribed in [insert citation to Section 
13 of NAIC Medicare Supplement Insurance Model Regulation].
    (2) Forms assumed under an assumption reinsurance agreement shall 
not be combined with the experience of other forms for purposes of the 
refund or credit calculation.

    Drafting Note: It has come to the attention of the NAIC that the 
use of attained age rating in the determination of rates in Medicare 
supplement policies may result in situations to which a regulatory 
response is desirable. States should assess their Medicare 
supplement marketplace to determine whether a regulatory response is 
needed. The following provisions may be included as a new subsection 
to Section 14. The first option prohibits insurers from attained age 
rating as a methodology for setting rates. The second option does 
not prohibit the use of attained age rating but requires Medicare 
supplement insurers who do use attained age rating as a rate setting 
methodology to apply the age component to its rates annually. The 
effective date of the regulation should provide sufficient time for 
insurers to re-rate approved policy forms in accordance with Section 
14A and for the insurance department to approve (according to its 
rate filing practices and procedures), such re-ratings prior to the 
effective date of the regulation.

Option 1
    F. An issuer shall not present for filing or approval a rate 
structure for its Medicare supplement policies or certificates issued 
after the effective date of the amendment of this regulation based upon 
attained age rating as a structure or methodology.
Option 2
    F. An issuer shall not present for filing or approval a rate 
structure for its Medicare supplement policies or certificates issued 
after the effective date of the amendment of this regulation based upon 
a structure or methodology with any groupings of attained ages greater 
than one year. The ratio between rates for successive ages shall 
increase smoothly as age increases.

Section 16. Permitted Compensation Arrangements

    A. An issuer or other entity may provide commission or other 
compensation to an agent or other representative for the sale of a 
Medicare supplement policy or certificate only if the first year 
commission or other first year compensation is no more than 200 percent 
of the commission or other compensation paid for selling or servicing 
the policy or certificate in the second year or period.
    B. The commission or other compensation provided in subsequent 
(renewal) years must be the same as that provided in the second year or 
period and must be provided for no fewer than five (5) renewal years.
    C. No issuer or other entity shall provide compensation to its 
agents or other producers and no agent or producer shall receive 
compensation greater than the renewal compensation payable by the 
replacing issuer on renewal policies or certificates if an existing 
policy or certificate is replaced.
    D. For purposes of this section, ``compensation'' includes 
pecuniary or non-pecuniary remuneration of any kind relating to the 
sale or renewal of the policy or certificate including but not limited 
to bonuses, gifts, prizes, awards and finders fees.

Section 17. Required Disclosure Provisions

    A. General Rules--(1) Medicare supplement policies and certificates 
shall include a renewal or continuation provision. The language or 
specifications of the provision shall be consistent with the type of 
contract issued. The provision shall be appropriately captioned and 
shall appear on the first page of the policy, and shall include any 
reservation by the issuer of the right to change premiums

[[Page 67097]]

and any automatic renewal premium increases based on the policyholder's 
age.
    (2) Except for riders or endorsements by which the issuer 
effectuates a request made in writing by the insured, exercises a 
specifically reserved right under a Medicare supplement policy, or is 
required to reduce or eliminate benefits to avoid duplication of 
Medicare benefits, all riders or endorsements added to a Medicare 
supplement policy after date of issue or at reinstatement or renewal 
which reduce or eliminate benefits or coverage in the policy shall 
require a signed acceptance by the insured. After the date of policy or 
certificate issue, any rider or endorsement which increases benefits or 
coverage with a concomitant increase in premium during the policy term 
shall be agreed to in writing signed by the insured, unless the 
benefits are required by the minimum standards for Medicare supplement 
policies, or if the increased benefits or coverage is required by law. 
Where a separate additional premium is charged for benefits provided in 
connection with riders or endorsements, the premium charge shall be set 
forth in the policy.
    (3) Medicare supplement policies or certificates shall not provide 
for the payment of benefits based on standards described as ``usual and 
customary,'' ``reasonable and customary'' or words of similar import.
    (4) If a Medicare supplement policy or certificate contains any 
limitations with respect to preexisting conditions, such limitations 
shall appear as a separate paragraph of the policy and be labeled as 
``Preexisting Condition Limitations.''
    (5) Medicare supplement policies and certificates shall have a 
notice prominently printed on the first page of the policy or 
certificate or attached thereto stating in substance that the 
policyholder or certificateholder shall have the right to return the 
policy or certificate within thirty (30) days of its delivery and to 
have the premium refunded if, after examination of the policy or 
certificate, the insured person is not satisfied for any reason.
    (6) (a) Issuers of accident and sickness policies or certificates 
which provide hospital or medical expense coverage on an expense 
incurred or indemnity basis to persons eligible for Medicare shall 
provide to those applicants a Guide to Health Insurance for People with 
Medicare in the form developed jointly by the National Association of 
Insurance Commissioners and the Health Care Financing Administration 
and in a type size no smaller than 12 point type. Delivery of the Guide 
shall be made whether or not the policies or certificates are 
advertised, solicited or issued as Medicare supplement policies or 
certificates as defined in this regulation. Except in the case of 
direct response issuers, delivery of the Guide shall be made to the 
applicant at the time of application and acknowledgement of receipt of 
the Guide shall be obtained by the issuer. Direct response issuers 
shall deliver the Guide to the applicant upon request but not later 
than at the time the policy is delivered.
    (b) For the purposes of this section, ``form'' means the language, 
format, type size, type proportional spacing, bold character, and line 
spacing.
    B. Notice Requirements--(1) As soon as practicable, but no later 
than thirty (30) days prior to the annual effective date of any 
Medicare benefit changes, an issuer shall notify its policyholders and 
certificateholders of modifications it has made to Medicare supplement 
insurance policies or certificates in a format acceptable to the 
commissioner. The notice shall:
    (a) Include a description of revisions to the Medicare program and 
a description of each modification made to the coverage provided under 
the Medicare supplement policy or certificate, and
    (b) Inform each policyholder or certificateholder as to when any 
premium adjustment is to be made due to changes in Medicare.
    (2) The notice of benefit modifications and any premium adjustments 
shall be in outline form and in clear and simple terms so as to 
facilitate comprehension.
    (3) The notices shall not contain or be accompanied by any 
solicitation.
    C. Outline of Coverage Requirements for Medicare Supplement 
Policies--(1) Issuers shall provide an outline of coverage to all 
applicants at the time application is presented to the prospective 
applicant and, except for direct response policies, shall obtain an 
acknowledgement of receipt of the outline from the applicant; and (2) 
If an outline of coverage is provided at the time of application and 
the Medicare supplement policy or certificate is issued on a basis 
which would require revision of the outline, a substitute outline of 
coverage properly describing the policy or certificate shall accompany 
the policy or certificate when it is delivered and contain the 
following statement, in no less than twelve (12) point type, 
immediately above the company name:

    Notice: Read this outline of coverage carefully. It is not 
identical to the outline of coverage provided upon application and 
the coverage originally applied for has not been issued.''

    (3) The outline of coverage provided to applicants pursuant to this 
section consists of four parts: a cover page, premium information, 
disclosure pages, and charts displaying the features of each benefit 
plan offered by the issuer. The outline of coverage shall be in the 
language and format prescribed below in no less than twelve (12) point 
type. All plans A-J shall be shown on the cover page, and the plans 
that are offered by the issuer shall be prominently identified. Premium 
information for plans that are offered shall be shown on the cover page 
or immediately following the cover page and shall be prominently 
displayed. The premium and mode shall be stated for all plans that are 
offered to the prospective applicant. All possible premiums for the 
prospective applicant shall be illustrated.
    (4) The following items shall be included in the outline of 
coverage in the order prescribed below.

                             [COMPANY NAME]
           Outline of Medicare Supplement Coverage-Cover Page:
     Benefit Plans ________ [insert letters of plans being offered]
 
Medicare supplement insurance can be sold in only ten standard plans
 plus two high deductible plans. This chart shows the benefits included
 in each plan. Every company must make available Plan ``A''. Some plans
 may not be available in your state.
Basic Benefits: Included in All Plans.
Hospitalization: Part A coinsurance plus coverage for 365 additional
 days after Medicare benefits end.
Medical Expenses: Part B coinsurance (generally 20% of Medicare-approved
 expenses), or, in the case of hospital outpatient department services,
 applicable copayments.
Blood: First three pints of blood each year.
 


[[Page 67098]]


--------------------------------------------------------------------------------------------------------------------------------------------------------
                A                      B          C          D          E         F    F*           G              H              I           J    J*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Basic Benefits..................  Basic       Basic      Basic      Basic      Basic          Basic          Basic          Basic          Basic
                                   Benefits    Benefits   Benefits   Benefits   Benefits       Benefits       Benefits       Benefits       Benefits
                                  ..........  Skilled    Skilled    Skilled    Skilled        Skilled        Skilled        Skilled        Skilled
                                               Nursing    Nursing    Nursing    Nursing Co-    Nursing Co-    Nursing Co-    Nursing Co-    Nursing Co-
                                               Co-        Co-        Co-        Insurance      Insurance      Insurance      Insurance      Insurance
                                               Insuranc   Insuranc   Insuranc
                                               e          e          e
                                  Part A      Part A     Part A     Part A     Part A         Part A         Part A         Part A         Part A
                                   Deductibl   Deductib   Deductib   Deductib   Deductible     Deductible     Deductible     Deductible     Deductible
                                   e           le         le         le
                                  ..........  Part B     .........  .........  Part B         .............  .............  .............  Part B
                                               Deductib                         Deductible                                                  Deductible
                                               le
                                  ..........  .........  .........  .........  Part B Excess  Part B Excess  .............  Part B Excess  Part B Excess
                                                                                (100%)         (80%)                         (100%)         (100%)
                                  ..........  Foreign    Foreign    Foreign    Foreign        Foreign        Foreign        Foreign        Foreign
                                               Travel     Travel     Travel     Travel         Travel         Travel         Travel         Travel
                                               Emergenc   Emergenc   Emergenc   Emergency      Emergency      Emergency      Emergency      Emergency
                                               y          y          y
                                  ..........  .........  At-Home    .........  .............  At-Home        .............  At-Home        At-Home
                                                          Recovery                             Recovery                      Recovery       Recovery
                                  ..........  .........  .........  .........  .............  .............  Basic Drugs    Basic Drugs    Extended
                                                                                                              ($1,250        ($1,250        Drugs
                                                                                                              Limit)         Limit)         ($3,000
                                                                                                                                            Limit)
                                  ..........  .........  .........  Preventiv  .............  .............  .............  .............  Preventive
                                                                     e Care                                                                 Care
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Plans F and J also have an option called a high deductible plan F and a high deductible plan J. These high deductible plans pay the same or offer the
  same benefits as Plans F and J after one has paid a calendar year [$1500] deductible. Benefits from high deductible plans F and J will not begin until
  out-of-pocket expenses are [$1500]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. These
  expenses include the Medicare deductibles for Part A and Part B, but does not include, in plan J, the plan's separate prescription drug deductible or,
  in Plans F and J, the plan's separate foreign travel emergency deductible.

PREMIUM INFORMATION [Boldface Type]

    We [insert issuer's name] can only raise your premium if we raise 
the premium for all policies like yours in this State. [If the premium 
is based on the increasing age of the insured, include information 
specifying when premiums will change.]

DISCLOSURES [Boldface Type]

    Use this outline to compare benefits and premiums among policies.

READ YOUR POLICY VERY CAREFULLY [Boldface Type]

    This is only an outline describing your policy's most important 
features. The policy is your insurance contract. You must read the 
policy itself to understand all of the rights and duties of both you 
and your insurance company.

RIGHT TO RETURN POLICY [Boldface Type]

    If you find that you are not satisfied with your policy, you may 
return it to [insert issuer's address]. If you send the policy back to 
us within 30 days after you receive it, we will treat the policy as if 
it had never been issued and return all of your payments.

POLICY REPLACEMENT [Boldface Type]

    If you are replacing another health insurance policy, do NOT cancel 
it until you have actually received your new policy and are sure you 
want to keep it.

NOTICE [Boldface Type]

    This policy may not fully cover all of your medical costs.
[For agents:]
    Neither [insert company's name] nor its agents are connected with 
Medicare.
[For direct response:]
    [insert company's name] is not connected with Medicare.
    This outline of coverage does not give all the details of Medicare 
coverage. Contact your local Social Security Office or consult ``The 
Medicare Handbook'' for more details.

COMPLETE ANSWERS ARE VERY IMPORTANT [Boldface Type]

    When you fill out the application for the new policy, be sure to 
answer truthfully and completely all questions about your medical and 
health history. The company may cancel your policy and refuse to pay 
any claims if you leave out or falsify important medical information. 
[If the policy or certificate is guaranteed issue, this paragraph need 
not appear.]
    Review the application carefully before you sign it. Be certain 
that all information has been properly recorded.
    [Include for each plan prominently identified in the cover page, a 
chart showing the services, Medicare payments, plan payments and 
insured payments for each plan, using the same language, in the same 
order, using uniform layout and format as shown in the charts below. No 
more than four plans may be shown on one chart. For purposes of 
illustration, charts for each plan are included in this regulation. An 
issuer may use additional benefit plan designations on these charts 
pursuant to Section 9D of this regulation.]
    [Include an explanation of any innovative benefits on the cover 
page and in the chart, in a manner approved by the commissioner.]

                        Plan A--Medicare (Part A)--Hospital Services--PER Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $0.....................  $[764] (Part A
                                                                                          deductible)
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.

[[Page 67099]]

 
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  0......................  Up to $[95.50] a day 3
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan A--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as Physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts*.                                                                            deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  0......................  All costs
     Medicare Approved Amounts.
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  $100 (Part B
 Amounts*.                                                                                deductible)
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment First  0......................  0......................  100 (Part B deductible)
     $100 of Medicare Approved
     Amounts*.
    Remainder of Medicare Approved     80%....................  20%....................  0
     Amounts.
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


                        Plan B--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764](Part A            $0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0

[[Page 67100]]

 
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  0......................  Up to $[95.50] a day
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan B--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts.*                                                                            deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  0......................  All costs
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  100 (Part B deductible)
 Amounts.*
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood Test for Diagnostic Services...  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:
    Medically necessary skilled care   100%...................  0......................  0
     services and medical supplies.
    Durable medical equipment
    First $100 of Medicare Approved    0......................  0......................  100 (Part B deductible)
     Amounts.*.
    Remainder of Medicare Approved     80%....................  20%....................  0
     Amounts.
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


                        Plan C--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764](Part A            $0
                                                                 deductible).

[[Page 67101]]

 
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for
 you elect to receive these services.   outpatient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan C--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $100 (Part B             $0
     Amounts *.                                                  deductible).
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  0......................  All costs
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  100 (Part B deductible)  0
 Amounts *.
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                  PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services;
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment First  0......................  100 (Part B deductible)  0
     $100 of Medicare Approved
     Amounts *.
    Remainder of Medicare Approved     80%....................  20%....................  0
     Amounts.
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
            Foreign Travel
 
Not covered by Medicare:
    Medically necessary emergency
     care services beginning during
     the first 60 days of each trip
     outside the USA:
        First $250 each calendar year  0......................  0......................  0

[[Page 67102]]

 
        Remainder of Charges.........  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum.
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


                        Plan D--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day $0........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for
 you elect to receive these services.   outpatient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan D--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts*.                                                                            deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
      Part B Excess Charges (Above     0......................  0......................  All costs
       Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  $100 (Part B
 Amounts *.                                                                               deductible)
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:

[[Page 67103]]

 
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment
        First $100 of Medicare         0......................  0......................  100 (Part B deductible)
         Approved Amounts*.
        Remainder of Medicare          80%....................  20%....................  0
         Approved Amounts.
At-home recovery services--not
 covered by Medicare:
    Home care certified by your
     doctor, for personal care during
     recovery from an injury or
     sickness for which Medicare
     approved a Home Care Treatment
     Plan:
        --Benefit for each visit.....  0......................  Actual charges to $40 a  Balance
                                                                 visit.
        --Number of visits covered     0......................  Up to the number of      .......................
         (Must be received within 8                              Medicare Approved
         weeks of last Medicare                                  visits, not to exceed
         Approved visit).                                        7 each week.
        --Calendar year maximum......  0......................  1,600..................  .......................
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
    Foreign Travel--Not Covered by
               Medicare
 
Medically necessary emergency care
 services beginning during the first
 60 days of each trip outside the
 USA:
    First $250 each calendar year....  0......................  0......................  250
    Remainder of charges.............  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


                        Plan E--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part deductible  $0
    61st thru 90th day...............  All but $[191) a day...  $[191] a day...........  0
    91st day and after:
        --While Using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for
 you elect to receive these services    outpatient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


[[Page 67104]]


                         Plan E--Medicare (Part B)--Medical Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as Physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts \1\                                                                          deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  0......................  All costs
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  $100 (Part B
 Amounts \1\                                                                              deductible)
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
    Blood tests for diagnostic         100%...................  0......................  0
     service.
----------------------------------------------------------------------------------------------------------------
                                                  PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:
    Medically necessary skilled care   100%...................  0......................  0
     services and medical supplies
    --Durable medical equipment First  0......................  0......................  100 (Part B deductible)
     $100 of Medicare Approved
     Amounts \1\.
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
    Foreign Travel--Not Covered By
               Medicare
 
Medically necessary emergency care
 services beginning during the first
 60 days of each trip outside the
 USA:
    First $250 each calendar year....  0......................  0......................  250
    Remainder of charges.............  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum
 
 Preventive Medical Care Benefit--Not
       Covered by Medicare \2\
 
Some annual physical and preventive
 tests and services such as: digital
 rectal exam, hearing screening,
 dipstick urinalysis, diabetes
 screening, thyroid function test,
 tetanus and diphtheria booster and
 education, administered or ordered
 by your doctor when not covered by
 Medicare:
    First $120 each calendar year....  0......................  120....................  0
    Additional charges...............  0......................  0......................  All costs
----------------------------------------------------------------------------------------------------------------
\1\ Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.
\2\ Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with
  Medicare.


           Plan F or High Deductible Plan F--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
                                                                  After you pay $1500
               Services                     Medicare pays         deductible,\2\ plan      In addition to $1500
                                                                          pays            deductible,\2\ you pay
----------------------------------------------------------------------------------------------------------------
         Hospitalization \1\
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           $0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        While using 60 lifetime        All but $[382] a day...  $[382] a day...........  0
         reserve days.
        Once lifetime reserve days
         are used:
            Additional 365 days......  0......................  100% of Medicare         0
                                                                 eligible expenses.
            Beyond the additional 365  0......................  0......................  All costs
             days.
 

[[Page 67105]]

 
  Skilled Nursing Facility Care \1\
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsur-ance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
                             MEDICARE (PART B)--MEDICAL SERVICES--PER CALENDAR YEAR
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare approved    0......................  100 (Part B deductible.  0
     amounts \1\.
    Remainder of Medicare approved     Generally 80%..........  Generally 20%..........  0
     amounts.
    Part B excess charges (Above       0......................  100%...................  0
     Medicare approved amounts).
 
                BLOOD
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare approved         0......................  100 (Part B deductible.  0
 amounts \1\.
Remainder of Medicare approved         80.....................  20%....................  0
 amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment
        First $100 of Medicare         0......................  100 (Part B deductible.  0
         approved amounts \2\.
        Remainder of Medicare          80%....................  20%....................  0
         approved Amounts.
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
    Foreign Travel--Not Covered by
               Medicare
 
Medically necessary emergency care
 services beginning during the first
 60 days of each trip outside the
 USA:
    First $250 each calendar year....  0......................  0......................  250
    Remainder of charges.............  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 life-time
                                                                 $50,000.                 maximum
----------------------------------------------------------------------------------------------------------------
\1\ A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after
  you have been out of the hospital and have not received skilled care in any other facility for 60 days in a
  row.
\2\ This high deductible plan pays the same or offers the same benefits as Plan F after one has paid a calendar
  year [$1500] deductible. Benefits from the high deductible plan F will not begin until out-of-pocket expenses
  are [$1500]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the
  policy. This includes the Medicare deductibles for Part A and Part B, but does not include the plan's separate
  foreign travel emergency deductible.


[[Page 67106]]


                        PLAN G--MEDICARE (PART A)--HOSPITAL SERVICES--PER BENEFIT PERIOD
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Hospitalization*
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           $0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
    Skilled Nursing Facility Care*
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan G--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts*.                                                                            deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  80%....................  20%
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  100 (Part B deductible)
 Amounts*.
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare approved services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment
        First $100 of Medicare         0......................  0......................  100 (Part B deductible)
         Approved Amounts*.
        Remainder of Medicare          80%....................  20%....................  0
         Approved Amounts.
At-home recovery services--not
 covered by Medicare
    Home care certified by your
     doctor, for personal care during
     recovery from an injury or
     sickness for which Medicare
     approved a Home Care Treatment
     Plan:
        --Benefit for each visit.....  0......................  Actual charges to $40 a  Balance
                                                                 visit.

[[Page 67107]]

 
        --Number of visits covered     0......................  Up to the number of
         (Must be received within 8                              Medicare-approved
         weeks of last Medicare                                  visits, not to exceed
         Approved visit).                                        7 each week.
        --Calendar year maximum......  0......................  1,600..................  .......................
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
            Foreign Travel
 
Not covered by Medicare:
    Medically necessary emergency
     care services beginning during
     the first 60 days of each trip
     outside the USA:
        First $250 each calendar year  0......................  0......................  250
        Remainder of Charges.........  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum.
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


                        Plan H--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Hospitalization*
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           $0
                                                                 deductible).
     61st thru 90th day..............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:..............
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
    Skilled Nursing Facility Care*
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.


                         Plan H--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as Physi-cian's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts*.                                                                            deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  0......................  All costs
     Medicare Approved Amounts).
 

[[Page 67108]]

 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  100 (Part B deductible)
 Amounts*.
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare Approved Services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment
        First $100 of Medicare         0......................  0......................  100 (Part B deductible)
         Approved Amounts*.
        Remainder of Medicare          80%....................  20%....................  0
         Approved Amounts.
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
            Foreign Travel
 
Not covered by Medicare--Medically
 necessary emergency care services
 beginning during the first 60 days
 of each trip outside the USA:
    First $250 each calendar year....  0......................  0......................  250
    Remainder of charges.............  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum
 
Basic Outpatient Prescription Drugs--
       Not Covered by Medicare
 
First $250 each calendar year........  0......................  0......................  250
Next $250 each calendar year.........  0......................  50%--$1,250 calendar     50%
                                                                 year maximum benefit.
Over $2,500 each calendar year.......  0......................  0......................  All costs
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B Deductible willbeen met for the calendar year.


                        Plan I--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Hospitalization*
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           $0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare         0
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
    Skilled Nursing Facility Care*
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    1st day and after................  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 

[[Page 67109]]

 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.



                         Plan I--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
               Services                     Medicare pays              Plan pays                 You pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physi-cian's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $0.....................  $100 (Part B
     Amounts *.                                                                           deductible)
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  100%...................  0
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  0......................  100 (Part B deductible)
 Amounts *.
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood test for diagnostic services...  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------
                                                   PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare Approved Services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment
        First $100 of Medicare         0......................  0......................  100 (Part B deductible)
         Approved Amounts *.
        Remainder of Medicare          80%....................  20%....................  0
         Approved Amounts.
At-Home Recovery Services--Not
 Covered By Medicare--Home care
 certified by your doctor, for
 personal care during recovery from
 an injury or sickness for which
 Medicare approved a Home Care
 Treatment Plan:
    --Benefit for each visit.........  0......................  Actual charges to $40 a  Balance
                                                                 visit.
    --Number of visits covered (Must   0......................  Up to the number of
     be received within 8 weeks of                               Medicare-approved
     last Medicare Approved visit).                              visits, not to exceed
                                                                 7 each week.
    --Calendar year maximum..........  0......................  1,600..................
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
    Foreign Travel--Not Covered By
               Medicare
 
Medically necessary emergency care
 services beginning during the first
 60 days of each trip outside the
 USA:
    First $250 each calendar year....  0......................  0......................  250
    Remainder of charges.............  0......................  80% to a lifetime maxi-  20% and amounts over
                                                                 mum benefit of $50,000.  the $50,000 lifetime
                                                                                          maximum
 
Basic Outpatient Prescription Drugs--
       Not Covered by Medicare
 
First $250 each calendar year........  0......................  0......................  250
Next $250 each calendar year.........  0......................  50%--$1,250 calendar     50%
                                                                 year maximum benefit.

[[Page 67110]]

 
Over $2,500 each calendar year.......  0......................  0......................  All costs
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.


           Plan J or High Deductible Plan J--Medicare (Part A)--Hospital Services--Per Benefit Period
----------------------------------------------------------------------------------------------------------------
                                                                  After you pay $1500      In addition to $1500
               Services                     Medicare pays       deductible,** plan pays   deductible,** you pay
----------------------------------------------------------------------------------------------------------------
          Hospitalization *
 
Semiprivate room and board, general
 nursing and miscellaneous services
 and supplies:
    First 60 days....................  All but $[764].........  $[764] (Part A           $0
                                                                 deductible).
    61st thru 90th day...............  All but $[191] a day...  $[191] a day...........  0
    91st day and after:
        --While using 60 lifetime      All but $[382] a day...  $[382] a day...........  0
         reserve days.
        --Once lifetime reserve days
         are used:
            --Additional 365 days....  0......................  100% of Medicare
                                                                 eligible expenses.
            --Beyond the additional    0......................  0......................  All costs
             365 days.
 
   Skilled Nursing Facility Care *
 
You must meet Medicare's
 requirements, including having been
 in a hospital for at least 3 days
 and entered a Medicare-approved
 facility within 30 days after
 leaving the hospital:
    First 20 days....................  All approved amounts...  0......................  0
    21st thru 100th day..............  All but $[95.50] a day.  Up to $[95.50] a day...  0
    101st day and after..............  0......................  0......................  All costs
 
                Blood
 
First 3 pints........................  0......................  3 pints................  0
Additional amounts...................  100%...................  0......................  0
 
             Hospice Care
 
Available as long as your doctor       All but very limited     0......................  Balance
 certifies you are terminally ill and   coinsurance for out-
 you elect to receive these services.   patient drugs and
                                        inpatient respite care.
----------------------------------------------------------------------------------------------------------------
* A benefit period begins on the first day you receive service as an inpatient in a hospital and ends after you
  have been out of the hospital and have not received skilled care in any other facility for 60 days in a row.
** This high deductible plan pays the same or offers the same benefits as Plan J after one has paid a calendar
  year [$1500] deductible. Benefits from high deductible plan J will not begin until out-of-pocket expenses are
  [$1500]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy.
  This includes the Medicare deductibles for Part A and Part B, but does not include the plan's separate
  prescription drug deductible or the plan's separate foreign travel emergency deductible.


            Plan J or High Deductible Plan J--Medicare (Part B)--Medical Services--Per Calendar Year
----------------------------------------------------------------------------------------------------------------
                                                                  After you pay $1500
               Services                     Medicare pays         deductible,**  plan      In addition to $1500
                                                                          pays            deductible,**  you pay
----------------------------------------------------------------------------------------------------------------
           Medical Expenses
 
In or out of the hospital and
 outpatient hospital treatment, such
 as physician's services, inpatient
 and outpatient medical and surgical
 services and supplies, physical and
 speech therapy, diagnostic tests,
 durable medical equipment:
    First $100 of Medicare Approved    $0.....................  $100 (Part B             $0
     Amounts*.                                                   deductible).
    Remainder of Medicare Approved     Generally 80%..........  Generally 20%..........  0
     Amounts.
    Part B Excess Charges (Above       0......................  100%...................  0
     Medicare Approved Amounts).
 
                Blood
 
First 3 pints........................  0......................  All costs..............  0
Next $100 of Medicare Approved         0......................  $100 (Part B             0
 Amounts.*                                                       deductible).
Remainder of Medicare Approved         80%....................  20%....................  0
 Amounts.
 
     Clinical Laboratory Services
 
Blood tests for diagnostic services..  100%...................  0......................  0
----------------------------------------------------------------------------------------------------------------

[[Page 67111]]

 
                                                  PARTS A & B
----------------------------------------------------------------------------------------------------------------
           Home Health Care
 
Medicare Approved Services:
    --Medically necessary skilled      100%...................  0......................  0
     care services and medical
     supplies.
    --Durable medical equipment First  0......................  100 (Part B deductible)  0
     $100 of Medicare Approved
     Amounts *
        Remainder of Medicare          80%....................  20%....................  0
         Approved Amounts.
At-home recovery services--not
 covered by Medicare--Home care
 certified by your doctor, for
 personal care during recovery from
 an injury or sickness for which
 Medicare approved a Home Care
 Treatment Plan:
    --Benefit for each visit.........  0......................  Actual charges to $40 a  Balance
                                                                 visit.
    --Number of visits covered (Must   0......................  Up to the number of      .......................
     be received within 8 weeks of                               Medicare Approved
     last Medicare Approved visit).                              visits, not to exceed
                                                                 7 each week.
    --Calendar year maximum..........  0......................  $1,600.................  .......................
----------------------------------------------------------------------------------------------------------------
                                     OTHER BENEFITS--NOT COVERED BY MEDICARE
----------------------------------------------------------------------------------------------------------------
    Foreign Travel--Not Covered by
               Medicare
 
Medically necessary emergency care
 services beginning during the first
 60 days of each trip outside the
 USA:
First $250 each calendar year........  0......................  0......................  250
Remainder of charges.................  0......................  80% to a lifetime        20% and amounts over
                                                                 maximum benefit of       the $50,000 lifetime
                                                                 $50,000.                 maximum
 
   Extended Outpatient Prescription
    Drugs--Not Covered by Medicare
 
First $250 each calendar year........  0......................  0......................  250
Next $6,000 each calendar year.......  0......................  50%--$3,000 calendar     50%
                                                                 year maximum benefit.
    Over $6,000 each calendar year...  0......................  0......................  All costs
 
 ***Preventive Medical Care Benefit--
       Not Covered by Medicare
 
 Some annual physical and preventive
 tests and services such as: digital
   rectal exam, hearing screening,
    dipstick urinalysis, diabetes
  screening, thyroid function test,
  tetanus and diphtheria booster and
education, administered or ordered by
   your doctor when not covered by
              Medicare:
    First $120 each calendar year....  0......................  120....................  0
    Additional charges...............  0......................  0......................  All costs
----------------------------------------------------------------------------------------------------------------
* Once you have been billed $100 of Medicare-approved amounts for covered services (which are noted with an
  asterisk), your Part B deductible will have been met for the calendar year.
** This high deductible plan pays the same or offers the same benefits as Plan J after one has paid a calendar
  year [$1500] deductible. Benefits from high deductible plan J will not begin until out-of-pocket expenses are
  [$1500]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy.
  This includes the Medicare deductibles for Part A and Part B, but does not include the plan's separate
  prescription drug deductible or the plan's separate foreign travel emergency deductible.
*** Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with
  Medicare.

    D. Notice Regarding Policies or Certificates Which Are Not Medicare 
Supplement Policies.
    (1) Any accident and sickness insurance policy or certificate, 
other than a Medicare supplement policy a policy issued pursuant to a 
contract under Section 1876 of the Federal Social Security Act (42 
U.S.C. Sec. 1395 et seq.), disability income policy; or other policy 
identified in Section 3B of this regulation, issued for delivery in 
this state to persons eligible for Medicare shall notify insureds under 
the policy that the policy is not a Medicare supplement policy or 
certificate. The notice shall either be printed or attached to the 
first page of the outline of coverage delivered to insureds under the 
policy, or if no outline of coverage is delivered, to the first page of 
the policy, or certificate delivered to insureds. The notice shall be 
in no less than twelve (12) point type and shall contain the following 
language:
    ``THIS [POLICY OR CERTIFICATE] IS NOT A MEDICARE SUPPLEMENT [POLICY 
OR CONTRACT]. If you are eligible for Medicare, review the Guide

[[Page 67112]]

to Health Insurance for People with Medicare available from the 
company.''
    (2) Applications provided to persons eligible for Medicare for the 
health insurance policies or certificates described in Subsection D(1) 
shall disclose, using the applicable statement in Appendix C, the 
extent to which the policy duplicates Medicare. The disclosure 
statement shall be provided as a part of, or together with, the 
application for the policy or certificate.

Section 18. Requirements for Application Forms and Replacement 
Coverage

    A. Application forms shall include the following questions designed 
to elicit information as to whether, as of the date of the application, 
the applicant has another Medicare supplement or other health insurance 
policy or certificate in force or whether a Medicare supplement policy 
or certificate is intended to replace any other accident and sickness 
policy or certificate presently in force. A supplementary application 
or other form to be signed by the applicant and agent containing such 
questions and statements may be used.

[Statements]

    (1) You do not need more than one Medicare supplement policy.
    (2) If you purchase this policy, you may want to evaluate your 
existing health coverage and decide if you need multiple coverages.
    (3) You may be eligible for benefits under Medicaid and may not 
need a Medicare supplement policy.
    (4) The benefits and premiums under your Medicare supplement policy 
can be suspended, if requested, during your entitlement to benefits 
under Medicaid for 24 months. You must request this suspension within 
90 days of becoming eligible for Medicaid. If you are no longer 
entitled to Medicaid, your policy will be reinstituted if requested 
within 90 days of losing Medicaid eligibility.
    (5) Counseling services may be available in your state to provide 
advice concerning your purchase of Medicare supplement insurance and 
concerning medical assistance through the state Medicaid program, 
including benefits as a Qualified Medicare Beneficiary (QMB) and a 
Specified Low-Income Medicare Beneficiary (SLMB).

[Questions]

    To the best of your knowledge,
     (1) Do you have another Medicare supplement policy or certificate 
in force?
    (a) If so, with which company?
    (b) If so, do you intend to replace your current Medicare 
supplement policy with this policy [certificate]?
    (2) Do you have any other health insurance coverage that provides 
benefits similar to this Medicare supplement policy?
    (a) If so, with which company?
    (b) What kind of policy?
    (3) Are you covered for medical assistance through the state 
Medicaid program:
    (a) As a Specified Low-Income Medicare Beneficiary (SLMB)?
    (b) As a Qualified Medicare Beneficiary (QMB)?
    (c) For other Medicaid medical benefits?
    B. Agents shall list any other health insurance policies they have 
sold to the applicant.
    (1) List policies sold which are still in force.
    (2) List policies sold in the past five (5) years which are no 
longer in force.
    C. In the case of a direct response issuer, a copy of the 
application or supplemental form, signed by the applicant, and 
acknowledged by the insurer, shall be returned to the applicant by the 
insurer upon delivery of the policy.
    D. Upon determining that a sale will involve replacement of 
Medicare supplement coverage, any issuer, other than a direct response 
issuer, or its agent, shall furnish the applicant, prior to issuance or 
delivery of the Medicare supplement policy or certificate, a notice 
regarding replacement of Medicare supplement coverage. One copy of the 
notice signed by the applicant and the agent, except where the coverage 
is sold without an agent, shall be provided to the applicant and an 
additional signed copy shall be retained by the issuer. A direct 
response issuer shall deliver to the applicant at the time of the 
issuance of the policy the notice regarding replacement of Medicare 
supplement coverage.
    E. The notice required by Subsection D above for an issuer shall be 
provided in substantially the following form in no less than twelve 
(12) point type:

NOTICE TO APPLICANT REGARDING REPLACEMENT OF MEDICARE SUPPLEMENT 
INSURANCE [Insurance company's name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

    According to [your application] [information you have furnished], 
you intend to terminate existing Medicare supplement insurance and 
replace it with a policy to be issued by [Company Name] Insurance 
Company. Your new policy will provide thirty (30) days within which you 
may decide without cost whether you desire to keep the policy.
    You should review this new coverage carefully. Compare it with all 
accident and sickness coverage you now have. If, after due 
consideration, you find that purchase of this Medicare supplement 
coverage is a wise decision, you should terminate your present Medicare 
supplement coverage. You should evaluate the need for other accident 
and sickness coverage you have that may duplicate this policy.
STATEMENT TO APPLICANT BY ISSUER, AGENT [BROKER OR OTHER 
REPRESENTATIVE]:
    I have reviewed your current medical or health insurance coverage. 
To the best of my knowledge, this Medicare supplement policy will not 
duplicate your existing Medicare supplement coverage because you intend 
to terminate your existing Medicare supplement coverage. The 
replacement policy is being purchased for the following reason (check 
one):
    ____ Additional benefits.
    ____ No change in benefits, but lower premiums.
    ____ Fewer benefits and lower premiums.
    ____ Other. (please specify)
----------------------------------------------------------------------

    1. Health conditions which you may presently have (preexisting 
conditions) may not be immediately or fully covered under the new 
policy. This could result in denial or delay of a claim for benefits 
under the new policy, whereas a similar claim might have been payable 
under your present policy.
    2. State law provides that your replacement policy or certificate 
may not contain new preexisting conditions, waiting periods, 
elimination periods or probationary periods. The insurer will waive any 
time periods applicable to preexisting conditions, waiting periods, 
elimination periods, or probationary periods in the new policy (or 
coverage) for similar benefits to the extent such time was spent 
(depleted) under the original policy.
    3. If, you still wish to terminate your present policy and replace 
it with new coverage, be certain to truthfully and completely answer 
all questions on the application concerning your medical and health 
history. Failure to include all material medical information on an 
application may provide a basis for the company to deny any future 
claims and to refund your premium as though your policy had never been 
in force. After the application has been completed and

[[Page 67113]]

before you sign it, review it carefully to be certain that all 
information has been properly recorded. [If the policy or certificate 
is guaranteed issue, this paragraph need not appear.]
    Do not cancel your present policy until you have received your new 
policy and are sure that you want to keep it.
----------------------------------------------------------------------

(Signature of Agent, Broker or Other Representative)*

[Typed Name and Address of Issuer, Agent or Broker]
----------------------------------------------------------------------
(Applicant's Signature)

----------------------------------------------------------------------
(Date)

    *Signature not required for direct response sales.
    F. Paragraphs 1 and 2 of the replacement notice (applicable to 
preexisting conditions) may be deleted by an issuer if the replacement 
does not involve application of a new preexisting condition limitation.

Section 19. Filing Requirements for Advertising

    An issuer shall provide a copy of any Medicare supplement 
advertisement intended for use in this state whether through written, 
radio or television medium to the Commissioner of Insurance of this 
state for review or approval by the commissioner to the extent it may 
be required under state law.

    Drafting Note: States should examine their existing laws 
regarding the filing of advertisements to determine the extent to 
which review or approval is required.

Section 20. Standards for Marketing

    A. An issuer, directly or through its producers, shall:
    (1) Establish marketing procedures to assure that any comparison of 
policies by its agents or other producers will be fair and accurate.
    (2) Establish marketing procedures to assure excessive insurance is 
not sold or issued.
    (3) Display prominently by type, stamp or other appropriate means, 
on the first page of the policy the following:

    ``Notice to buyer: This policy may not cover all of your medical 
expenses.''

    (4) Inquire and otherwise make every reasonable effort to identify 
whether a prospective applicant or enrollee for Medicare supplement 
insurance already has accident and sickness insurance and the types and 
amounts of any such insurance.
    (5) Establish auditable procedures for verifying compliance with 
this Subsection A.
    B. In addition to the practices prohibited in [insert citation to 
state unfair trade practices act], the following acts and practices are 
prohibited:
    (1) Twisting. Knowingly making any misleading representation or 
incomplete or fraudulent comparison of any insurance policies or 
insurers for the purpose of inducing, or tending to induce, any person 
to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow 
on, or convert an insurance policy or to take out a policy of insurance 
with another insurer.
    (2) High pressure tactics. Employing any method of marketing having 
the effect of or tending to induce the purchase of insurance through 
force, fright, threat, whether explicit or implied, or undue pressure 
to purchase or recommend the purchase of insurance.
    (3) Cold lead advertising. Making use directly or indirectly of any 
method of marketing which fails to disclose in a conspicuous manner 
that a purpose of the method of marketing is solicitation of insurance 
and that contact will be made by an insurance agent or insurance 
company.
    C. The terms ``Medicare Supplement,'' ``Medigap,'' ``Medicare Wrap-
Around'' and words of similar import shall not be used unless the 
policy is issued in compliance with this regulation.

    Drafting Note: Remember that the Unfair Trade Practice Act in 
your state applies to Medicare supplement insurance policies and 
certificates.

Section 21. Appropriateness of Recommended Purchase and Excessive 
Insurance

    A. In recommending the purchase or replacement of any Medicare 
supplement policy or certificate an agent shall make reasonable efforts 
to determine the appropriateness of a recommended purchase or 
replacement.
    B. Any sale of Medicare supplement coverage that will provide an 
individual more than one Medicare supplement policy or certificate is 
prohibited.

Section 22. Reporting of Multiple Policies

    A. On or before March 1 of each year, an issuer shall report the 
following information for every individual resident of this state for 
which the issuer has in force more than one Medicare supplement policy 
or certificate:
    (1) Policy and certificate number, and
    (2) Date of issuance.
    B. The items set forth above must be grouped by individual 
policyholder.

    Editor's Note: Appendix B contains a reporting form for 
compliance with this section.

Section 23. Prohibition Against Preexisting Conditions, Waiting 
Periods, Elimination Periods and Probationary Periods in 
Replacement Policies or Certificates

    A. If a Medicare supplement policy or certificate replaces another 
Medicare supplement policy or certificate, the replacing issuer shall 
waive any time periods applicable to preexisting conditions, waiting 
periods, elimination periods and probationary periods in the new 
Medicare supplement policy or certificate for similar benefits to the 
extent such time was spent under the original policy.
    B. If a Medicare supplement policy or certificate replaces another 
Medicare supplement policy or certificate which has been in effect for 
at least six (6) months, the replacing policy shall not provide any 
time period applicable to preexisting conditions, waiting periods, 
elimination periods and probationary periods for benefits similar to 
those contained in the original policy or certificate.

    Drafting Note: Although NAIC is restricted from making revisions 
to its models that do not conform to the Omnibus Budget 
Reconciliation Act of 1990, states are encouraged to consider 
deletion of the words ``for similar benefits'' in Subsection A and 
the words ``for benefits similar to those contained in the original 
policy or certificate'' in Subsection B. States should eliminate 
Paragraphs (1) and (2) (applicable to preexisting conditions) of the 
replacement notice required by Section 16E.

Section 24. Separability

    If any provision of this regulation or the application thereof to 
any person or circumstance is for any reason held to be invalid, the 
remainder of the regulation and the application of such provision to 
other persons or circumstances shall not be affected thereby.

Section 25. Effective Date

    This regulation shall be effective on [insert date].

Appendix A--Medicare Supplement Refund Calculation Form for 
Calendar Year______

TYPE \1\---------------------------------------------------------------
For the State of-------------------------------------------------------

[[Page 67114]]

NAIC Group Code--------------------------------------------------------
Address----------------------------------------------------------------
Title------------------------------------------------------------------
SMSBP \2\--------------------------------------------------------------
Company Name-----------------------------------------------------------
NAIC Company Code------------------------------------------------------
Person Completing Exhibit----------------------------------------------
Telephone Number-------------------------------------------------------

 
                                                                 (b)
      Line                                      (a)  Earned    Incurred
                                                   Premium    Claims \4\
1...............  Current Year's Experience...
                  a. Total (all policy years).
                  b. Current year's issues \5\
                  c. Net (for reporting
                   purposes = 1a-1b.
2...............  Past Years' Experience (all
                   policy years).
3...............  Total Experience (Net
                   Current Year + Past Year).


4............  Refunds Last Year (Excluding Interest)......
5............  Previous Since Inception (Excluding
                Interest).
6............  Refunds Since Inception (Excluding Interest)
7............  Benchmark Ratio Since Inception (see
                worksheet for Ratio 1).
8............  Experienced Ratio Since Inception (Ratio 2)
                Total Actual Incurred Claims (line 3, col.
                b)  Total Earned Prem. (line 3,
                col. a)-Refunds Since Inception (line 6).
9............  Life Years Exposed Since Inception.If the
                Experienced Ratio is less than the
                Benchmark Ratio, and there are more than
                500 life years exposure, then proceed to
                calculation of refund
10...........  Tolerance Permitted (obtained from
                credibility table).
------------------------------------------------------------------------
\1\ Individual, Group, Individual Medicare Select, or Group Medicare
  Select Only.
\2\ ``SMSBP''=Standardized Medicare Supplement Benefit Plan--Use ``P''
  for pre-standardized plans.
\3\ Includes Modal Loadings and Fees Charged.
\4\ Excludes Active Life Reserves.
\5\ This is to be used as ``Issue Year Earned Premium'' for Year 1 of
  next year's ``Worksheet for Calculation of Benchmark Ratios''.


                  Medicare Supplement Credibility Table
------------------------------------------------------------------------
                           Life Years Exposed
-------------------------------------------------------------------------
                     Since Inception                         Tolerance
------------------------------------------------------------------------
10,000 +................................................            0.0%
5,000-9,999.............................................            5.0%
2,500-4,999.............................................            7.5%
1,000-2,499.............................................           10.0%
500-999.................................................           15.0%
If less than 500, no credibility.
------------------------------------------------------------------------

REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE 
INCEPTION FOR GROUP POLICIES FOR CALENDAR YEAR ______

TYPE \1\---------------------------------------------------------------
SMSBP \2\--------------------------------------------------------------
For the State of-------------------------------------------------------
Company Name-----------------------------------------------------------
NAIC Group Code--------------------------------------------------------
NAIC Company Code------------------------------------------------------
Address----------------------------------------------------------------
Person Completing Exhibit----------------------------------------------
Title------------------------------------------------------------------
Telephone Number-------------------------------------------------------

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 (a) \3\                   (b) \4\      (c)        (d)         (e)        (f)        (g)        (h)         (i)        (j)      (o) \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 Policy
                  Year                      Earned     Factor    (b)x(c)   Cumulative   (d)x(e)     Factor    (b)x(g)   Cumulative   (h)x(i)   Year Loss
                                           Premium                         Loss Ratio                                   Loss Ratio               Ratio
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................                 2.770                  0.507                 0.000                 0.0000                  0.46
2.......................................                 4.175                  0.567                 0.000                  0.000                  0.63
3.......................................                 4.175                  0.567                 1.194                  0.759                  0.75
4.......................................                 4.175                  0.567                 2.245                  0.771                  0.77
5.......................................                 4.175                  0.567                 3.170                  0.782                  0.80
6.......................................                 4.175                  0.567                 3.998                  0.792                  0.82

[[Page 67115]]

 
7.......................................                 4.175                  0.567                 4.754                  0.802                  0.84
8.......................................                 4.175                  0.567                 5.445                  0.811                  0.87
9.......................................                 4.175                  0.567                 6.075                  0.818                  0.88
10......................................                 4.175                  0.567                 6.650                  0.824                  0.88
11......................................                 4.175                  0.567                 7.176                  0.828                  0.88
12......................................                 4.175                  0.567                 7.655                  0.831                  0.88
13......................................                 4.175                  0.567                 8.093                  0.834                  0.89
14......................................                 4.175                  0.567                 8.493                  0.837                  0.89
15......................................                 4.175                  0.567                 8.684                  0.838                  0.89
Total:..................................                             (k):                   (l):                  (m):                   (n):
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benchmark Ratio Since Inception: (l + n)/(k + m): ____
\1\ Individual, Group, Individual Medicare Select, or Group Medicare Select Only.
\2\ ``SMSBP'' = Standardized Medicare Supplement Benefit Plan--Use ``P'' for pre-standardized plans
\3\ Year 1 is the current calendar year--1. Year 2 is the current calendar year--2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990;
  Year 2 is 1989, etc.)
\4\ For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
\5\ These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in
  the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.

Reporting Form for the Calculation of Benchmark Ratio Since 
Inception for Individual Policies               for Calendar 
Year______

Type \1\---------------------------------------------------------------
SMSBP \2\--------------------------------------------------------------
For the State of-------------------------------------------------------
Company Name-----------------------------------------------------------
NAIC Group Code NAIC---------------------------------------------------
Company Code-----------------------------------------------------------
Address----------------------------------------------------------------
Person Completing Exhibit----------------------------------------------
Title------------------------------------------------------------------
Telephone Number-------------------------------------------------------

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 (a) \3\                   (b) \4\      (c)        (d)         (e)        (f)        (g)        (h)         (i)        (j)      (o) \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 Policy
                  Year                      Earned     Factor   (b) x (c)  Cumulative  (d) x (e)    Factor   (b) x (g)  Cumulative  (h) x (i)  Year Loss
                                           premium                         loss ratio                                   loss ratio               Ratio
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................                 2.770                  0.442                 0.000                  0.000                  0.40
2.......................................                 4.175                  0.493                 0.000                  0.000                  0.55
3.......................................                 4.175                  0.493                 1.194                  0.659                  0.65
4.......................................                 4.175                  0.493                 2.245                  0.669                  0.67
5.......................................                 4.175                  0.493                 3.170                  0.678                  0.69
6.......................................                 4.175                  0.493                 3.998                  0.686                  0.71
7.......................................                 4.175                  0.493                 4.754                  0.695                  0.73
8.......................................                 4.175                  0.493                 5.445                  0.702                  0.75
9.......................................                 4.175                  0.493                 6.075                  0.708                  0.76
10......................................                 4.175                  0.493                 6.650                  0.713                  0.76
11......................................                 4.175                  0.493                 7.176                  0.717                  0.76
12......................................                 4.175                  0.493                 7.655                  0.720                  0.77
13......................................                 4.175                  0.493                 8.093                  0.723                  0.77
14......................................                 4.175                  0.493                 8.493                  0.725                  0.77
15......................................                 4.175                  0.493                 8.684                  0.725                  0.77
                                         ---------------------------------------------------------------------------------------------------------------
    Total:..............................                           (k):                   (l):                  (m):                   (n):
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benchmark Ratio Since Inception: (l + n)/(k + m): ____
 
 \1\ Individual, Group, Individual Medicare Select, or Group Medicare Select Only.
\2\ ``SMSBP'' = Standardized Medicare Supplement Benefit Plan--Use ``P'' for pre-standardized plans
\3\ Year 1 is the current calendar year--1. Year 2 is the current calendar year--2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990;
  Year 2 is 1989, etc.)
\4\ For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year.
\5\ These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in
  the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only.


[[Page 67116]]

Appendix B--Form for Reporting Medicare Supplement Policies

Company Name:----------------------------------------------------------
Address:---------------------------------------------------------------
Phone Number:----------------------------------------------------------
Due March 1, annually

    The purpose of this form is to report the following information on 
each resident of this state who has in force more than one Medicare 
supplement policy or certificate. The information is to be grouped by 
individual policyholder.

------------------------------------------------------------------------
      Policy and certificte #                  Date of issuance
------------------------------------------------------------------------
                                     ...................................
------------------------------------------------------------------------
                                     ...................................
------------------------------------------------------------------------
                                     ...................................
------------------------------------------------------------------------
                                     ...................................
------------------------------------------------------------------------

----------------------------------------------------------------------
Signature

----------------------------------------------------------------------
Name and Title (please type)

----------------------------------------------------------------------
Date

Appendix C Disclosure Statements

Instructions for Use of the Disclosure Statements for Health Insurance 
Policies Sold to Medicare Beneficiaries That Duplicate Medicare

    1. Section 1882 (d) of the federal Social Security Act [42 
U.S.C. 1395ss] prohibits the sale of a health insurance policy (the 
term policy includes certificate) to Medicare beneficiaries that 
duplicates Medicare benefits unless it will pay benefits without 
regard to a beneficiary's other health coverage and it includes the 
prescribed disclosure statement on or together with the application 
for the policy.
    2. All types of health insurance policies that duplicate 
Medicare shall include one of the attached disclosure statements, 
according to the particular policy type involved, on the application 
or together with the application. The disclosure statement may not 
vary from the attached statements in terms of language or format 
(type size, type proportional spacing, bold character, line spacing, 
and usage of boxes around text).
    3. State and federal law prohibits insurers from selling a 
Medicare supplement policy to a person that already has a Medicare 
supplement policy except as a replacement policy.
    4. Property/casualty and life insurance policies are not 
considered health insurance.
    5. Disability income policies are not considered to provide 
benefits that duplicate Medicare.
    6. Long-term care insurance policies that coordinate with 
Medicare and other health insurance are not considered to provide 
benefits that duplicate Medicare.
    7. The federal law does not preempt state laws that are more 
stringent than the federal requirements.
    8. The federal law does not preempt existing state form filing 
requirements.
    9. Section 1882 of the federal Social Security Act was amended 
in Subsection (d)(3)(A) to allow for alternative disclosure 
statements. The disclosure statements already in Appendix C remain. 
Carriers may use either disclosure statement with the requisite 
insurance product. However, carriers should use either the original 
disclosure statements or the alternative disclosure statements and 
not use both simultaneously.

[Original disclosure statement for policies that provide benefits for 
expenses incurred for an accidental injury only.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This is not Medicare Supplement Insurance

    This insurance provides limited benefits, if you meet the policy 
conditions, for hospital or medical expenses that result from 
accidental injury. It does not pay your Medicare deductibles or 
coinsurance and is not a substitute for Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when it pays:
     Hospital or medical expenses up to the maximum stated in 
the policy

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for policies that provide benefits for 
specified limited services.]

[[Page 67117]]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance provides limited benefits, if you meet the policy 
conditions, for expenses relating to the specific services listed in 
the policy. It does not pay your Medicare deductibles or coinsurance 
and is not a substitute for Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when:
     Any of the services covered by the policy are also covered 
by Medicare

    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for policies that reimburse expenses 
incurred for specified diseases or other specified impairments. This 
includes expense-incurred cancer, specified disease and other types of 
health insurance policies that limit reimbursement to named medical 
conditions.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance provides limited benefits, if you meet the policy 
conditions, for hospital or medical expenses only when you are treated 
for one of the specific diseases or health conditions listed in the 
policy. It does not pay your Medicare deductibles or coinsurance and is 
not a substitute for Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when it pays:
     Hospital or medical expenses up to the maximum stated in 
the policy

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for policies that pay fixed dollar 
amounts for specified diseases or other specified impairments. This 
includes cancer, specified disease, and other health insurance policies 
that pay a scheduled benefit or specific payment based on diagnosis of 
the conditions named in the policy.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance pays a fixed amount, regardless of your expenses, if 
you meet the policy conditions, for one of the specific diseases or 
health conditions named in the policy. It does not pay your Medicare 
deductibles or coinsurance and is not a substitute for Medicare 
Supplement insurance.

    This insurance duplicates Medicare benefits because Medicare 
generally pays for most of the expenses for the diagnosis and treatment 
of the specific conditions or diagnoses named in the policy.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.

[[Page 67118]]

 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for indemnity policies and other 
policies that pay a fixed dollar amount per day, excluding long-term 
care policies.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance pays a fixed dollar amount, regardless of your 
expenses, for each day you meet the policy conditions. It does not pay 
your Medicare deductibles or coinsurance and is not a substitute for 
Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when:
    Any expenses or services covered by the policy are also covered by 
Medicare

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for policies that provide benefits upon 
both an expense-incurred and fixed indemnity basis.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance pays limited reimbursement for expenses if you meet 
the conditions listed in the policy. It also pays a fixed amount, 
regardless of your expenses, if you meet other policy conditions. It 
does not pay your Medicare deductibles or coinsurance and is not a 
substitute for Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when:
     Any expenses or services covered by the policy are also 
covered by Medicare; or
     It pays the fixed dollar amount stated in the policy and 
Medicare covers the same event

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice care
     Other approved items & services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Original disclosure statement for other health insurance policies not 
specifically identified in the preceding statements.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS INSURANCE DUPLICATES 
SOME MEDICARE BENEFITS

This Is Not Medicare Supplement Insurance

    This insurance provides limited benefits if you meet the conditions 
listed in the policy. It does not pay your Medicare deductibles or 
coinsurance and is not a substitute for Medicare Supplement insurance.

    This insurance duplicates Medicare benefits when it pays:
     The benefits stated in the policy and coverage for the 
same event is provided by Medicare

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice

[[Page 67119]]

     Other approved items and services

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Alternative disclosure statement for policies that provide benefits 
for expenses incurred for an accidental injury only.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy.
    This insurance provides limited benefits, if you meet the policy 
conditions, for hospital or medical expenses that result from 
accidental injury. It does not pay your Medicare deductibles or 
coinsurance and is not a substitute for Medicare Supplement insurance.

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Other approved items and services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Alternative disclosure statement for policies that provide benefits 
for specified limited services.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits under this policy.
    This insurance provides limited benefits, if you meet the policy 
conditions, for expenses relating to the specific services listed in 
the policy. It does not pay your Medicare deductibles or coinsurance 
and is not a substitute for Medicare Supplement insurance.

    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Other approved items and services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.
[Alternative disclosure statement for policies that reimburse expenses 
incurred for specified diseases or other specified impairments. This 
includes expense-incurred cancer, specified disease and other types of 
health insurance policies that limit reimbursement to named medical 
conditions.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy. Medicare generally pays for most 
or all of these expenses.
    This insurance provides limited benefits, if you meet the policy 
conditions, for hospital or medical expenses only when you are treated 
for one of the specific diseases or health conditions listed in the 
policy. It does not pay your Medicare deductibles or coinsurance and is 
not a substitute for Medicare Supplement insurance.

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice

[[Page 67120]]

     Other approved items and services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Alternative disclosure statement for policies that pay fixed dollar 
amounts for specified diseases or other specified impairments. This 
includes cancer, specified disease, and other health insurance policies 
that pay a scheduled benefit or specific payment based on diagnosis of 
the conditions named in the policy.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy.
    This insurance pays a fixed amount, regardless of your expenses, if 
you meet the policy conditions, for one of the specific diseases or 
health conditions named in the policy. It does not pay your Medicare 
deductibles or coinsurance and is not a substitute for Medicare 
Supplement insurance.

    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services

    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Alternative disclosure statement for indemnity policies and other 
policies that pay a fixed dollar amount per day, excluding long-term 
care policies.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy.
    This insurance pays a fixed dollar amount, regardless of your 
expenses, for each day you meet the policy conditions. It does not pay 
your Medicare deductibles or coinsurance and is not a substitute for 
Medicare Supplement insurance.

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.
[Alternative disclosure statement for policies that provide benefits 
upon both an expense-incurred and fixed indemnity basis.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy.
    This insurance pays limited reimbursement for expenses if you meet 
the conditions listed in the policy. It also pays a fixed amount, 
regardless of your expenses, if you meet other policy conditions. It 
does not pay your Medicare deductibles or coinsurance and is not a 
substitute for Medicare Supplement insurance.

    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:

[[Page 67121]]

     Hospitalization
     Physician services
     Hospice care
     Other approved items & services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

[Alternative disclosure statement for other health insurance policies 
not specifically identified in the preceding statements.]

IMPORTANT NOTICE TO PERSONS ON MEDICARE--THIS IS NOT MEDICARE 
SUPPLEMENT INSURANCE

    Some health care services paid for by Medicare may also trigger the 
payment of benefits from this policy.
    This insurance provides limited benefits if you meet the conditions 
listed in the policy. It does not pay your Medicare deductibles or 
coinsurance and is not a substitute for Medicare Supplement insurance.
    Medicare generally pays for most or all of these expenses.
    Medicare pays extensive benefits for medically necessary services 
regardless of the reason you need them. These include:
     Hospitalization
     Physician services
     Hospice
     Other approved items and services
    This policy must pay benefits without regard to other health 
benefit coverage to which you may be entitled under Medicare or other 
insurance.

Before You Buy This Insurance

 Check the coverage in all health insurance policies you already 
have.
 For more information about Medicare and Medicare Supplement 
insurance, review the Guide to Health Insurance for People with 
Medicare, available from the insurance company.
 For help in understanding your health insurance, contact your 
state insurance department or state senior insurance counseling 
program.

Legislative History (All References Are to the Proceedings of the 
NAIC).

    1980 Proc. II 22, 26, 588, 591, 593, 595-603 (adopted).
    1981 Proc. I 47, 51, 420, 422, 424, 446-447, 470-481 (amended 
and reprinted).
    1988 Proc. I 9, 20-21, 629-630, 652-654, 668-677 (amended and 
reprinted).
    1988 Proc. II 5, 13, 568, 601, 604, 615-624 (amended and 
reprinted).
    1989 Proc. I 14, 813-814, 836.4-836.26 (amended at special 
plenary session September 1988).
    1989 Proc. I 9, 25, 703, 753-754, 757-760 (appendices amended at 
regular plenary session).
    1990 Proc. I 6, 27-28, 477, 574-576, 580-599 (amended and 
reprinted).
    1990 Proc. II 7, 16, 599, 656, 657 (adopted reporting form).
    1992 Proc. I 12, 16-75, 1084-1085 (amended at special plenary 
session in July 1991).
    1995 Proc. 1st Quarter 7, 12, 501, 575, 586, 592-615 (amended 
and most of model reprinted).
    1995 Proc. 4th Quarter 11, 33, 889, 892 (amended).
    1998 Proc. 1st Quarter (amended).
[FR Doc. 98-32103 Filed 12-3-98; 8:45 am]
BILLING CODE 4120-01-C