Department  of  Health and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
THE  IMPACT  OF 
OBRA  1990  ON  STATE

REGULATION  OF 
MEDIGAP  INSURANCE

+  -? 
g  WINE  GIBBS  BROWN

2 
. Inspector  General
s 
6 
-#

%+ 
+ MARCH  1995 
%d~~ 
> 
OEI-09-93-00230
 EXECUTIVE  SUMMARY

PURPOSE 
TO determine  the  impact  of the  Omnibus  Budget  Reconciliation  Act of  1990 on State 
regulation  of Medigap  insurance  and  on related  consumer  education. 
BACKGROUND 
l%e M&are  Program  and  Medicare  Supplemental  or Medigap Insurance 
Congress  established  the  Medicare  program  in 1965 under  title  XVIII  of the  Social

Security  Act.  Medicare  consists  of two separate  insurance  programs,  hospital

insurance  (part  A) and  supplementary  medical  insurance  (part  B).  It provides

payment  for  certain  medical  services  for persons  at least  65 years  of age  or under  65 if

disabled,  including  those  afflicted  with end-stage  renal  disease.  In  1993, Medicare

covered  about  32.1 million  aged  and  3.4 million disabled  beneficiaries.  The  Health

Care  Financing  Administration  (HCFA)  manages  the  Medicare  program.

Medicare  covers  about  75 percent  of the  actual  cost of medical  care  provided  to

beneficiaries.  Beneficiaries  are  responsible  for deductibles  and  coinsurance  amounts

under  both  parts  A and  B, as well as services  and  items  that  Medicare  does  not  cover.

Almost  three-quarters  of aged  Medicare  beneficiaries  have  private  health  insurance,

including  Medicare  supplemental,  or Medigap,  to cover some  of their  expenses.

Regulation  of Medigap  Insurance 
The  States  were  solely responsible  for regulating  Medigap  until  1980, when  Congress 
responded  to numerous  reports  of abuses  in the  marketing  of Medigap  insurance. 
Legislation  established  minimum  Federal  standards  for Medigap  policies  by adopting 
model  standards  developed  by the  National  Association  of Insurance  Commissioners 
(NAIC).  At the  time  of our  fieldwork,  the  Omnibus  Budget  Reconciliation  Act  of 
1990 (OBRA  1990) contained  the  most  recent  amendment  to the  Medigap  statutes.  It 
required  the  standardization  of Medigap  policies,  Federal  and  State  action  to curb 
abuses  in the  marketing  of Medigap  policies,  and  the  education  of consumers.  The 
States  insurance  departments  and  information,  counseling,  and  assistance  (ICA) 
grantee  programs  are  responsible  for regulation  and  education. 
DEVELOPMENTS  SINCE  ISSUANCE  OF THE  DRAFI  REPORT 
On  October  31, 1994, Congress  passed  the  Social Security  Act Amendments  of 1994. 
Effective  January  1995, the  amendments  clarify that  a six-month  open  enrollment 
period  applies  to  all beneficiaries  who are  age 65, including  those  who had  been 
entitled  to Part  B benefits  prior  to age  65 due  to end-stage  renal  disease  or disability, 
The  legislation  also  amends  the  anti-duplication  provision  to allow some  Medigap 
1  RECOMMENDATIONS 
We  recommend  that  HCFA: 
1.  implement  plans  for direct  regional  office assistance  to  ICA grantees; 
2.	 a.  consider  expanding  the  Complaints  Database  System  to reflect  received, 
closed,  and  pending  Medigap  complaints; 
b.	 direct  State  insurance  departments  to furnish  key required  data,  such as 
policy type,  for each  reporting  period; 
c.  clarify instructions  to assure  uniform  reporting  of data  by States;  and 
3.	 work  with NAIC  and  State  insurance  departments  to encourage  States  to adopt 
consumer  safeguards  exceeding  the  minimum  standards,  including  open 
enrollment  for the  disabled  and  community  rating  of premiums. 
AGENCY  COMMENTS  AND  OFFICE  OF  INSPECZOR  GENERAL  RESPONSE 
In written  comments  on the  draft  report,  HCFA  concurred  fully with the  reports 
recommendations.  The  HCFA  described  actions  they  already  have  taken  or plan  to 
take  to  (1) provide  regional  office  support  to ICA grantees,  (2) obtain  key required 
data,  (3) clarify reporting  instructions,  and  (4) pursue  a legislative  proposal  to mandate 
the  use  of community  rating  for Medigap  policies.  They  do not,  however,  plan  to 
request  Office  of Management  and  Budget  clearance  for expanded  data  collection  at 
this time.  The  HCFA  noted  that  the  Social  Security  Act Amendments  of 1994 address 
issues surrounding  open  enrollment  for the  disabled  and  the  anti-duplication  provision. 
The  full text  of HCFAS  comments  appears  in appendix  C.  In response  to HCFAS 
comments,  we have  made  technical  corrections  to reflect  the  passage  of the  Social 
Security  Act Amendments  of 1994 and  actions  taken  by HCFA. 
... 
111  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1

FINDINGS.  . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..10

lmpactof  OBRA1990Medigap  reforms  on State  regulation  . . . . . . . . . . . . . . . . .  10

EffectiveFederal/Statecollaboration  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...14

]ssuesrequiring  further  action  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...14

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..18

APPENDICES 
A:  The  0BRA1990Minimum  Medigap  Standards  . . . . . . . . . . . . . . . . . . . . . .  A-1

B:	 The  NAIC  Standard  Complaint  Data  Form

and  the  Characteristics  ofMedigap  Complaints  . . . . . . . . . . . . . . . . . . . . . . .  B-1

C:  The  HCFA  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-1
 INTRODUCTION

PURPOSE 
To  determine  the  impact  of the  Omnibus  Budget  Reconciliation  Act  of  1990 on State 
regulation  of Medigap  insurance  and  on related  consumer  education. 
BACKGROUND 
%  Mkdicare  Program 
Congress  established  the  Medicare  program  in 1965 under  title  XVIII  of the  Social 
Securi~Act  toprovide  health  insurance  fortheelderly  and  disabled.  It consists  of 
two separate  but  complementary  insurance  programs,  hospital  insurance  (part  A) and 
supplementary  medical  insurance  (part  B).  Although  part  A is called  hospital 
insurance,  it also  covers  semices  furnished  by skilled  nursing  facilities,  home  health 
agencies,  and  hospices.  Part  B covers  a wide range  of medical  semices  and  supplies, 
including  physician  services  and  durable  medical  equipment.  In  1993. Medicare 
covered  about  32.1 million  aged  and  3.4 million  dis~b~ed beneficiaries.  The  Health 
Care  Financing  Administration  (HCFA)  manages  the  Medicare  program. 
W4y Beneficiaries  Might  Need  lksurance  Coverage  Supplemental  to AAiicare 
Medicare  does  not  cover  all health  services  or all costs.  Beneficiaries  are  responsible 
for deductibles  and  coinsurance  under  both  parts  A and  B, as well as services  and 
items  that  Medicare  does  not  cover.  For  example,  when  physicians  accept  the 
Medicare-approved  amount  for part  B services  as payment  in full (assignment  of 
benefits),  Medicare  covers  only 80 percent  of this amount,  excepting  mental  health 
services.  For  mental  health  services,  Medicare  covers  50 percent  of approved  charges, 
and  beneficiaries  are  responsible  for 50 percent.  Beneficiaries  also  may have  to pay 
amounts  above  those  approved  if they receive  covered  services  from  physicians  who do 
not  accept  assignment. 
While  Medicare  covers  most  of the  cost of medical  care  provided  to beneficiaries, 
almost  three-quarters  of aged  beneficiaries  buy private  health  insurance  for greater 
protection.  These  plans  typically provide  coverage  for some  or all of the  deductible 
and  coinsurance  amounts  for Medicare-covered  selvices.  They  are  known  as 
Medigap,  because  they  fill the  gaps  in Medicare  benefits.  Sometimes  they  also  cover 
items  or services  excluded  by Medicare,  such as preventive  health  care  or most 
outpatient  prescription  drugs. 
Despite  the  national  extent  of Medigap  insurance  coverage,  Medigap  policies  account 
for a small  portion  of total  premiums  for health  insurance  products  sold.  According  to 
the  National  Association  of Insurance  Commissioners  (NAIC),  Medigap  insurance 
premiums  represented  less than  three  percent  of those  written  nationally  in 1992.  The 
1  1992 State-reported  premiums  for Medigap  insurance  were  $11.8 billion.  The  total 
premiums  written  nationally  by Property  and  Ca.sua]ty  and  Life/Health  insurance 
companies,  excluding  Blue  Cross  and  Blue  Shield  plans  not  organized  as insurers,  were 
$443.5 billion. 
Reg4dim  of A4edigap 
The  States  were  solely responsible  for regulating  Medigap  until  1980, when  Congress 
responded  to numerous  reports  of abuses  in the  marketing  of Medigap  insurance. 
The  Baucus Amendment  established  minimum  Federal  standards  for Medigap 
policies  by adopting  model  standards  developed  by NAIC.  The  amendment  gave 
states  the  opportunity  to adopt  the  Federal  standards  as part  of their  regulatory 
programs  for Medigap  insurance.  The  Baucus  amendment,  however,  lacked  the 
enforcement  power  to assure  that  States  adopted  the  Federal  standards. 
Repeal  of the  Catastrophic  Coverage  Act of 1988 was the  greatest  stimulus  to further 
Congressional  action  to regulate  Medigap  insurance.  That  legislation  would  have  filled 
some  major  gaps  in Medicare  by limiting  beneficiaries  out-of-pocket  expenses  and  by 
increasing  coverage.  As a result,  during  the  Medicare  Hearings  of 1990, the 
Subcommittee  on Medicare  and  Long-term  Care  of the  Senate  Committee  on Finance 
concluded  that  several  specific  problem  areas  exist [with Medigap  insurance]  and 
must be  urgently  addressed  by Congress.  These  are  consumer  confusion,  duplication 
of coverage,  failure  to comply  with ratio  standards,  and  continued  abuses  in sales  and 
marketing  practices. 
These  concerns  caused  Congress  to enact  new Medigap  statutes  as part  of the 
Omnibus  Budget  Reconciliation  Act of 1990 (OBRA  1990).  These  statutes  provided 
for the  simplification  and  standardization  of Medigap  policies  and  mandatory 
compliance.  They  sought  to: 
set minimum  standards  for Medig,ap policies  and  prohibit  insurers  from  offering 
b	
beneficiaries  more  than  ten  different  benefit  packages,  effective  July 30, 1992; 
minimize  inappropriate  sales  and  marketing  of Medigap  policies;  and 
b 
educate  and  counsel  consumers  who wish to purchase  Medigap  insurance. 
b 
The  efforts  to realize  these  goals  required  an unusual  collaboration  among  the  Federal

government,  NAIC,  and  States,  following  passage  of the  legislation  on

November  5, 1990.  The  OBRA  1990 altered  the  Federal  role  in the  regulation  of

Medigap  policies.  As of the  effective  date  (July 30, 1992, with some  exceptions),

OBRA  1990 restricted  insurers  from  issuing any Medigap  policy in any State  unless

the  State  has an approved  regulatory  program  or the  Secretary  of Health  and  Human

Services  certifies  that  the  policy meets  the  revised  standards.  The  statute  called  for

NAIC  to revise  its model  regulation  for Medigap  policies  to meet  the  OBRA  1990

requirements  by August  5, 1991.  The  revised  NAIC  standards  were  to become

2  effective  in all States  within  the  following year.  The  OBRA  1990 also provided  for 
grants  from  FICFA  to the  States  to establish  an information,  counseling,  and  assistance 
(ICA)  program  to educate  consumers. 
Beginning  July 30, 1991, NAIC,  HCFA,  and  States  began  to implement  the  statute. 
The  NAIC  adopted  implementing  standards,  and  most  States  passed  new authorizing 
legislation.  The  HCFA  reviewed  and  approved: 
virtually  all Medigap  regulatory  programs  of 48 States,  the  District  of Columbia, 
b	
Puerto  Rico,  and  the  Virgin  Islands.  Two States  needed  extensions  for their 
legislatures  to act.  This  action  was authorized  by statute  when  State  legislatures 
could  not  meet  in time  to comply with the  mandates  of OBRA  1990.  The 
HCFA  approved  Montanas  program  on July 3, 1993, and  Oregons  program  on 
March  11, 1994; and 
most  State  applications  for  ICA grants  to educate  consumers,  providing  funds 
b 
($8.99 million  in FY  1994) to States  and  territories  for this purpose.  Mississippi 
received  funding  in FY  1994, the  last of the  53 States  and  territories  to get 
approval.  State  Insurance  Departments  (SIDS) administer  the  programs  in 
17 States,  and  State  Offices  on Aging conduct  the  program  in 36 States. 
lhe  Minimum  Standards  and  ~he Ten Slandard  Medigap  Policies 
Provisions  of the  1990 Medigap  amendments  included  the  standardization  of Medigap 
policies,  guaranteed  renewability,  higher  loss ratio  requirements,  required  refunds  or 
credits  if the  policies  do not  meet  loss ratio  requirements,  and  prohibition  against 
virtually  any sale  of duplicative  health  insurance  coverage  to Medicare  beneficiaries. 
Each  State  may determine  whether  insurers  may sell some  or all the  ten  benefit  plans 
in that  State,  but  all Medigap  insurers  must  make  Plan  A available  to beneficiaries  if 
they sell any of the  plans.  States  may not  authorize  the  sale  of more  than  these 
ten  Medigap  plans.  The  complete  minimum  standards  for Medigap  policies  appear  in 
appendix  A. 
Massachusetts,  Minnesota,  and  Wisconsin  adopted  stringent  Medigap  standardization 
requirements  before  passage  of OBRA  1990 and  applied  to HCFA  to waive NAIC 
standardization  requirements.  Since  the  statute  permitted  such waivers,  HCFA 
granted  all three  waiver  applications.  As a result,  policies  must  conform  to those 
States  unique  standardization  requirements  rather  than  to the  ten  standardized 
benefit  packages. 
State  Repotig  of A4edigap  Complaints 
The  OBRA  1990 called  for SIDS to receive  consumer  inquiries  and  complaints  about 
the  availability  and  marketing  of Medigap  policies.  State  reporting  of consumer 
Medigap  complaint  data  evolved  as a means  to gauge  the  extent  of complaint  activity, 
but  HCFA  had  no means  for collecting  the  information.  As an interim  measure, 
3  HCFA  has utilized  NAICS Complaints  Database  System which contains  data  on all

lines of insurance  from  each  State.  The  HCFA  asked  NAIC  to modify  the  system  in

early  1993 to incorporate  data  specific  to Medigap  complaints.  Since  then,  NAIC  has

been  providing  I-ICFA with quarterly  complaint  data  updates.  (See  appendix  B for

NAICS data  collection  fields and  the  characteristics  of closed  Medigap  complaint

cases  reported  for  1993.)

DEVELOPMENIX  SINCE  ISSUANCE  OF THE  DRAFT REPORT

(h  October  31, 1994, Congress  passed  the  Social Security  Act Amendments  of 1994.

Effective  January  1995, the  amendments  clarify that  a six-month  open  enrollment

period  applies  to all beneficiaries  who are  age 65, including  those  who  had  been

entitled  to Part  B benefits  prior  to age 65 due  to end-stage  renal  disease  or disability.

The  legislation  also amends  the  anti-duplication  provision  discussed  on page  16 of this

report.  The  HCFA  is working  with NAIC  and  the  States  to incorporate  required

changes  into  the  NAIC  model  regulation  and  State  legislation.

METHODOJ-X)GY

We obtained  the  views of 156 respondents  from  all States  and  other  organizations  on

the  impact  of OBRA  1990 on Medijyip  insurance  regulation  and  consumer  education.

In this report,  States refers  to the  States,  territories,  and  the  District  of Columbia.

We asked  each  respondent  to answer  a survey consisting  of five core  questions.  We

asked  insurance  commissioners  two additional  questions.

To supplement  information  from  the  sumey,  we asked  respondents  from  16 sample

States  in-depth  questions  about  their  procedures  and  how OBRA  1990 has  affected

their  workloads.  We  selected  these  States  purposively  to represent  a geographically

diverse  mix of States  with large,  medium,  and  small  Medicare  beneficiary  populations.

The  sample  States  include  11 ICA programs  run by State  Offices  on Aging and  the

remainder  run  by SIDS.  The  States  are  Arizona,  California,  Colorado,  Delaware,  .

District  of Columbia,  Florida,  Illinois, Maryland,  Mississippi,  Nevada,  New York,

Oregon,  Pennsylvania,  Texas,  Utah,  and  Washington.

Besides  State  regulators,  we contacted  insurance  industry  and  consumer  groups.

Insurer  organizations  include  the  Health  Insurance  Association  of America,  eight  Blue

Cross  and  Blue  Shield  plans  in four  States,  and  the  Prudential  Insurance  Company.

We  contacted  the  following  advocacy  organizations:  the  American  Association  for

Retired  People,  the  Consumers  Union,  United  Seniors  Health  Cooperative,  Action  for

Older  Persons,  Mass  Home  Care,  Provenant  Health  Insurance  Counseling  for Seniors,

and  an independent  consultant  from  California.

4
 The  following  table  displays  the  respondent  groups,  the  number  contacted,  the  number 
responding,  and  the  methods  used  to contact  them. 
Respondent Groups 
LEZLZZJEEZ 
[nsurance Commissioners  55  54  mail and telephone 
9 in-person and 
Policy Approval Staff  16  16 
7 telephone 
16 
9 in-person and 
Sample  Complaint Resolution SMf  16  16 
7 telephone 
States 
9 in-person and 
ICA Program Coordinators  16  16 
7 telephone 
Remaining ICA Program Coordinators  37  36  mail and telephone 
Consumer Advocates  7  7  mail and telephone 
[nsurer Organizations  10  10  mail and telephone 
NAIC  1 
3?(3TAL  158 
:  .-
Our  findings  represent  all the  opinions  expressed  by respondents.  When  respondents 
lacked  enough  experience  or knowledge  to respond  to a specific  question,  we excluded 
them  from  the  statistical  results  related  to that  question.  On  the  other  hand,  we have 
included  and  described  responses  other  than  the  choices  available  in the  statistical 
results  as appropriate. 
We  also obtained  and  reviewed: 
SID documents  describing  regulations,  policies,  and  procedures  for the  review 
and  approval  of Medigap  policies,  market  conduct,  and  complaint  investigation 
and  resolution; 
SID and  NAIC  documents  describing  the  collection  and  disposition  of Medigap 
complaint  data; 
NAIC  and  State  complaint  data,  including  the  NAIC  Complaint  Database 
System  for cases  closed  in calendar  year  1993; and 
examples  of educational  information  regarding  Medigap  insurance  disseminated 
by HCFA,  NAIC,  SIDS, ICA grantees,  and  other  advocacy  organizations. 
We  conducted  this inspection  according  to the  Quality Standards  for  Inspections  issued 
by the  Presidents  Council  on Integrity  and  Efficiency. 
5  AN  OVERVIEW  OF  SAMPLE  STATES  MEDIGAP  REGULATION  AND 
EDUCATION 
The  following isasummmyofthe  16sample  States  Medigap  policy and  market 
conduct  review,  education,  and  complaint  resolution  activities.  The  States  use similarly 
structured  procedures  to conduct  reviews,  to educate  consumers,  and  to resolve 
complaints.  They  did  not  specifically  create  these  procedures  to regulate  Medigap 
insurance,  but  they  have  applied  procedures  that  have  been  in use for years  and 
address  all other  lines of insurance. 
State  insurance  department  respondents  described  their  procedures  for reviewing  and 
approving  Medigap  policies,  for reviewing  market  conduct,  for educating  consumers, 
and  for resolving  consumer  complaints.  They  also  provided  detailed  written 
procedures  and  the  State  regulations  from  which those  procedures  were  drawn.  State 
ICA grantees  also provided  descriptions  of their  consumer  education  programs.  Our 
evaluation  of those  documents  confirmed  States  use  of structured  procedures  to 
regulate  Medigap  insurance  and  resolve  complaints. 
Jkkligap  Policy  Review 
Sample  States  have  similar  procedures  for the  submission,  review,  and  approval  of

Medigap  policies.  Typically,  States  require  the  insurer  to submit  policy forms,

proposed  rate  material  with an actuarial  justification,  and  advertising  material.  Some

States  require  certificates  attesting  to compliance  with all State  laws, actuarial  rules  for

rates  and  loss ratios,  and  readability.  Usually,  an analyst  or attorney  reviews  the

proposed  policy language  and  an actuary  reviews  the  proposed  rates  before  States

grant  approval.  If a policy  is disapproved,  the  company  typically  has  up to 60 days to

make  necessary  corrections  and  resubmit.

Before  any policies  may be offered  to consumers,  most  SIDS require  review  and

approval  of both  policies  and  premium  rates.  According  to SID respondents  in these

States,  regulators  perform  thorough  reviews  to assure  that  policies  correspond  to

one  of the  ten  standard  types,  required  forms  and  disclosure  statements  are  used,  and

rates  are  appropriate.  Most  sample  States  require  insurers  to submit  Medigap  policies

and  premium  rates  for approval  before  marketing  the  policies  to consumers.  Four  of

these  States,  however,  have  a deeming  provision.  The  deeming  provision  means

that  insurers  may  assume  approval  of proposed  policies  and  rates  unless  the  SID

explicitly  disapproves  them  within  a given number  of days.  In practice,  States  usually

approve  or disapprove  filings within  the  specified  period.

A few States  use  other  methods  for  reviewing  policies  and  rates.  In one  sample  State,

insurers  may file and  use policies  or rates  by attesting  that  all requirements  are  met,

subject  to heavy  fines  and  possible  loss of licensing  if facts  establish  otherwise.  In

another  State,  insurers  must wait  for review  and  approval  for proposed  policies,  but

may file proposed  rates  and  use them  immediately.

6
 Sample  States  vary in whether  they  review  marketing  materials  to assure  they  are 
accurate.  Half  require  review  and  approval  of marketing  materials  before  insurers 
may use them,  while  two deem  proposed  materials  approved  unless  they explicitly 
disapprove  them  within  a given number  of days.  However,  six States  neither  require 
prior  nor  deemed  approval  of all marketing  materials.  These  States  rely on consumer 
complaints  to identify  problems.  A respondent  from  one  of these  States  said: 
[We utilize]  reactionary  monitoring.  Once  there  is a complaint  made,  we 
investigate.  Mostly, we assure  that  insurers  and  agents  dont  use the 
abusive  marketing  or sales  practices  of the  past  through  the  complaints 
system.  An agent  or company  will complain  about  anothers  practices. 
If we find advertising  that  has technical  violations,  we refer  it to the  legal 
division. 
Market  Conduct  Exams 
During  market  conduct  exams,  States  review insurance  company  records  to check  for 
compliance  with State  laws and  standards.  Most  SIDS in the  sample  States  perform 
market  conduct  exams  on a cause  basis,  if they  have  received  complaints  or other 
information  to warrant  an extensive  review.  All but  three  sample  States  rely on 
complaints  to identify  candidates  for market  conduct  reviews,  since  most  exams  are 
very  comprehensive  and  require  substantial  resources,  especially  if the  number  of 
companies  in the  State  is high.  During  an exam,  regulators  review  all lines of 
insurance,  Medigap  being  one  of the  smallest.  A respondent  from  a large  sample 
State  noted,  The complaint  process  is a major  way we monitor  performance.  We 
follow-up  on each  complaint,  and  do a market  conduct  review  of that  company  and  its 
agents  if necessary. 
Several  SIDS perform  market  conduct  exams  on a three-to-five-year  basis, although 
some  have  only begun  their  first cycle.  This practice  is more  typical  of the  smaller 
States  with  fewer  companies  to review.  A respondent  from  a small  State  told  us, We 
perform  market  conduct  exams  primarily  on domestic  companies  because  we share  the 
results  of exams  with other  States.  We have  a three-to-five-year  schedule  for doing 
exams.  We  also target  exams  if we suspect  problems. 
MA.iigap  Complaint  Resolution 
Each  sample  SID  has staff devoted  to complaint  investigation  and  resolution,  often

within  a consumer  services  unit.  Usually  these  staff handle  complaints  about  all lines

of insurance,  not just  Medigap  complaints.  States  obtain  the  complaints  in writing

where  possible  and  promptly  contact  insurers  and  agents,  as appropriate.

Complainants  are  given periodic  status  on their  complaints  as well as on their  final

disposition.

Although  day-to-day  operation  varies  somewhat  among  sample  States  complaint  units,

most  discourage  investigation  by referring  agencies,  including  ICA grantees.  This  is

7  rarely  a problem,  since  the  referring  agencies  lack investigative  expertise  and 
resources.  Some  SID  complaint  units  do provide  training  to ICA grantee  volunteers 
on recognizing  problems  and  making  appropriate  referrals,  usually  in States  where  the 
SID  is also the  grantee. 
The  sample  States  are  similar  in how they  manage  Medigap  complaints,  although  they 
differ  significantly  in the  extent  to which their  complaint  management  information 
systems  are  automated.  Several  States,  including  both  large  and  small  ones,  have 
sophisticated  complaint  management  systems  to process  all complaints,  including  those 
involving Medigap.  These  States  can  count  receipts,  clearances,  and  pending 
workloads.  However,  only one  of these  States  regularly  produces  complaint  reports 
that  permit  detailed  analysis  of Medigap  complaints.  Others  do not  because  the  size 
of the  workload  is too  small to make  any analysis  meaningful. 
Whenever  SIDS take  disciplinary  action  against  insurers  and  agents,  including  those 
few involved  in Medigap  cases,  they publicize  the  results  in detail.  States  frequently 
publish  such  cases  in SID  newsletters,  which they  share  with other  States,  and  NAICS 
interstate  electronic  messaging  system  that  connects  all SIDS.  This  exposure  assures 
the  widest  publicity  among  States  and  alerts  those  who may have  the  same  insurers 
and  agents  operating  in their  jurisdictions. 
Since  June  1993, States  have  reported  closed  Medigap  complaint  data  quarterly  to 
NAICS Complaints  Database  System,  The  NAIC,  in turn,  provides  HCFA  the  data 
for review.  For  1993, the  sample  States  reported  1,374 complaints  closed, 
representing  about  half the  national  total.  Complaints  from  sample  States  are  similar 
to those  from  the  rest  of the  nation  in both  the  reasons  for complaints  and  their 
dispositions.  (See  appendix  B for further  details  about  Medigap  complaints.) 
Information  Counseling  and Assktance  Programs 
States  are  in various  stages  of launching  their  ICA programs  to educate  and  counsel 
consumers.  Most  ICA grantees  in the  sample  States  contract  with area  aging or other 
agencies  to set up a network  to provide  information  and  counseling.  Since  only a ,few 
paid  staff positions  are  available,  the  program  depends  heavily on volunteers.  The 
ICA providers  recruit  and  train  volunteers,  develop  newsletters  and  other  information, 
establish  toll-free  numbers,  and  conduct  outreach.  Half  the  ICA grantees  in the 
sample  States  have  established  information  and  counseling  networks  in all areas  of 
their  States,  and  six have  networks  in most  areas.  One  State  is set up only in some 
areas,  and  one,  a recent  grantee,  has not yet set up its network.  Several  States 
mentioned  the  difficulty  in establishing  programs  in rural  areas,  or in reaching 
minorities  and  other  target  groups.  In the  sample  States,  all but  one  of the  ICA 
grantees  have  set up  a toll-free  number  or will have  one  shortly. 
All ICA  grantees  in the  sample  States  are  establishing  outreach  programs  to inform 
those  turning  65 about  their  health  insurance  options,  including  Medigap  open 
enrollment.  Grantees  use a variety  of outreach  methods,  including  radio  and  television 
8  public  service  announcements  and  programs,  articles  in ethnic  and  neighborhood 
newspapers,  and  presentations  at senior  centers  and  other  sites.  Eleven  of the  sample 
ICA  grantees  have  implemented  outreach  programs,  four  have  limited  outreach,  and 
one  is just  starting.  Several  grantees  are  negotiating  agreements  with regional  HCFA 
and  local  Social  Security  offices  to provide  Medigap  information  in notices  sent  to 
current  and  expected  Medicare  beneficiaries.  One  State, for  example,  has arranged  to 
get  the  state-wide  Medicare  carrier  to put  information  about  the  ICA program  into 
the  mailing  of the  explanation  of medical  benefits  sent  to beneficiaries. 
Most  sample  ICA grantees  characterize  their  relationship  and  communication  with  the 
State  insurance  complaint  division as effective, but  three  located  in State  Offices  on 
Aging believe  the  relationship  is not  effective.  They  cited  political  differences  and 
different  bureaucratic  styles as factors  resulting  in less effective  relationships  between 
SIDS and  ICA grantees,  but  otherwise  these  ICA grantee  responses  were  similar  to 
those  of other  respondents. 
We  also learned  that  NAIC  enhances  communication  among  ICA grantees  through  its 
sponsorship  of The  Senior  Counseling  Letter.  The  North  Carolina  ICA grantee  was 
instrumental  in starting  this quarterly  publication  and  produced  the  first  editions. 
Subsequently,  NAIC  has produced  and  distributed  it to all grantees.  The  newsletter 
solicits submissions  from  State  programs  and  incorporates  them  into  each  issue, 
reflecting  their  outreach  activity,  innovative  practices,  and  relevant  social  and  legal 
issues.  FINDINGS

IMPLEMENTATION  OF  1990 MEDIGAP  REFORMS  HAS  SUBSTANTIALLY 
IMPROVED  STATE  REGULATION  OF  MEDIGAP  INNJRANCE 
Most  rqxmdents  believe  Slates  are well on  the  wav  to achievin~  the  objectivm  of OBRA 
   
1990  M&gap  reforms  in less than  two yean  since implementation 
The  main  goals  of the  OBRA  1990 Medigap  provisions  were  to help  consumers 
choose  insurance  that  best  fits their  needs  through  (1) standardizing  policies, 
(2) reducing  inappropriate  sales  and  marketing  practices,  and  (3) educating 
consumers.  As the  following  chart  depicts,  more  than  90 percent  of respondents 
believe  each  objective  has been  at least  partially  achieved  and  a majority  said that 
standardization  has been  fully achieved.  This  response  was consistent  among  the 
different  groups  of respondents. 
RESPONDE~S  RATINGS OF PROGRESS TOWARD OBRA 1990 GOALS 
OBRA 1990 GOA~ 
Policy standardization 
Limiting  inappropriate 
sales practices 
Consumer  education 
o  20  40  60  80  100 
PERCENT OF RESPONDENTS 
   
= Fully achieved  ~  = Partially  achieved  = Not achieved 

Respondent  answered but could not rate progress using the above categories 
 
Respondents  agreed  that  OBRA  1990 has succeeded  in simplifying  the  choices 
consumers  have  to make  in buying Medigap  insurance.  They  said-standardizing 
benefits  allows consumers  to compare  similar  plans  offered  by different  insurers. 
Some  respondents  cautioned,  however,  that  choosing  a Medigap  policy remains 
challenging.  Many  consumers,  they believe,  lack sufficient  understanding  to make 
informed  choices.  They  also were  concerned  that  the  ten  standard  plans  may not 
10
 contain  the  best  mix of benefits  to Ineet  consumers  needs.  One  consumer  advocate 
noted  that  consumers  choices  are  easier,  but  not  optimal: 
The  passage  of OBRA  1990 has absolutely  made  it easier  for consumers 
to select,  since  they  have  only ten  choices.  Choosing  from  the  wide 
range  before  could  be  confusing.  However,  the  situation  is not  perfect, 
since  none  of the  ten  options  may exactly fit consumer  needs. 
Respondents  said  instances  of marketing  abuse  are  much  less prevalent  since  the 
implementation  of OBRA  1990.  Many respondents  credited  OBRA  1990 provisions, 
such  as restrictions  on commissions  and  detailed  disclosure  requirements,  with 
decreasing  inappropriate  sales  and  marketing  practices.  Both  SID and  ICA grantee 
respondents  told  us that  many  recent  consumer  contacts  have  more  to do with 
uncertainty  about  choosing  a policy than  with blatantly  inappropriate  marketing  and 
sales  practices.  Yet  49 respondents,  including  those  from  31 States,  reported  that 
some  agents  or insurers  continue  inappropriate  practices  in spite  of the  reforms. 
Other  respondents  fear  that  consumers  continue  to be vulnerable,  because  many  still 
do not  know what  practices  are  inappropriate  or how to avoid  abuses. 
Respondents  believe  consumer  education  is central  to making  informed  choices  easier 
for consumers  and  to preventing  sales  and  marketing  abuse.  As described  later  in this 
report,  many  told  us the  ICA program  is an important  vehicle  for educating  consumers 
about  choosing  insurance  to fit their  needs.  Two-thirds  of respondents,  however, 
believe  this goal  is only partially  achieved,  primarily  because  educational  efforts  have 
just  recently  begun  and  because  education  is an ongoing  process.  They  believe 
improved  and  continued  outreach  is necessary  to reach  more  consumers,  especially 
minority  and  rural  populations. 
Many  States  have provkled  signiJican~ consumer  safeguards  by implementing  starukzrds 
exceeding  the  minimum  standards  required  by OBRA  1990 
Encouraged  by NAIC,  many  States  have  adopted  Medigap  insurance  standards 
exceeding  those  required  by OBRA  1990.  For  example,  approximately  75 percent  of 
all States  have  adopted  NAICS recommendation  to eliminate  first-year  sales 
commissions  for all Medigap  replacement  policies.  This  action  removed  a major 
incentive  for  agents  to sell consumers  policies  they  do not  need.  Although  the 
conference  committee  report  accompanying  OBRA  1990 reflected  Congresss  intent  to 
prohibit  first-year  commissions  for sales of policy upgrades,  the  final bill omitted  this 
provision.  The  NAIC  acceded  to Congresss  intent  by adding  a drafting  note  which 
encouraged  States  to modify  their  regulations  accordingly.  The  NAIC  advised,  If this 
phrase  is removed,  the  payment  of first-year  commissions  will not  be  allowed  in any 
replacement  sale.  States  will not jeopardize  their  approval  by HCFA  if they remove 
this language. 
Several  States  have  assured  that  agents  will face severe  consequences,  including  loss of 
Iicensure  to sell insurance  in that  State,  if they try to sell consumers  Medigap  policies 
11
 they  do not  need.  As one  SID staffer  noted,  We require  an agent  certification  that

the  consumers  current  health  coverage  was reviewed  and  this new policy is

appropriate  to meet  the  consumers  needs.  Legislation  in other  States  prohibits

agents  from  collecting  more  than  one  months  premium  until  consumers  have

examined  their  Medigap  policies  for 30 days.  This  motivates  agents  to return  to see  if

consumers  are  satisfied  with their  policies.

A few States  have  adopted  community  rating  of premiums  as a consumer  safeguard.

Community  rating  of premiums  eliminates  automatic  rate  increases  with  age.  States

did this to respond  to the  increasing  efforts  of insurers  to offer  policies  with premiums

calculated  by attained  age.  The  cost of these  plans  increases  automatically  as the

consumer  grows older  and  is substantially  higher  in later  years  when  consumers  can  no

longer  afford  them.  According  to one  respondent,  community  rating  of premiums  has

eliminated  both  this problem  and  a major  source  of consumer  complaints  in his State.

At the  time  of our  interviews,  we found  that  some  States  had  extended  open

enrollment  to the  disabled,  something  OBRA  1990 did not  do.  Many  ICA and

advocate  respondents  complained  that  the  disabled  could  not  take  advantage  of the

open  enrollment  period  available  to beneficiaries  first enrolling  in Medicare  Part  B at

age  65.  Open  enrollment  gives beneficiaries  six months  in which insurers  may not

deny  them  coverage  because  of health  problems.  The  recent  amendments  to the

Social  Security  Act  require  that  an open  enrollment  period  be  available  to all

beneficiaries  aged  65, including  those  who had  been  enrolled  in Medicare  Part  B prior

to age  65 due  to end-stage  renal  disease  or disability.  Some  States  had  extended  open

enrollment  to the  disabled  and  required  insurers  to offer  at least  one  policy to

disabled  Medicare  beneficiaries,  even  before  the  federal  amendments.  Currently,

some  States,  such  as Oklahoma  and  Pennsylvania,  exceed  the  legislative  requirement

by requiring  open  enrollment  for disabled  persons  of any age.

Most  States  reported  more  efficient  A4edigap poli~  review  since  implementing  OBRA  1990 
Almost  60 percent  of all insurance  commissioners  and  75 percent  of sample  State 
policy review  staff  said  that  their  States  review  and  approval  of Medigap  policies  is 
more  efficient  since  implementing  the  OBRA  1990 Medigap  provisions.  Of those  who 
provided  comments,  most  explained  that  OBRA  1990 has streamlined  their  review 
process.  One  policy revie~ver described  a typical  change  in the  process: 
We  used  to have  a huge  variation  in policies  submitted.  We would  have 
to  decide  in each  case  if the benefits  justified  the  policy.  Now the 
policies  are  all standard  with the  ten  allowed  models,  and we dont have 
to  decide  about  benefits  to the  individual.  Our  reviews  are  standardized 
and  dont  take  the  time  they used  to. 
Most  of the  respondents  who expressed  different  views said that  their  States  already 
had  efficient  review  procedures  in place  or that  their  review  process  did not  change. 
12
 A few others  reported  that  the  review  of the  standard  plans  requires  a more  detailed 
and  time-consuming  review. 
Consumer  education  program~  are growing  and  essential 
Many  respondents  believe  that  the  ICA program  not  only is effective  but  also is 
important  to achieving  the  OBRA  1990 consumer  education  objective.  Forty-one 
respondents,  including  most  advocates,  volunteered  their  belief  that  the  ICA program 
is vital  to consumer  education  efforts.  As one  advocate  explained,  the  ICA program 
provides  accurate,  unbitised  consumer  information  about  Medigap.  Another  consumer 
advocacy  organization  stated  that  consumer  education  has been  enhanced,  especially 
with  the  increased  number  of staff  and volunteers  in the  ICA grant  program.  Even 
some  insurers  recognized  the  importance  of consumer  education.  For  example, 
one  insurer  acknowledged  that,  through  the  ICA program,  at least  consumers  have 
somewhere  to turn  for help  with difficult  decisions. 
Approximately  one  quarter  of all respondents  believe  ICA programs  need  to address 
the  consumer  confusion  resulting  from  the  complexity  of Medigap  insurance  and  the 
Medicare  program.  These  respondents  emphasized  the  urgency  to provide  direct 
consumer  education,  counseling,  and  outreach,  especially  since there  are  always new 
groups  of people  eligible  for Medicare. 
Respondenfi  in most  Slates  believe  Medigap  complaints  have  dechked  since  the 
tiplementation  of OBRA  1990 
Most  State  commissioners  and  sample  State  complaint  resolution  staff said the  number 
of Medigap  complaints  has  decreased  since  OBRA  1990.  However,  only a few of the 
sample  States  knew what  their  actual  complaint  receipts  and  pending  workloads  were. 
A SID  respondent  who handles  complaints  in one  State  told  us: 
We  are  getting  fewer  complaints  each  quarter.  Prior  to OBRA  1990, we 
used  to get  a lot of complaints  about  rates  and  doctor  payments.  Now 
[we get] very few about  anything,  although  I cant give you any exact 
figures.  The  Medigap  standardization  has been  so successful  that  we 
would  like to see  it extended  to other  kinds of health  insurance. 
Although  respondents  told  us Medigap  complaints  generally  have  decreased,  the

number  of complaints,  they  said, was never  very large.  Complaint  resolution  staff in

the  two sample  States  with the  largest  Medicare  populations  noted  that  the  annual

number  of Medigap  complaints  is fewer  than  500 out  of more  than  100,000 total

complaints  received  for all insurance  product  lines.  Other  States  made  similar

comments  about  the  small  size of their  Medigap  complaint  workloads.

Some  respondents  reported  that  the  types  of complaints  they  receive  have  changed

since  the  implementation  of OBRA  1990.  For  example,  there  are  fewer  complaints

about  claims  because  policy coverage  is now standard.  In some  States,  the  number  of marketing-

13  and  sales-related  complaints  has decreased  due  to OBRA  1990 restrictions  on first-
year  sales  commissions  and  duplicative  policies.  As discussed  on page  11, many  States 
have  adopted  more  stringent  standards  than  required  by OBRA  1990.  This action  has 
also  helped  to decrease  complaints.  On  the  other  hand,  some  respondents  in different 
States  told  us that  complaints  have  increased  as consumers  are  more  aware  of their 
rights. 
We  reviewed  data  from  NAICS Complaints  Database  System  for complaints  closed  in 
1993 and  found  no  apparent  relationships  between  the  regulation  of Medigap 
insurance  and  the  nature  of complaints  in the  16 sample  States.  Analysis  of complaint 
data  by the  types  of policy, rate,  and  marketing  review  sample  States  use made  no 
clear  connection  with the  number  of complaints  closed,  the  ratio  of complaints  per 
Medicare  population,  or the  reasons  for complaints.  We  did not  draw  distinctions  in 
how sample  States  perform  market  conduct  ex~ms or resolve  complaints,  precluding 
analysis  of variations  in closed  complaints.  As noted  in our  discussion  about  this 
database  below,  having  only closed  complaints  to analyze  prevents  any reasonable 
comparison  of State  activity, since  the  full size and  nature  of workloads  is unknown. 
MOST  RESPONDENTS  BELIEVE  THE  FEDERALJSTATE  COLLABORATION 
TO  INWLEMENT  013RA  1990 WAS EFFECIIVE 
Approximately  85 percent  of all respondents  believe  that  Federal/State  collaboration 
to implement  OBRA  1990 Medigap  provisions  has been  effective.  A consumer 
advocate  reflected  the views of many,  saying, . . . most  of the  problems  which  plagued 
Medigap  were  solved  or minimized  by the  cooperation  of States,  the  Feds,  and  NAIC. 
Even  most  insurers  believe  the  process  worked  well.  A national  insurers  organization 
strongly supports  and  encourages  the  continued  use  of the  [OBRA  1990 
implementation  process]. 
A few respondents  believe  that  collaboration  was not  effective  or was problematic. 
The  problems  cited  included  consumer  hardships  resulting  from  the  anti-duplication 
provision  and  the  long delay in issuing Federal  regulations.  Ten  who believe 
collaboration  has worked  well nevertheless  mentioned  the  need  for technical 
correction  of the  anti-duplication  provision.  Others  cited  problems  with Federal 
responsiveness,  such as not getting  prompt  answers  to questions. 
SEVERAL  ISSUES  WARRANT  FURTHER  ACTION 
Respondent  comments  and  our  analysis  of complaint  data  highlight  three  issues that 
warrant  action  by HCFA.  These  issues concern  the  ICA program,  NAICS Complaints 
Database  System,  and  the  anti-duplication  provision. 
1.4
 Rapondenfi  questioned  ~he udequacy  of HCFA k role  in promoting  the ICA  program; 
HCFA  has plans  to  work  more  directly  wilh  Stale programs 
While  most  respondents  recognize  the  important  role  played  by the  ICA program, 
some  believe  that  HCFA  has not  given it adequate  priority.  For  example, 
one  advocate  believes  that  HCFA  had  no clear  idea  of what  the  ICA programs  should 
do and  only began  to clarify Federal  policy and  program  standards  after  the  initial 
funding.  A few ICA  grantees  said HCFAS failure  to publish  notices  nationally  about 
the  role  of the  ICA program  illustrates  the  low priority  HCFA  gives the  ICAS.  In a 
typical  comment,  one  ICA grantee  said each  State  has  to approach  the  local  Social 
Security  office,  Medicare  carriers,  and  fiscal intermediaries  for help  to get information 
to beneficiaries.  The  grantee  concluded  that  a sincere  commitment  to successful  ICA 
programs  would  have  built  these  bridges  up front. 
The  HCFA  is aware  of ICA grantee  concerns  and  is acting  to respond  to them.  For 
fiscal year  1994, HCFA  distributed  $242,108 among  the  ten  HCFA  regional  offices for 
the  support  of ICA  grantees  in each  region.  Funds  were  used  for travel,  contracts, 
equipment  purchases,  and  other  materials  and  services.  Additionally,  Medigap 
coordinators  in each  region  support  State  ICA programs  by assisting  in training  staff 
and  volunteers,  providing  technical  support,  assisting  with publicity  and  outreach,  and 
creating  pamphlets  and  brochures. 
l%e N&C5  Complaints  Dalabase  System  has  the potenlial  to bean  efiective  analytical 
wol  for  HCFA;  HCFA  and  NMC  are working  on  ways  to improve  it 
The  NAIC  established  the  Complaints  Database  System  in October  1991 as a central 
repository  for closed  consumer  complaints  against  insurers  and  agents  regulated  by 
NAIC-member  States.  The  system  was designed  primarily  to facilitate  market  conduct 
examinations  of companies  and  to identify  national,  regional,  and  State  trends  that 
may be  observed  from  complaints  analysis.  State  reporting  of complaint  data  to NAIC 
is voluntary. 
Although  NAIC  did not  create  the  Complaints  Database  System  to be  a monitoring 
tool  for HCFA,  it has the  potential  to be  an effective  one,  We identified  several 
changes  that  could  improve  the  usefulness  of the  database  as an effective  analytical 
tool.  These  changes  involve  data  that  the  system  currently  does  not  collect  as well as 
more  consistent  reporting  of required  data. 
Since  States  do not  report  received  and  pending  Medigap  complaints,  there  is no way 
to determine  the  size of the  complaint  workload  at any specific  time.  This negates  the 
potential  for identifying  patterns  of behavior  among  consumers,  insurers,  and  agents 
that  inform  policy makers  who seek  to improve  Medigap  products  and  protect 
consumers.  Looking  only at  closed  complaints  prevents  any reasonable  comparison  of 
State  activity,  since  it reveals  nothing  about  investigations  in progress. 
15
 Sample  States  differ  in the  date  they  use to close a complaint,  when  making  a referral 
for disciplinary  action.  Nationwide  in 1993, six States  closed  38 complaints  when  they 
made  referrals  for administrative  or law enforcement  action.  They  closed  the 
complaints  because  their  final  resolution  could  take  months  or years.  On the  other 
hand,  one  State  is holding  open  more  than  60 complaints  until  such  final resolution. 
That  States  average  complaint  processing  time  is almost  nine  months,  the  highest  in 
the  country.  Such variations  make  the  analysis  of complaint  processing  time  difficult 
and  any results  unreliable.  The  NAICS instruction  to States  emphasizes  using the 
date  the  complaint  is referred  for disciplinary  action  as the  date  the  complaint  is 
closed.  However,  the  instruction  leaves  the  choice  of a closing date  to the  State. 
Other  changes  address  the  incomplete  reporting  of policy type  and  consumer  age data 
fields.  Among  the  16 sample  States,  44 percent  of data  on the  type  of Medigap  policy 
the  consumer  has are  missing, as are  79 percent  on the  age of the  policyholder.  Such 
data  would  be  crucial  if Congress  were  to consider  revising  the  number  and  type  of 
Medigap  policies  to make  available  to Medicare  beneficiaries  of all ages. 
Finally,  sample  States  make  excessive  use of the  Other  code  in recording  complaint 
data.  For  example,  in the  16 sample  States  25 percent  of complaint  dispositions  are 
coded  Other,  as are  8 percent  of data  on the  source  of the  complaint.  The  use of 
this category  indicates  a possible  limitation  in the  definitions  available  for complaint 
disposition  and  source,  varying  interpretations  by different  staff of the  case  facts,  or 
inappropriate  coding when  the  best  choice  is not  immediately  evident.  It should  be 
noted  that  sometimes  multiple  dispositions  result  from  one  complaint,  including  the 
disposition  Other.  (See  appendix  B for the  data  collection  fields  and  the 
characteristics  of closed  Medigap  complaints  reported  nationally  for  1993.) 
The  HCFA  has negotiated  with NAIC  to modify the  Complaints  Database  System  to 
incorporate  changes  that  would  strengthen  its use as an analytical  tool.  Also, NAIC  is 
in the  process  of analyzing  the  use of Other  to determine  whether  the  disposition 
codes  need  to be expanded  to include  additional  common  dispositions  and  reduce  the 
use of the  Other  code. 
Many  respondents  found  the  anli-duplication  provkion  of OBRA  1990  hindered  some 
beneficiaries  from  obtaining  Medigap  coverage;  HCFA  is working  with  NMC  and  the 
States  to incorporate  clarified  provisiom  into  State  law 
While  nationally  respondents  agreed  that  the  anti-duplication  provision  has curtailed 
the  sale  of duplicative  and  unnecessary  insurance,  at the  time  of our  interviews  many 
maintained  that  it also unjustly  penalized  some  consumers.  The  anti-duplication 
provision  prohibited  insurers  from  selling Medigap  policies  to a beneficiary  if the 
insurer  knew  that  the  policy duplicates  Medicare,  Medicaid,  or other  health  benefits  to 
which the  beneficiary  is entitled.  But  the  strict  wording  of the  provision  meant  that 
many beneficiaries  who needed  Medigap  coverage  were  not  able  to buy it because 
they  already  had  long-term  care,  hospital  indemnity,  or employer  group  health 
insurance.  Respondents  pointed  out  these  beneficiaries  had  a difficult  choice:  (1) to 
16  forgo  Medigap  coverage  or (2) to drop  their  current  coverage,  which generally  costs 
them  little  or frequently  contains  more  desirable  benefits,  such as extended 
prescription  drug  coverage.  (See  appendix  A,page  A-2, foradescription  of standard 
Medigap  benefits.) 
According  to respondents,  State  regulators  interpreted  theanti-duplication  provision 
differently,  resulting  in inconsistent  enforcement.  Some  States  followed  the  provision 
strictly, while  others  allowed  concurrent  coverage  with limited  benefit  plans  or 
long-term  care  insurance.  For  this reason,  they  considered  duplication  of policies  to 
be  continuing  in their  States.  At the  time  of our  interviews,  respondents  emphasized 
the  need  for  technical  correction  or clarification  from  HCFA  to aid them  in 
interpreting  the  provision.  Since  then,  the  Social Security  Act Amendments  of 1994 
have  clarified  that  knowingly  selling a duplicate  Medigap  policy to someone  who 
already  has  Medigap  coverage  is not  allowed,  while  selling a Medigap  policy to 
someone  who  has other  private  health  insurance  is allowed  as long as the  Medigap 
policy pays benefits  regardless  of the  other  insurance.  The  HCFA  is now working  with 
NAIC  and  the  States  to incorporate  these  changes  into  State  law. 
17
 APPENDIX  A

THE  OBRA  1990  MINIMUM  MEDIGAP  ST~DARDS 
Standardization  ofiWedicare  supplemental  policies  into  no  more  than  ten packqp 
to as.wkt beneficiaries  in comparative  shopping  for  a policy; 
Guaranteed  renewability; 
Suspension  of Medigap  beneJits  and premiums  during  Medicaid  eligibility  (for up 
to 24  months  if the beneficiary  notifies  the insurer  within  90 days  of the start  of 
Medicaid  eligibility.  Medigap  benefi~s will be renewed  f  the benejticimy  notifies  the 
ihsurer  within  90 days  after Medicaid  eligibility  eti); 
New  and  higher  loss  ratio  requirement  for  individual  policies  (65 percent  hstead 
of 60 percent)  and for group  policies  (75 percent)  and  required  refitndk  or credits  if 
the policies  do  not  meet  the  loss ratio  requiremen~; 
Pre-existing  conditions  limitation  (pre-exhting  conditions  may  only  be imposed  in a 
replacement  policy  to the  extent  such  conditions  were not  met  under  the original 
policy); 
Restrictions  on  medical  underwriting  (sir-month  open  enrollment  period  for  new 
Part  B enrollees  who  are 65 or older); 
State  assurances  that  thq  will maintain  and  make  public~  available  copies  of all 
policy  forms  approved  in the Stale,  along  with  information  on  the policy  premium 
and  loss ratio  data  for  the past  three years; 
Implementation  of a process  for  approving  or dkapproving  premium  increas~  and 
establkhment  of a policy,  whereby  insurance  commiwioners  may  hoki public 
bean-ngs prior  to  approval  of a premium  increase; 
Required  filing  in all States  in which  a policy  h  marketed  (deemed  approval  of 
mail  order policies  is no  longer permitted); 
Clarification  that  Heallh  iWain~enance  Ogani.zations  are excluded  j70m  the 
definition  of a Medicare  supplement  only  when  lhey  are providing  Medicare 
benefifi  pumuant  to a Federal  contract  under  seclion  1876  or 1833  or a 
demonstration  authority;  and 
l?ohibition  against  virtual~  any sale  of duplicative  health  insurance  coverage  to 
Medicare  beneficiaries  (including  prescribed  questions  that  must  be asked  and 
declarations  made  bv bo~h lhe buyer  and  seller  on  the  uolicv  amlieahon  formj. 
A-1
 THE  TEN  ST~DARD  MEDIGU  POLICIES 
A B  c  D E F G H  I J 
CORE  BENEFIT  Coverage of Part A coinsurance amount ($174 
per dayin 1994) for the 61st through 90th day of hospitalization in                     
each Medicare benefit period. 
CORE  BENEFIp  Coverage for the Part A coinsurance amount 
($348 per day in 1994) for each of Medicares 60 non-renewable                     
lifetime hospital inpatient  reserve days used. 
CORE  BENEFIT:  After all Medicare hospiial 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 policyholders lifetime. 
CORE  BENEFIT:  Coverage under Medicare Parts A and B [or the 
reasonable cost of the first three pints of blood or equivalent  .  .  .  .  .  .    .    . 
quantities  of packed red blood cells per calendar year untess replaced 
in accordance with Federat  regutat ions. 
CORE  BENEFIT  Coverage for the coinsurance amount for Part B 
seMcx?s (generally 20 percent of approved amount) after $100 annual                     
deductible  is met. 
Coverage for the Medicare Part A inpatient hospital deductible ($696                   
per benefit period in 1994). 
Coverage for the skilled nursing facility care coinsurance amount              9   
($87 per dayfor days 21 lhrough 100 per benefit period in 1994). 
coverage  for the Medicare Part B deductible ($100 per calendar year       
in 1994). 
Coverage for 80 percent of medically necessaty emergency care in a  .  .  .    .       
foreign country, after a $250 deductible. 
Coverage for at-home recovery.  This benefit pays up 10$1600 per 
year for short-term,  at-home assistance with activities of daity living  .  .  .   
(bathing,dressing,personal hygiene, etc.) for those recovering from 
an illness, injury, or surgery. 
Coverage for preventive health care.  This benefh pays up to $120 
per year for such things as a physical examination, serum cholesterol  .  . 
screening, hearing lest, diabetes screenings, and thyroid  funciion test. 
Cover-age for 100 percent of Medicare Part B excess charges 
(difference  between Medicare approved amount and actual charges).    .   
Coverage for 80 percent of Medicare Part B excess charges 
(difference  between Medicare approved amount and actual charges).  . 
Basic coverage for 50 percent of the cost of prescription  drags up to 
a maximum annual benefit of $1250 after the policyholder meets a    . 
$250 per year deducible. 
Extended coverage for 50 percent of the cost of prescription  drugs  . 
up to a maximum annual benefit of $3000 after the policy holder 
meets a $250 per year deductible.  APPENDIX  B

THE  NATIONAL  ASSOCIATION  OF  INSURANCE  COMMISSIONERS

STANDARD  COMPLAINT  DATA  FORM  AND

THE  CHARACTERISTICS  OF  MEDIGAP  COMPLAINTS

The  following  pages  include  a copy of the  National  Association  of Insurance 
Commissioners  (NAIC)  Standard  Complaint  Data  form  and  tables  that  summarize  the 
characteristics  of national  Medigap  complaints,  including  reason  for complaint, 
disposition,  type  of Medigap  policy, source  of complaint,  and  age  of insured.  We 
calculated  these  statistics  using NAICS database  of complaints  that  State  insurance 
departments  closed  during  calendar  year  1993.  This  is the  same  database  that  NAIC 
routinely  sends  to the  Health  Care  Financing  Administration.  In these  tables,  the  total 
percents  may not  exactly  equal  the  sum of individual  percents  because  of rounding. 
We  did not  attempt  to verify the  data  contained  in the  NAIC  Complaints  Database 
System. 
B-1
 NAIC  STANDARD  COMPLAINT  DATA 
FIEIJIS WHICH ARE SNAOED ON THIS MM  SHOULD SE USED FoR REPORTING MEDICARE SU~EMENT  COMPMNT  INFORMATION THROUGH THE CDS. 
==M-i.  ~*.. ..:.:... .   ....*...J...... ........ ..   .:.:.:....  !!08m.Opmmlx, / ..:..li.. . ...../..- 4W.W$.* ..:~~+%lm  :  . ... 
-+%+-  ~~ 
YY?T 
COMP~;  A$NST 
[ 
Ea@&i.ii;::::.,  .........,.,,:, :... y.:  . ... ..,,..,.:.  $:.{:.::,.wmw 
......  ..................... .............;,,&,,.  ....:..,..,..........&....  .....  ..
~,m;.:..-::,:  ~:;;~,w,....,.w. ,  :..+:;.;:.;:
.:.,.,.,.......,:%..,...,.........  .,,
..+.;.........~-:..:.....w. ...,,,:,. ,.:..,:.Lyi:J::.::.s...,,' ,:,2.,,,;: :,.;;,;::..:Y,, ,'.....%.... .!.?::.-:-<--:-:-;-#'"f~`:>?:,~:Y~.,$:.:e,.-,-<-,.  :F~----
m~:?$???%.~x,.ex.:.,  ...................  ........x. ................~.   ...<.../<  ~~../  ..,,.:..,.,...,.:;.......,....:;..... ..:;....::...,:....;.......;..... ........&*@  ,. .  .....-$-..:...:.;...::;.5 .;.. . .... .  ,,
~..;...:..~.*.-., i-+*. .:.: ;:.W:.......:.....i.. :...:..i,.:k!i.,:%,;;,<,,.:....+;. :~w~:<...< ,.b...,.. s.. ..:.;.F...;..<5.d~ >:....:.>.*p.?y..?;.<.~ $-,<f.. .w:.. $.?.,.*,. .~ ,....~.....m i..;  3;.~.;...,>.,.+.:. ~.9:.w;.G, ~:..:...l..,y.: . ..m .....~..?.. ~..+ .?...$\.y,.l. , ...:;:.:...:,~::....::.-..r,..:....,,?.,..2;,:;.;;..,,:... ::.;~,..,.&..,y$..w,,:. ., -:.:..;,,,::,.,;* &*>**&:,~:*::;$?:~,~y,-~.. .:.;.2.:::::+:  ,..:::.  :...,: ~~ 
.  .....  -- .--- 
1  COMPLAINANT  / INSURED lNFORMAIWN  [
......... ... .... ...  .  ....... 
. @.g.a~.:.m.,..>,~,.~,,A. g.m  1 2 3 4  A@GJU@m  1.<25  2.3s&42  3.  SO1O64  4.-
;.:..;$~,:.:l ~  .:W+J*:..:.Y.. ,....,.  .. .... ...  ........,,~  ,,......*.++.....<.-,+  ........  .. ......=..... ..
~tixwii>  ./.............. .+.................. +.......f..,? .3.:,*.;>~$.g.% @ *?x.  ..:... ~~~~~~ 
--mz-ws:&[e*~~~S*.  ............  ,, .... 
~??@!b%~3%@dMzmt  afMkif8:Sm?PmA~2b@#%+iWi  ::+:   
I  TYPE OF COVERAGE  1 
ti*--l-titimw  ti~w~*m3~ym~tim~ti 
.. 
FIRE. Al -ES&CM  P 
1%1  0105 z  PamOngW  020sfim. alhc  0305nmmenmn 
Low  0110Cummfa@  0210~kAWPui  0310 f~ 
0115MmOmych  021s Cmdi Plqmq  0215 hi0hi10Nmns0uW 
0120 MmOImmO  0220 Ounl  03200umr 
,.  01s almf 
0130 Lh&ily  oz25LidiMy  032s Liai&y 
L4u4  0135 Ph)dA  ~  0220nm41  0330 nmn 
0140~  ~  0235Ftm-R4d Pmmy  m35Fh-Rdl%qmty 
0145IJWuu  0240PcnmMPmmny  u240Pumm#~ 
0150 NO.FmdlfPIP  0245 Othw  03450ma 
01s5 JuA R4hmd 
01s0 ahof 
LIFF AN D ANNIJ17Y  WaDE~  AND HFAI ~  M!SC~  LA NEOUS 
040shoidd@u*  :0505.idvidal  0505&llud  07C5w~  CamWmmh 
0410 42m@U10  . ~~+O51OGfmw.  Oslo~  0710 FilMty 6 Sunly 
0415 ~  051s C18di  Osls ~  lEho  071s W  M8mn 
0420awdilulo  051701hu  0s20- 0720kdm@Mmho 
0425&mInmds4flMim  0520~oq  0722 Tmb 
0430aIml  M  M250i8at4y  Mwnm  0730 b4mIowoGurmw 
.. 
0530 Nea211Onry  0735 08nmg@Wakw 
.  .,.~~~..,.  0744 W~my  Comma 
0s3s ~sdca;..  0741 I%m81 PKqfams 
0540 bJIW.Tmm C8m  0742 Ouml 
0s45 Dw4a 
0550wlndCmMy 
0525cmlmrtolamohnn 
05SOOUIW 
t  REASON FOR COMPLAINT  1 
.s04u!164mmm(qmnspumqwy. 
:; ~. 
-;...i y?v#Ff#gy:J...:$.. .~..&....t.~.. fi  =.. .+W5:~Nu~::..  :,100s??  .... .   W905wblmmhg.AdW&nl).
,.:.~wv~,~z&:?  ..........:,:l,ll~~~,  ,.,...,., .... ~.~ 
~.m. ?mnfs~ ........... .. ..:..~..,~. ..~.;,..J.+.....W.$...;.+.:iy+!p:>>$,,.gF2$*:...: ,,,.,  .... ......rtiwfk  _..:  .........  7..  .  :0x9$1sloumApfm)mumrHh mni%g.
~. ~+~:wsfc~ ....................... .....~.....x...2.........s,#,x...?.: :?.,,.+..j!+   l120~R4ilmd?.  .~ -mlswliiK4@iiitl:<;.  . az?mibimino  :  
->:.:.* :,W<..:., +.,.,*y~-q~*;;. ~~;:**,<, ::,  .. .. ..........  .. ..7 l:n1x2Swu~a geOwImOl.a*.l .  ..,
  +~02~0:~ .~vao:;n;,di.m  a:  ;: ,,, ;  ~~=l!~;;-;,~~
....... ... .. . ~~ia.::;  1127;OUMYOI cwo  .:,=~~  :...    %c2mlJn  Pms8mwTuti

1130 Oumf  la3s4xlmw;.:;:j_  -.~  dcawt8g0 
~:~022S130a*.. 
...... ....::..  clpii6Ymlhwm.l%fina..  ,,  .: ..a.,:,m,:,*  ., 
,j+:?$=*:;~~n~=o-**~*-
$ 
J  DISPOSITION  { 
... .. ..............  .SmUJwlonn0(3)#SmS
:,w;,....% .,3iq~21.,rl~r WmYR&~  1240 Rdcfmd ld?lqac~  .  1275~iJ  ~ .  -
..
 ........  $%UmnIiiy.  1245.~wthdmnnfAmUb9Uk:  lzmwkymd  far.0im5@lmq AamlY
:+::...::tas~~,~~j  :::~::~j:i::  ,=  ~~~..  Inwxmmmn  d$au

.>.:....:l~~~-y:: 
..<,,.><.$~q~.~..,.  1255 04My.Rosak4d::. ,  ~h.lflfia  PuAOnlwbmn
...  .....  12s0 CanC4Mlimwabwtilommn:.  ~~  :29sGonq9Kf  MIml  Ugrmm 
~...:;::..: 
12s5 NOnmnndNa*~  ~-kwkdich
1270 Pmmlwl~41b4@Ud..  130s.~MOnnmiM 
1310Qkir. 
B-2
 TABLE  1:  REASON  FOR  MEDIGAP  COMPLAINTS 
CODE IN  NUMBER OF 
REASON FOR COMPLAINT  PERCENT
DATABASE  COMPLAINTS 
Claim handling  1005 to 1035  1,080  34.8 
Policyholder service  1105 to 1130  819  26.4 
Marketing and sales  0905 to 0930  606  19.5 
Underwriting  0805 to 0845  599  19.3 
TOTAL NUMBER OF COMPLAINT REASONS  3,104  100.0 
In this table,  the  total  number  of complaint  reasons  does  not  equal  the  total  number 
of complaints  (2,799),  because  214 complaints  contain  2 reason;,  41 contain  3 reasons, 
and  3 contain  4 reasons. 
TABLE  2:  DISPOSITION  OF  MEDIGAP  COMPLAINTS 
CODE IN  NUMBER OF 
DISPOSITION OF COMPLAINT  PERCENT
DATABASE  COMPLAINTS 
Company position upheld  1295  488  15.8 
Refund  1215  468  15.1 
Claim settled  1230  332  10.7 
No action requested or required  1235  236  7.6 
Contract provision or legal issue  1290  216  7.0 
All 16 remaining dispositions  All remaining 
792  25.6 
(excluding those  coded  other)  codes  except  1310 
Dispositions  coded  other  1310  560  18.1 
TOTAL  NUMBER  OF  COMPLAINT  DISPOSITIONS  3,092  100.0 
In this table,  the  total  number  of complaint  dispositions  does  not  equal  the  total 
number  of complaints  (2,799), because  269 complaints  contain  2 dispositions  and 
12 contain  3 dispositions. 
B-3
 TABLE  3:  COMPLAINTS  BY TYPE  OF  MEDIGAP  POLICY

CODE IN  NUMBER OF 
TYPE OF MEDIGAP  POLICY* 
DATABASE  COMPLAINTS  PERCENT 
Type A  A  179  6.4 
Type B  B  102  3.6 
Type C  c  80  2.9 
Type D  D  26  0.9 
Type E  E  5  0.2 
Type F  F  165  5.9 
Type G  G  9  0.3 
Type H  H  12  0.4 
Type I  I  37  1.3 
Type J  J  18  0.6 
Policies issued prior to OBRA 1990 
P 694  24.8 
and no longer offered in the State 
Other  o  332  11.9 
Missing data  Blank  1,140  40.7 
TOTAL NUMBER OF COMPLAINTS  2,799  100.0 

For  descriptions  of these  Medigap  policy types,  see  appendix  A. 
B-4
 TABLE  4:  SOURCE  OF  COMPLAINT  FOR  MEDIGAP  COMPLAINTS 
I  CODE  IN  NUMBER  OF 
SOURCE  OF  COMPLAINT 
DATABASE  COMPLAINTS  PERCENT 
Insured  I  INS  2,288  I  81.7 
Third party  I  THP  168  I  , 6.0 
Producer 
PRO  48  I  1.7
(agent, broker, solicitor, etc.) 
Beneficiary  BEN  14  I  0.5 
Other  OTH  280  I  10.0 
Missing data  I  Blank  1  I  0.0 
TOTAL NUMBER OF COMPLAINTS  2,799  I  100.0 
For  Medigap  insurance  products,  the  terms  insured  and  beneficiary  used  in this 
table  generally  refer  to the  same  thing--the  person  insured  and  eligible  for benefits 
through  the  policy.  In the  NAIC  Complaints  Database  System,  however,  States  have 
the  discretion  to enter  data  according  to their  own definitions.  Some  States  may 
consider  a spouse  covered  under  a joint  Medigap  policy to be  a beneficial  rather 
than  the  insured,  for data  entry  purposes. 
TABLE  5:  AGE  OF  INSURED  FOR  MEDIGAP  COMPLAINTS 
CODE IN
 NUMBER OF 
AGE CATEGORY 
DATABASE
 COMPLAINTS  PERCENT 
Under age 25  1
 9  0.3 
25 to 49  2
 11  0.4 
50 to 64  3
 17  0.6 
65 and older  4
 750  26.8 
Missingdata  Blank
 2,012  71.9 
TOTAL NUMBER OF COMPLAINTS
 2.799  100.0 
B-5
 APPENDIX  C

HCFA  COMMENTS 
~.m,,, 
/  4  Health Care 
;  DEPARTMEIiT  OF HEALTH  & HUhlAN SERVICES  FinaMing  Administfafion 
; 
 
% Memorandum 
FEB241995 
To:	 June Gibbs Brown 
InspectorGesseraf 
FROM;	 Bruce C, Wadcck 
Administrator 
SUBf~  OftW of InspeetorGerscrrd(OIG) Draft Report  llreImpact of the 
OmnibusBudgetReeoncihion  Act  of 1990on State ReguMiousof 
Medigalpn suratscc(;O  E1419.93-00Z30)
Wereviewetdh eatww-referencreedp ortinwhichOIGexpressedconcernsabout
the Health Care F%sastcinAgdministrationssuppersfor the informati~counsc@ 
ands&stancegranteeprogram,and the usefib.ss  of the Medigapaxrsplafnb data 
basesystemas assanalytjeid toii. 
Our detailed commentsOQthe report findingsand reeommendatioasarc attached for 
yourconsideration. Thankyoufortbe opportunitytoreviewaadcommenton this 
draft report. Please contact us if you wouldlike to discussour commentsand 
response, 
Attachment 
tG_. 
HUG   
PDIG   
DIGAS 
DIGES  z 
IMKIi  _ 
AWCFAA  . 
NG-MP  _.  -ivx3i39

xn~~~wq!~  +~ ~~! : I

Occm 
I,::{sccf 

[t ~fld
  LzGjj$~j]

OATEsF.NT_2&?_

tili,;;dj~ 
c-1  HealthCareFinancin~Administrationfsl-fCFAslCornmeutS 
on office  of InsrrectorGeneral(OK3 Draft Rcuort: 
TheImpactoftheCMtibusBud~etRCeorsciliatiooAct 1990 
on State RezuIatio_  izau Insurance 
OE149-93-0023Q 
OIG RecommerrdatioC 
HCFAsbottldimplementplansforduectregionaloffice(RO)assis~  to 
infonrrationc,ounseling,and assistarsm(lCA) grantee~ 
We concurwiththisrecornnrendadon.WISilCa fewof the R06 supported the ICA 
programfromitskptio~  notaUregion$provideddirectsupport. IDresponseto 
commentsat a meetinginDenver,in March1994,byseveraloftbe ICAState 
repracmtativeq HCFA took positivestefNto involveall of tbe R&  Be$innirsgin 
late Ju!y1994,HCFAmadefundsavailableto tbc ROSforlCA supportactivities. 
For fwal yeaI 1994,$242,10$wasulfocstedto the ROSfor trisvcf,contracm 
equipmentpumbsses,andotbcrmaterialsandse-in  supportofthelCA 
progruns.Thereare Medigapcoordinatorsdesignatedin ench RO in the Divisionof 
Medwre, ttsuallyin the beneficiaryservicesarea. lltesocoordinatorsalso work with 
the StateOfficesofAgingtodevelopresponsesto requestsfor informationby 
benefieiarie$ fhe NM supportthe Stateprogramsbyassistingin training@affand 
vohsntee~ furnishing@f@a]  SUpp@assitig  iISputrficizingthe programs~ tbe 
various media includingN, radio, Qewspape%ttewslette~ and communicating 
through eomprrterbuUetinboards. The ROSalso aasistitsthe creation of various 
writtenmaterialsincludingpamphletsandbrochures. 
OIGRecommendatii~ 
HCFAshouldconsider~andtig  thecourplaintsdatabasesystemtoreflect 
received,C1OSCaAndpendingMedigapcomplahs~,directState insurance 
departments(SID) to furnishkeyrequireddata, suchas @icy type,for eaeh 
reportingperiod;clarifyinstructiootto assureuniformreportingof data byStates. 
HCFA Response 
Weconcurwiththisrecommendation.@r initialplansweretocollectthesetypa of 
complaintsandtic databasewasdesigaedtoallowentryoftheseMmpIairsts. 
However,wc bad to reiyon the NationalAssociationof lstsurarrceCornmiasiorrers 
(NAIC) to providedata from their complaintdata b~  systemin the pas~ because 
we did not have approvalfromtheOfficeofManagementandBudgetto coflect 
complaintsdnta (clearancewas received  f)cccmbcr  19513 for closed  complainotsnly). 
Tbereforc,wecouldnotcompelStatestoWsisb thisinformation. 
c-2  Page2 
In order to capture data on received,  OpCU, and pendingcomplaiu~ wewillhaveto 
revisethe originalc]earaocerequestto includethesee!earerrss.(%trCtlt  st.afbg 
constraintsprecludeusfrom starting work on this activity at this rime.  Wewillkeep 
youinfomwdof our progress. 
Additioaal!y,we havediscussedwithNAICsherequirementfor SIDs10furnishkey 
data,andwehavetregotiatcddatacollectionrequirementswiththem. NAfCha$ also 
agreed to ensure that Statesprovidethe requireddata for transmissionto HCFA 
FiiaUy,wchavedeterminedthatadatadictionaryk neededtoclarifynwmingsof 
term to enrwe uniformrepoting.  Wc plan to developthe dietiomy andneg~ate 
its implemerttatkxrwith NAICand the States. 
OIG &C04UtStrrdatioa 
HCFAshouldworkwiththeNAICandW% toencourageStatesto adopt consumer 
safeguardsoxceedirr.tghe minintrrmstandards,includingopen enrollmentfor the 
disabkd andcomtnunityratingofptcmiums, 
HCFAILesposmc 
Wccoacurwiththisrec~mendatioa,  HCFA favorsstrengthening~cneficiasy 
safeguardswith regard to Mcdigapinsurance. We havesupporsedteohsrical 
wncndmeats  that were passed reedy  1ssthe SocialSecurityAct Antendmentsof 
1994(the Act), In part these asnexdmeritsrequirethat effectiveJarrrmy 1995,the 
&monthopsmeurof.lmcnptericd for MedigappoliciesI@rra with the first month 
thatabenefidaryisage6SorolderandiserrrolledforbenefitsuodcrPartB. lltis 
clarifiesthal the open ertrokncapteriodappliesto~  beneficiarieswhoareage6S, 
ittcludingthosewhobadbeenentitledtoPart Bbeacfitspriortoage6Sose resultof 
ersd-stagereml diseaseor disability. 
f3errefiiiarieswho turned age 65 after the effective date of she originalopen 
enrollmentprovisicta(November5, 1991)nndwhodidnotreceivean open 
enrollmentperiodbeeausetheywerepreviouslyentitledto Part B@f be giversa 
onc.tirrre6-monthopenenrollmentperiodbeginningJanuary1,1995, Alsq SOtsw 
Statesaowrequireopenenrohent  forthedisabledatanyage(Oklahomaand 
Ierrnsylvania).WewouldsupportanyStateprogramthatadoptedsuchprovisions, 
c-3  ? 
Page3 
Ati~tionaUyH, CFAhasalsorecognkedtheWinee aqruei atilessoa pssuorcsuiattiged aw liethgitsbke*U*of 
attained-ageraw in the Me&gapmarket. 
propmalto man&tctheuseofcommunityratingforMed@appolicies, 
~cm~~ 
l%etextatthetopofpagem1m6d iwp~o$p osprdroshpa=vde b\ece@netinosn@  foarswt-hhe Ackt--%Y Mmay
~~lu&tgantidupha~n. 
wantto updatetherepotito reflecttbcseamendmenw. 
AIw,the so-of  the dab in tie Tablesfwmdin Appcn&  B shdd  be idcaticd. 
Table4contiks bothinsuredandbeueMlatYas soumesof complahs. me mpoti 
shouldexplainthedistentionbeheenthem. 
C-4

 
____