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 

%+ -#


+

%d~~ MARCH 1995 

> 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 report’s 

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: 

b	 set minimum standards for Medig,ap policies and prohibit insurers from offering 

beneficiaries more than ten different benefit packages, effective July 30, 1992; 

b minimize inappropriate sales and marketing of Medigap policies; and 

b educate and counsel consumers who wish to purchase Medigap insurance. 

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: 

b	 virtually all Medigap regulatory programs of 48 States, the District of Columbia, 

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 Montana’s program on July 3, 1993, and Oregon’s program on 

March 11, 1994; and 

b most State applications for ICA grants to educate consumers, providing funds 

($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 NAIC’S 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


NAIC’S 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 

Policy Approval Staff 16 16 9 in-person and 

7 telephone 

16 

Sample Complaint Resolution SM’f 

States 

16 16 9 in-person and 

7 telephone 

ICA Program Coordinators 16 16 9 in-person and 

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 President’s 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 don’t use the 

abusive marketing or sales practices of the past through the complaints 

system. An agent or company will complain about another’s 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 NAIC’S 

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 

NAIC’S 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 NAIC’S 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 Congress’s intent to 

prohibit first-year commissions for sales of policy upgrades, the final bill omitted this 

provision. The NAIC acceded to Congress’s 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 consumer’s current health coverage was reviewed and this new policy is


appropriate to meet the consumer’s needs.” Legislation in other States prohibits


agents from collecting more than one month’s 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 State’s 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 don’t have 

to decide about benefits to the individual. Our reviews are standardized 

and don’t 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 can’t 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 firstyear 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 NAIC’S 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 EFFECI’IVE 

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, NAIC’S 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 HCFA’S 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 State’s 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 NAIC’S 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 Medicare’s 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 policyholder’s 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 NAIC’S 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

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NAIC STANDARD COMPLAINT DATA 

FIEIJIS WHICH ARE SNAOED ON THIS MM SHOULD SE USED FoR REPORTING MEDICARE SU~EMENT COMPMNT INFORMATION THROUGH THE CDS. 

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TYPE OF COVERAGE 

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B-2

TABLE 1: REASON FOR MEDIGAP COMPLAINTS 

REASON FOR COMPLAINT CODE IN NUMBER OF 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 

DISPOSITION OF COMPLAINT CODE IN NUMBER OF PERCENT DATABASE COMPLAINTS 

Company position upheld 

Refund 

Claim settled 

No action requested or required 

Contract provision or legal issue 

All 16 remaining dispositions 

(excluding those coded “other”) 

Dispositions coded “other” 

1295 

1215 

1230 

1235 

1290 

All remaining 

codes except 1310 

1310 

488 15.8 

468 15.1 

332 10.7 

236 7.6 

216 7.0 

792 25.6 

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


TYPE OF MEDIGAP POLICY* CODE IN 

DATABASE 

Type A A 

Type B B 

Type C c 

Type D D 

Type E E 

Type F F 

Type G G 

Type H H 

Type I I 

Type J J 

Policies issued prior to OBRA 1990 P and no longer offered in the State 

Other o 

Missing data Blank 

TOTAL NUMBER OF COMPLAINTS 

NUMBER OF 

COMPLAINTS PERCENT 

179 6.4 

102 3.6 

80 2.9 

26 0.9 

5 0.2 

165 5.9 

9 0.3 

12 0.4 

37 1.3 

18 0.6 

694 24.8 

332 11.9 

1,140 40.7 

2,799 100.0 

For descriptions of these Medigap policy types, see appendix A. 

B-4

TABLE 4: SOURCE OF COMPLAINT FOR MEDIGAP COMPLAINTS 

SOURCE OF COMPLAINT I CODE IN 

DATABASE 

NUMBER OF 

COMPLAINTS PERCENT 

Insured I INS 2,288 I 81.7 

Third party I THP 168 I , 6.0 

Producer 

(agent, broker, solicitor, etc.) PRO 48 1.7 I 

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 

AGE CATEGORY 

Under age 25 

25 to 49 

50 to 64 

65 and older 

Missing data 

TOTAL NUMBER OF COMPLAINTS


CODE IN


DATABASE


1


2


3


4


Blank


NUMBER OF 

COMPLAINTS 

9 

11 

17 

750 

2,012 

2.799 

PERCENT 

0.3 

0.4 

0.6 

26.8 

71.9 

100.0 

B-5

APPENDIX C


HCFA COMMENTS 

~.m,,, 

/ “ Health Care 

; DEPARTMEIiT OF HEALTH & HUhlAN SERVICES FinaMing Administfafion ; 

� “%4 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 

Medigap lnsuratscc; (OE1419.93-00Z30)

Wereviewed theatww-referenced reportin whichOIG expressedconcernsabout

the Health Care F%sastcingAdministration’suppersfor the informati~counsc@ 

ands&stancegranteeprogram,and the usefib.ss of the Medigapaxrsplafnb data 

base systemas assanalytjeid toii. 

Our detailed commentsOQthe report findingsand reeommendatioasarc attached for 

your consideration. Thankyou for tbe opportunityto reviewaad commenton this 

draft report. Please contact us if you wouldlike to discussour commentsand 

response, 

Attachment 

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PDIG — 

DIGAS 

DIGES z 

IMKIi _ 

AWCFAA —. 

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HealthCare Financin~Administration’sfl-fCFA’sl”CornmeutS on office of InsrrectorGeneral(OK3 Draft Rcuort: 

The Impactof the CMtibusBud~etRCeorsciliatiooAct 1990 

on State RezuIatio_ izau Insurance 

OE149-93-0023Q 

OIG RecommerrdatioC 

HCFA sbottldimplementplansfor duect regionaloffice(RO) assis~ to 

infon’rration,counseling,and assistarsm(lCA) grantee~ 

We concurwith thisrecornnrendadon.WISilCa fewof the R06 supported the ICA 

programfrom its kptio~ not aUregion$provideddirectsupport. IDresponseto 

commentsat a meetingin Denver,in March1994,byseveralof tbe ICA State 

repracmtativeq HCFA took positivestefNto involveall of tbe R& Be$innirsgin 

late Ju!y 1994,HCFAmade fundsavailableto tbc ROSforlCA supportactivities. 

For fwal yeaI 1994,$242,10$wasulfocstedto the ROSfor trisvcf,contracm 

equipmentpumbsses,and otbcr materialsand se-in support of the lCA 

progruns.Thereare Medigapcoordinatorsdesignatedin ench RO in the Divisionof 

Medwre, ttsuallyin the beneficiaryservicesarea. ‘lltesocoordinatorsalso work with 

the State Officesof Agingto developresponsesto requestsfor informationby 

benefieiarie$ ‘fhe NM supportthe Stateprogramsbyassistingin training@affand 

vohsntee~ furnishing@f@a] SUpp@assitig iISputrficizingthe programs~ tbe 

various media including‘N, radio, Qewspape%ttewslette~ and communicating 

through eomprrterbuUetinboards. The ROSalso aasistitsthe creation of various 

writtenmaterialsincludingpamphletsand brochures. 

OIGRecommendatii~ 

HCFA shouldconsider~andtig the courplaintsdata base systemto reflect 

received,C1OSCAand pendingMedigapcomplahs~,direct State insurance 

departments(SID) to furnishkeyrequireddata, suchas @icy type,for eaeh 

reporting period; clarifyinstructiootto assureuniformreportingof data by States. 

HCFA Response 

We concurwith thisrecommendation.@r initialplanswere to collectthese typa of 

complaintsand tic data basewasdesigaedto allowentryof these MmpIairsts. 

However,wc bad to reiyon the NationalAssociationof lstsurarrceCornmiasiorrers 

(NAIC) to providedata from their complaintdata b~ systemin the pas~ because 

we did not have approvalfromthe Officeof Managementand Budgetto coflect 

complaintsdnta (clearancewas received f)cccmbcr 19513 for closed complaintsonly). 

Tbereforc,we couldnot compelStatesto Wsisb thisinformation. 

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Page 2 

In order to capture data on received, OpCU, and pendingcomplaiu~ we willhaveto 

revisethe originalc]earaocerequestto includethesee!earerrss.(%trCtlt st.afbg 

constraintsprecludeusfrom starting work on this activity at this rime. Wewillkeep 

you infomwdof our progress. 

Additioaal!y,we havediscussedwithNAICsherequirementfor SIDs10furnishkey 

data, and we have tregotiatcddata collectionrequirementswiththem. NAfCha$ also 

agreed to ensure that Statesprovidethe requireddata for transmissionto HCFA 

FiiaUy,wc havedeterminedthat a data dictionaryk neededto clarifynwmings of 

term to enrwe uniformrepoting. Wc plan to developthe dietiomy andneg~”ate 

its implemerttatkxrwith NAICand the States. 

OIG &C04UtSt rrdatioa 

HCFA shouldworkwiththe NAICandW% to encourageStatesto adopt consumer 

safeguardsoxceedirr.gthe minintrrmstandards,includingopen enrollmentfor the 

disabkd and comtnunityratingof ptcmiums, 

HCFAILesposmc 

Wc coacurwiththisrec~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.lmcntpericd for MedigappoliciesI@rra with the first month 

that a benefidaryis age 6Sor older and is errrolledfor benefitsuodcr Part B. lltis 

clarifiesthal the open ertrokncatperiodappliesto ~ beneficiarieswho are age 6S, 

ittcludingthosewhobad been entitledto Part Bbeacfitsprior to age 6Sos e resultof 

ersd-stagereml diseaseor disability. 

f3errefiiiarieswho turned age 65 after the effective date of she originalopen 

enrollmentprovisicta(November5, 1991)nndwhodidnot receivean open 

enrollmentperiod beeausetheywerepreviouslyentitledto Part B @f be giversa 

onc.tirrre6-monthopen enrollmentperiodbeginningJanuary1, 1995, Alsq SOtsw 

States aow require open enrohent for the disabledat anyage (Oklahomaand 

I’errnsylvania).WewouldsupportanyStateprogramthat adoptedsuch provisions, 

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associated

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Page 3 

Ati~tionaUy,HCFAhas alsorecognkedtheWe inequities are alsopursutig a with legisk* tbe U* of 

attained-ageraw in the Me&gapmarket. 

propmalto man&tc the use of communityratingforMed@appolicies, 

~cm~~ 

l%e text at the top of page16diw~$ prop=d \c@tion asthe Act- YM may ~~lu&tg antidupha~n. mm poposrdshavebeenens@for w-h k-% 

wantto update the repotito reflecttbcseamendmenw. 

AIw,the so-of the dab in tie Tablesfwmdin Appcn& B shdd be idcaticd. 

Table4 contiks both ‘insuredandbeueMlatY”as soumesof complahs. me mpoti 

shouldexplainthe distentionbeh’eenthem. 

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