Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. Existing law regulates Medicare supplement contracts, including, among other things, prohibiting an issuer of a Medicare supplement contract from advertising, soliciting, or issuing for delivery a Medicare supplement contract before it has been filed with and approved by the director, and requiring an issuer to secure the directors review of a Medicare supplement contract by submitting specified information not less than 30 days before any proposed advertising or other use of the contract. Existing law requires an outline of coverage for a Medicare supplement contract sold on or after June 1, 2010, to include specified items set forth in the National Association of Insurance Commissioners (NAIC) Minimum Standards Model Act, as adopted by NAIC in 2008.

This bill would require the director to require an issuer of a Medicare supplement contract to annually complete and submit the National Association of Insurance Commissioners Medicare supplement experience exhibit. The bill would request that NAIC permit the department to participate in NAIC proceedings as a complementary nonmember, and would require the department to participate in NAIC proceedings relating to Medicare supplement insurance if NAIC accepts the department as a complementary nonmember. express the intent of the Legislature that the department participate in proceedings of NAICs Senior Issues Task Force that relate to Medicare supplement insurance.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. Existing law regulates Medicare supplement contracts, including, among other things, prohibiting an issuer of a Medicare supplement contract from advertising, soliciting, or issuing for delivery a Medicare supplement contract before it has been filed with and approved by the director, and requiring an issuer to secure the directors review of a Medicare supplement contract by submitting specified information not less than 30 days before any proposed advertising or other use of the contract. Existing law requires an outline of coverage for a Medicare supplement contract sold on or after June 1, 2010, to include specified items set forth in the National Association of Insurance Commissioners (NAIC) Minimum Standards Model Act, as adopted by NAIC in 2008.

This bill would require the director to require an issuer of a Medicare supplement contract to annually complete and submit the National Association of Insurance Commissioners Medicare supplement experience exhibit. The bill would request that NAIC permit the department to participate in NAIC proceedings as a complementary nonmember, and would require the department to participate in NAIC proceedings relating to Medicare supplement insurance if NAIC accepts the department as a complementary nonmember.

SENATE THIRD READING

STR Bill Id:SB 1457

Author:(Hernandez)

As Amended Ver:June 21, 2018

Majority vote

SENATE VOTE: 38-0

SUMMARY: States the intent of the Legislature that the Department of Managed Health Care (DMHC) participate in proceedings relating to Medicare supplement insurance of the National Association of Insurance Commissioners' (NAIC) Senior Issues Task Force, constituted as a subgroup of the NAIC's Health Insurance and Managed Care (B) Committee. Directs the DMHC Director to require an issuer to annually complete and submit the NAIC Medicare supplement experience exhibit. Makes other technical changes.

FISCAL EFFECT: According to the Assembly Appropriations Committee, costs of $70,000 annually to DMHC for three years to review filings and draft legal memoranda, and $50,000 annually thereafter (Managed Care Fund).

COMMENTS: According to the author, California has two regulators of health insurance but only one is an official member of NAIC. While California regulators have minimal authority over Medicare supplement policies (also known as Medigap policies), the state regulators are required to enforce federal standards. While DMHC may collect data as required to use for its own enforcement activities, those data are not included in national data reported through NAIC. This bill is needed to capture complete information about California Medicare Supplement insurance, contribute to the accuracy of national data, and promote more participation by DMHC at NAIC to ensure compliance with federal requirements. NAIC Medicare supplement insurance experience reports appear to undercount the number of Californians with Medigap policies by almost a half (approximately 425,000 people). National Medigap data is relied upon by the Medicare Payment Advisory Commission, researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs.

1. NAIC. NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The NAIC also collects and analyzes data about the insurance industry. One such report is the Medicare Supplement Loss Ratios report. Included in the report are the loss ratios on Medicare supplement business. Reporting of these loss ratios, on forms conforming to those developed by the NAIC, is required by the Medicare Catastrophic Coverage Act of 1988, Public Law 100-360. Although major provisions of the Act were repealed one year later, this reporting requirement was left intact. The data reported are utilized by state insurance departments to help evaluate insurers' compliance with loss ratio standards for Medicare supplement policies. The 2016 Medicare Supplement Insurance Experience Reports indicate that California has 514,026 covered lives with actual premiums earned over $1.1 billion issued by 10 insurance companies (regulated by the California Department of Insurance).
2. Medigap market in California. An April 2013 Kaiser Family Foundation (KFF) report on the Medigap market indicates that one in four Medicare beneficiaries had a Medigap policy; however Medigap penetration varies by state, ranging from 2% in Hawaii to 51% in North Dakota. This report does not include data for California because “these national figures do not include California, which was excluded because companies in that state are not required to report to the NAIC, leading to incomplete data on Medigap enrollment and premiums in California.” According to the DMHC website, in 2016 there were over 425,000 lives enrolled in Medigap policies with four DMHC regulated carriers. For the fourth quarter of 2017, there were over 435,000 lives. According to KFF, in 2015 there were over 5.6 million Californians on Medicare.

California Health Advocates states that this bill will eliminate the gap in the national record and ensure that DMHC has the latest and most accurate information about any state regulatory issues that arise, and accurately respond to any changes that are made to Medigap products by federal law.

The DMHC is opposed because it believes that this bill is unwarranted at this time.

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0004410

Date of Hearing: August 15, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1457

Author:(Hernandez) – As Amended Ver:June 21, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requests the National Association of Insurance Commissioners (NAIC) to permit the Department of Managed Health Care (DMHC) to participate in NAIC proceedings as a complimentary nonmember, and, if permitted, requires DMHC to participate in NAIC as a complimentary nonmember.

It also requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit and makes other technical changes.

FISCAL EFFECT:

Costs of $70,000 annually to DMHC for three years to review filings and draft legal memoranda, and $50,000 annually thereafter (Managed Care Fund).

COMMENTS:

1. Purpose. According to the author, California has two regulators of health insurance but only one is an official member of NAIC. While California regulators have minimal authority over Medicare supplement policies (also known as Medigap policies), the state regulators are required to enforce federal standards. While DMHC may collect data as required to use for its own enforcement activities, those data are not included in national data reported through NAIC. This bill is needed to capture complete information about California Medicare Supplement insurance, contribute to the accuracy of national data, and promote more participation by DMHC at NAIC to ensure compliance with federal requirements.
2. Background. NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The California Department of Insurance is a member, but DMHC is not.

An April 2013 Kaiser Family Foundation (KFF) report on the Medigap market indicates that one in four Medicare beneficiaries had a Medigap policy nationwide. This report does not include data for California because companies are not required to report to the NAIC, leading to incomplete data. According to the DMHC website, in 2016 there were over 425,000 lives enrolled in Medigap policies with four DMHC regulated carriers, out of 5.6 million Medicare enrollees.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: June 19, 2018

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

SBPCA Bill Id:SB 1457

Author:(Hernandez) – As Introduced Ver:February 16, 2018

SENATE VOTE: 38-0

SUBJECT: Medicare supplement insurance.

SUMMARY: Requests the National Association of Insurance Commissioners (NAIC) to permit the Department of Managed Health Care (DMHC) to participate in NAIC proceedings as a complimentary nonmember, and, if permitted, requires DMHC to participate in NAIC as a complimentary nonmember. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit. Makes other technical changes.

EXISTING FEDERAL LAW:

1. Defines, under federal law, a Medicare supplemental policy as a health insurance or other health benefit plan offered by a private entity to individuals on Medicare, which provides reimbursement for expenses incurred for services and items for which payment may be made under Medicare but which are not reimbursable by reason of the applicability of deductibles, coinsurance amounts, or other limitations imposed pursuant to Medicare. Excludes specific types of coverage such as a Medicare +Choice plan (Medicare Advantage) or any such policy or plan of one or more employers or labor organizations as well as other types of policies.
2. Permits any Medicare supplemental policy issued in any state in which the Secretary of the federal Department of Health and Human Services (Secretary) determines has established under state law a regulatory program that meets specified requirements including providing for the application and enforcement of standards with respect to such policies equal to or more stringent than the NAIC Model Standards; and, providing for information with respect to the actual ratio of benefits provided to premiums collected under such policies to be reported to the state on forms conforming to those developed by NAIC.
3. Permits the ratio of benefits in 2) above to be monitored in an alternative manner approved by the Secretary, and that a copy of each such policy, the most recent premium for each policy, and a listing of the ratio of benefits provided to premiums collected for the most recent three year period for each policy issued or sold in the state is maintained and made available to interested persons.
4. Requires reports to the Secretary on the implementation and enforcement of Medicare supplement policy standards and requirements at intervals established by the Secretary.
5. Requires each report to include information on loss ratios of policies sold in the state, frequency and types of instances in which policies approved by the state fail to meet the standards and requirements, actions taken by the state to bring such policies into compliance, information regarding state programs implementing consumer protection provisions, and further information as the Secretary in consultation with NAIC may specify.

EXISTING STATE LAW:

1. Establishes DMHC to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance.
2. Establishes requirements for a Medicare supplement contract including a requirement that the issuer not advertise, solicit, or issue for a Medicare supplement contract to a resident of this state unless the contract has been filed and approved by the DMHC Director and that the issuer submit to DMHC or CDI a copy of the calculations for the actual or expected loss ratio, as specified.

FISCAL EFFECT: According to the Senate Appropriations Committee, the DMHC identified no fiscal impact. However, potential ongoing costs in low thousands for workload and attendance at required NAIC meetings.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, California has two regulators of health insurance but only one is an official member of NAIC. While California regulators have minimal authority over Medicare supplement policies (also known as Medigap policies), the state regulators are required to enforce federal standards. While DMHC may collect data as required to use for its own enforcement activities, those data are not included in national data reported through NAIC. This bill is needed to capture complete information about California Medicare Supplement insurance, contribute to the accuracy of national data, and promote more participation by DMHC at NAIC to ensure compliance with federal requirements. NAIC Medicare supplement insurance experience reports appear to undercount the number of Californians with Medigap policies by almost a half (approximately 425,000 people). National Medigap data is relied upon by the Medicare Payment Advisory Commission, researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs.
2. BACKGROUND.
   1. Medigap. Medigap (also referred to as Medicare Supplement Insurance) is health insurance sold by private insurance companies to fill the “gaps” in Medicare coverage. Traditional Medicare has cost-sharing requirements and Medigap policies help enrollees have more predictable cost-sharing because Medigap policies help pay some of the health care costs that Medicare does not cover. Generally, to have a Medigap policy a person must have Medicare Part A and Part B, and not a Medicare Advantage product. Medigap policies must follow federal and state laws. Insurance companies can only sell a “standardized” Medigap policy.
      
      The chart on the next page shows basic information about the different benefits Medigap policies cover.

Yes = the plan covers 100% of this benefit

No = the policy doesn't cover that benefit

% = the plan covers that percentage of this benefit

N/A = not applicable

* Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,240 in 2018 before your Medigap plan pays anything.

# After you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.

+ Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don't result in inpatient admission.

• 1. NAIC. NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The NAIC also collects and analyzes data about the insurance industry. One such report is the Medicare Supplement Loss Ratios report. Included in the report are the loss ratios on Medicare supplement business. Reporting of these loss ratios, on forms conforming to those developed by the NAIC, is required by the Medicare Catastrophic Coverage Act of 1988, Public Law 100-360 (Act). Although major provisions of the Act were repealed one year later, this reporting requirement was left intact. The data reported are utilized by state insurance departments to help evaluate insurers’ compliance with loss ratio standards for Medicare supplement policies. The 2016 Medicare Supplement Insurance Experience Reports indicate that California has 514,026 covered lives with actual premiums earned over $1.1 billion issued by ten insurance companies (regulated by CDI).
  2. Medigap market in California. An April 2013 Kaiser Family Foundation (KFF) report on the Medigap market indicates that one in four Medicare beneficiaries had a Medigap policy; however Medigap penetration varies by state, ranging from 2% in Hawaii to 51% in North Dakota. This report does not include data for California because “these national figures do not include California, which was excluded because companies in that state are not required to report to the NAIC, leading to incomplete data on Medigap enrollment and premiums in California.” According to the DMHC website, in 2016 there were over 425,000 lives enrolled in Medigap policies with four DMHC regulated carriers. For the fourth quarter of 2017, there were over 435,000 lives. According to KFF, in 2015 there were over 5.6 million Californians on Medicare.

1. SUPPORT. California Health Advocates states that this bill will eliminate the gap in the national record and ensure that DMHC has the latest and most accurate information about any state regulatory issues that arise, and accurately respond to any changes that are made to Medigap products by federal law.
2. AUTHOR’S AMENDMENTS.  The author proposes to instead codify the provisions of this bill as intent language as follows:

1342.3. (a) The Legislature requests that the National Association of Insurance Commissioners (NAIC) permit the Department of Managed Health Care to participate in NAIC proceedings as a complementary nonmember.

(b) If NAIC accepts It is the intent of the Legislature that the Department of Managed Health Care participate as a complementary nonmember, the department shall participate in NAIC in proceedings relating to Medicare supplement insurance of the National Association of Insurance Commissioners’ (NAIC) Senior Issues Task Force, constituted as a subgroup of the NAIC’s Health Insurance and Managed Care (B) Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Advocates for Nursing Home Reform

California Health Advocates

Justice in Aging

Opposition

None on file.

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 1457

Author:

:

Vote:

SENATE HEALTH COMMITTEE: 9-0, 4/11/18

AYES: Hernandez, Nguyen, Leyva, Mitchell, Monning, Newman, Nielsen, Pan, Roth

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/22/18

AYES: Lara, Bates, Beall, Bradford, Hill, Nielsen, Wiener

SUBJECT:

SOURCE: Author

DIGEST: This bill requests the National Association of Insurance Commissioners (NAIC) to permit the Department of Managed Health Care (DMHC) to participate in NAIC proceedings as a complimentary nonmember, and requires DMHC to participate if NAIC accepts DMHC as a complimentary nonmember. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit.

ANALYSIS:

Existing federal law:

1. Defines a Medicare supplemental policy as a health insurance or other health benefit plan offered by a private entity to individuals on Medicare, which provides reimbursement for expenses incurred for services and items for which payment may be made under Medicare but which are not reimbursable by reason of the applicability of deductibles, coinsurance amounts, or other limitations imposed pursuant to Medicare. Excludes specific types of coverage such as a Medicare +Choice plan (Medicare Advantage) or any such policy or plan of one or more employers or labor organizations as well as other types of policies. [42 U.S.C. 1395ss §1882]
2. Permits any Medicare supplemental policy issued in any state which the Secretary of the federal Department of Health and Human Services (Secretary) determines has established under state law a regulatory program that meets specified requirements including providing for the application and enforcement of standards with respect to such policies equal to or more stringent than the NAIC Model Standards; and, providing for information with respect to the actual ratio of benefits provided to premiums collected under such policies to be reported to the state on forms conforming to those developed by NAIC. [42 U.S.C. 1395ss §1882]
3. Permits ratios in 2) above to be monitored in an alternative manner approved by the Secretary, and that a copy of each such policy, the most recent premium for each policy, and a listing of the ratio of benefits provided to premiums collected for the most recent three-year period for each policy issued or sold in the state is maintained and made available to interested persons. [42 U.S.C. 1395ss §1882]
4. Requires reports to the Secretary on the implementation and enforcement of Medicare supplement policy standards and requirements at intervals established by the Secretary. [42 U.S.C. 1395ss §1882]
5. Requires each report to include information on loss ratios of policies sold in the state, frequency and types of instances in which policies approved by the state fail to meet the standards and requirements, actions taken by the state to bring such policies into compliance, information regarding state programs implementing consumer protection provisions, and further information as the Secretary in consultation with NAIC may specify. [42 U.S.C. 1395ss §1882]

Existing state law:

1. Establishes DMHC to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et. seq., and INS §106, et. seq.]
2. Establishes requirements for a Medicare supplement contract including that the issuer submit to DMHC or CDI a copy of the calculations for the actual or expected loss ratio, as specified. [HSC§ 1358-1358.24 and INS §10192.1-10192.24]

This bill:

1. Requests NAIC to permit DMHC to participate in NAIC proceedings as a complimentary nonmember, and requires DMHC to participate if NAIC accepts DMHC as a complimentary nonmember.
2. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit.

Comments

1. Author’s statement. According to the author, California has two regulators of health insurance but only one is an official member of NAIC. While California regulators have minimal authority over Medicare supplement policies (also known as Medigap policies) they are required to enforce federal standards. While DMHC may collect data as required to use for its own enforcement activities, those data are not included in national data reported through NAIC. This bill is needed to capture complete information about California Medicare Supplement insurance, contribute to the accuracy of national data, and promote more participation by DMHC at NAIC to ensure compliance with federal requirements. NAIC Medicare Supplement Insurance Experience reports appear to undercount the number of Californians with Medigap policies by almost a half (approximately 425,000 people). National Medigap data is relied upon by the Medicare Payment Advisory Commission (MedPAC), researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs.
2. Medigap. Medigap is health insurance sold by private insurance companies to fill the “gaps” in Medicare coverage. Traditional Medicare has cost-sharing requirements and Medigap policies help enrollees have more predictable cost-sharing because Medigap policies help pay some of the health care costs that Medicare does not cover. Generally, to have a Medigap policy a person must have Medicare Part A and Part B, and not a Medicare Advantage product. Medigap policies must follow federal and state laws. Insurance companies can only sell a “standardized” Medigap policy. For example, Medigap plans A-G, M and N are required to offer the following basic benefits:

• Coinsurance for hospital days 61-90 ($335/day in 2018) and 60 lifetime reserve days ($670/day in 2018).
• 100% of hospital care beyond the 150 days covered by Medicare, up to a maximum of 365 lifetime days.
• Hospice cost share.
• 20% coinsurance for the Medicare-approved amount after the $183 annual Part B deductible is met.
• The first three pints of blood in each calendar year.

Medigap plans K and L also offer these basic benefits, but only cover 50% (K) or 75% (L) of the Part B coinsurance, hospice cost share and the first three pints of blood each year. Plan A offers only the basic benefits listed above.

1. NAIC. NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The NAIC also collects and analyzes data about the insurance industry. One such report is the Medicare Supplement Loss Ratios report. Included in the report are the loss ratios on Medicare supplement business. Reporting of these loss ratios, on forms conforming to those developed by the NAIC, is required by the Medicare Catastrophic Coverage Act of 1988, Public Law 100-360. Although major provisions of the Catastrophic Coverage Act were repealed one year later, this reporting requirement was left intact. The data reported are utilized by state insurance departments to help evaluate insurers’ compliance with loss ratio standards for Medicare supplement policies. The 2016 Medicare Supplement Insurance Experience Report indicates that California has 514,026 covered lives with actual premiums earned over $1.1 billion issued by ten insurance companies (regulated by CDI).
2. Medigap market. An April 2013 Kaiser Family Foundation (KFF) report on the Medigap market indicates that one in four Medicare beneficiaries had a Medigap policy; however Medigap penetration varies by state, ranging from 2% in Hawaii to 51% in North Dakota. This report does not include data for California because the report indicates that a “minority of companies in California reported data to NAIC.” According to the DMHC Web site, in 2016 there were over 425,000 lives enrolled in Medigap policies with four DMHC regulated carriers. For the fourth quarter of 2017, there were over 435,000 lives. According to KFF.org, in 2015 there were over 5.6 million Californians on Medicare.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, the DMHC identified no fiscal impact. However, potential ongoing costs in low thousands for workload and attendance at required NAIC meetings.

SUPPORT: (Verified 5/22/18)

California Advocates for Nursing Home Reform

California Health Advocates

Justice in Aging

OPPOSITION: (Verified 5/22/18)

None received

ARGUMENTS IN SUPPORT: California Health Advocates writes that DMHC is not a member of the NAIC since it is a different type of regulatory body than a state insurance department. Therefor the DMHC does not participate in the NAIC process for revising the models that reflect changes in federal law, nor does it receive the most current regulatory experience and information about Medigap policies. Insurance companies licensed by CDI are required to report their Medigap data annually as part of the NAIC’s accreditation of the state insurance department. National Medigap data is relied upon by MedPAC, researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs.

The California Advocates for Nursing Home Reform writes that it is important that products that are marketed to seniors be well regulated. In order to be well regulated, it is necessary to make sure that there is proper data collected and sharing amongst the regulators. Any gaps in data sharing can lead to inadequate or improper conclusions about the suitability of an offering.

Justice in Aging writes that this bill will eliminate the gap in national data record, and ensure that DMHC has the latest and most accurate information about any state regulatory issues that arise, and accurately respond to any changes that are made to Medigap products by federal law.

Prepared by:

5/24/18 14:43:08

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 1457 (Hernandez) - Medicare supplement insurance

This bill does not meet the criteria for referral to the Suspense File.

Bill Summary:

The bill would request the National Association of Insurance Commissioners (NAIC) permit the Department of Managed Health Care (DMHC) to participate in NAIC proceedings as a complimentary nonmember, and requires DMHC to participate if NAIC accepts DMHC as a complimentary nonmember. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit.

Fiscal Impact:

• The Department of Managed Health Care identified no fiscal impact. However, potential ongoing costs in low thousands for workload and attendance at required NAIC meetings.

Background:

NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The NAIC also collects and analyzes data about the insurance industry. Medigap is health insurance sold by private insurance companies to fill the “gaps” in Medicare coverage. Traditional Medicare has cost-sharing requirements and Medigap policies help enrollees have more predictable cost-sharing because Medigap policies help pay some of the health care costs that Medicare does not cover. Insurance companies licensed by CDI are required to report their Medigap data annually as part of the NAIC’s accreditation of the state insurance department.

Proposed Law:

The bill provides the Legislature requests the National Association of Insurance Commissioners (NAIC) permit the Department of Managed Health Care to participate in NAIC proceedings as a complementary nonmember.

The bill provides if NAIC accepts the Department of Managed Health Care as a complementary nonmember, the department shall participate in NAIC proceedings relating to Medicare supplement insurance.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: SB 1457

SUBJECT: Medicare supplement insurance

SUMMARY:

Requests the National Association of Insurance Commissioners (NAIC) permit the Department of Managed Health Care (DMHC) to participate in NAIC proceedings as a complimentary nonmember, and requires DMHC to participate if NAIC accepts DMHC as a complimentary nonmember. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit.

Existing federal law:

1. Defines a Medicare supplemental policy as a health insurance or other health benefit plan offered by a private entity to individuals on Medicare, which provides reimbursement for expenses incurred for services and items for which payment may be made under Medicare but which are not reimbursable by reason of the applicability of deductibles, coinsurance amounts, or other limitations imposed pursuant to Medicare. Excludes specific types of coverage such as a Medicare +Choice plan (Medicare Advantage) or any such policy or plan of one or more employers or labor organizations as well as other types of policies. [42 U.S.C. 1395ss §1882]
   
2. Permits any Medicare supplemental policy issued in any state which the Secretary of the federal Department of Health and Human Services (Secretary) determines has established under state law a regulatory program that meets specified requirements including providing for the application and enforcement of standards with respect to such policies equal to or more stringent than the NAIC Model Standards; and, providing for information with respect to the actual ratio of benefits provided to premiums collected under such policies to be reported to the state on forms conforming to those developed by NAIC. [42 U.S.C. 1395ss §1882]
   
3. Permits ratios in 2) above to be monitored in an alternative manner approved by the Secretary, and that a copy of each such policy, the most recent premium for each policy, and a listing of the ratio of benefits provided to premiums collected for the most recent three year period for each policy issued or sold in the state is maintained and made available to interested persons. [42 U.S.C. 1395ss §1882]
   
4. Requires reports to the Secretary on the implementation and enforcement of Medicare supplement policy standards and requirements at intervals established by the Secretary. [42 U.S.C. 1395ss §1882]
   
5. Requires each report to include information on loss ratios of policies sold in the state, frequency and types of instances in which policies approved by the state fail to meet the standards and requirements, actions taken by the state to bring such policies into compliance, information regarding state programs implementing consumer protection provisions, and further information as the Secretary in consultation with NAIC may specify. [42 U.S.C. 1395ss §1882]

Existing state law:

1. Establishes DMHC to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et. seq., and IC §106, et. seq.]
   
2. Establishes requirements for a Medicare supplement contract including that the issuer submit to DMHC or CDI a copy of the calculations for the actual or expected loss ratio, as specified. [HSC§ 1358-1358.24 and IC §10192.1-10192.24]

This bill:

1. Requests NAIC to permit DMHC to participate in NAIC proceedings as a complimentary nonmember, and requires DMHC to participate if NAIC accepts DMHC as a complimentary nonmember.
   
2. Requires DMHC to require a Medicare supplement policy issuer to annually complete and submit the NAIC Medicare supplement experience exhibit.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, California has two regulators of health insurance but only one is an official member of NAIC. While California regulators have minimal authority over Medicare supplement policies (also known as Medigap policies) they are required to enforce federal standards. While DMHC may collect data as required to use for its own enforcement activities, those data are not included in national data reported through NAIC. This bill is needed to capture complete information about California Medicare Supplement insurance, contribute to the accuracy of national data, and promote more participation by DMHC at NAIC to ensure compliance with federal requirements. NAIC Medicare Supplement Insurance Experience reports appear to undercount the number of Californians with Medigap policies by almost a half (approximately 425,000 people). National Medigap data is relied upon by the Medicare Payment Advisory Commission (MedPAC), researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs.
2. Medigap. Medigap is health insurance sold by private insurance companies to fill the “gaps” in Medicare coverage. Traditional Medicare has cost-sharing requirements and Medigap policies help enrollees have more predictable cost-sharing because Medigap policies help pay some of the health care costs that Medicare does not cover. Generally, to have a Medigap policy a person must have Medicare Part A and Part B, and not a Medicare Advantage product. Medigap policies must follow federal and state laws. Insurance companies can only sell a “standardized” Medigap policy. For example, Medigap plans A-G, M and N are required to offer the following basic benefits:

• Coinsurance for hospital days 61-90 ($335/day in 2018) and 60 lifetime reserve days ($670/day in 2018)
• 100% of hospital care beyond the 150 days covered by Medicare, up to a maximum of 365 lifetime days
• Hospice cost share
• 20% coinsurance for the Medicare-approved amount after the $183 annual Part B deductible is met
• The first three pints of blood in each calendar year.

Medigap plans K and L also offer these basic benefits, but only cover 50% (K) or 75% (L) of the Part B coinsurance, hospice cost share and the first three pints of blood each year. Plan A offers only the basic benefits listed above.

1. NAIC. NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. The NAIC also collects and analyzes data about the insurance industry. One such report is the Medicare Supplement Loss Ratios report. Included in the report are the loss ratios on Medicare supplement business. Reporting of these loss ratios, on forms conforming to those developed by the NAIC, is required by the Medicare Catastrophic Coverage Act of 1988, Public Law 100-360. Although major provisions of the Catastrophic Coverage Act were repealed one year later, this reporting requirement was left intact. The data reported are utilized by state insurance departments to help evaluate insurers’ compliance with loss ratio standards for Medicare supplement policies. The 2016 Medicare Supplement Insurance Experience Reports indicate that California has 514,026 covered lives with actual premiums earned over $1.1 billion issued by ten insurance companies (regulated by CDI).
2. Medigap market. An April 2013 Kaiser Family Foundation (KFF) report on the Medigap market indicates that one in four Medicare beneficiaries had a Medigap policy; however Medigap penetration varies by state, ranging from 2% in Hawaii to 51% in North Dakota. This report does not include data for California because the report indicates that a “minority of companies in California reported data to NAIC.” According to the DMHC website, in 2016 there were over 425,000 lives enrolled in Medigap policies with four DMHC regulated carriers. For the fourth quarter of 2017, there were over 435,000 lives. According to KFF.org, in 2015 there were over 5.6 million Californians on Medicare.
   
3. Support. California Health Advocates writes that DMHC is not a member of the NAIC since it is a different type of regulatory body than a state insurance department. Therefor the DMHC does not participate in the NAIC process for revising the models that reflect changes in federal law, nor does it receive the most current regulatory experience and information about Medigap policies. Insurance companies licensed by CDI are required to report their Medigap data annually as part of the NAIC’s accreditation of the state insurance department. National Medigap data is relied upon by MedPAC, researchers, and other federal policymakers who are studying and making recommendations about health care costs and payers of those costs. The California Advocates for Nursing Home Reform writes that it is important that products that are marketed to seniors be well regulated. In order to be well regulated, it is necessary to make sure that there is proper data collected and sharing amongst the regulators. Any gaps in data sharing can lead to inadequate or improper conclusions about the suitability of an offering. Justice in Aging writes that this bill will eliminate the gap in national data record, and ensure that DMHC has the latest and most accurate information about any state regulatory issues that arise, and accurately respond to any changes that are made to Medigap products by federal law.

SUPPORT AND OPPOSITION:

Support: California Advocates for Nursing Home Reform

California Health Advocates

Justice in Aging

Oppose: None received

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