§ 363a

Medicare supplement policies; disclosure, advertising, loss ratio standards. (1) Scope. This Section pertains to disclosure requirements of companies and agents and mandatory and prohibited practices of agents when selling a policy to supplement the Medicare program or any other health insurance policy sold to individuals eligible for Medicare. No policy shall be referred to or labeled as a Medicare supplement policy if it does not comply with the minimum standards required by regulation pursuant to Section 363 of this Code. Except as otherwise specifically provided in paragraph (d) of subsection (6), this Section shall not apply to accident only or specified disease type of policies or hospital confinement indemnity or other type policies clearly unrelated to Medicare. (2) Advertising. An advertisement that describes or offers to provide information concerning the federal Medicare program shall comply with all of the following: (a) It may not include any reference to that program on the envelope, the reply envelope, or the address side of the reply postal card, if any, nor use any language to imply that failure to respond to the advertisement might result in loss of Medicare benefits. (b) It must include a prominent statement to the effect that in providing supplemental coverage the insurer and agent involved in the solicitation are not in any manner connected with that program. (c) It must prominently disclose that it is an advertisement for insurance or is intended to obtain insurance prospects. (d) It must prominently identify and set forth the actual address of the insurer or insurers that issue the coverage. (e) It must prominently state that any material or information offered will be delivered in person by a representative of the insurer, if that is the case. The Director may issue reasonable rules and regulations for the purpose of establishing criteria and guidelines for the advertising of Medicare supplement insurance. (3) Mandatory agent practices. For the purpose of this Act, "home solicitation sale by an agent" means a sale or attempted sale of an insurance policy at the purchaser's residence, agent's transient quarters, or away from the agent's home office when the initial contact is personally solicited by the agent or insurer. Any agent involved in any home solicitation sale of a Medicare supplement policy or other policy of accident and health insurance, subject to subsection (1) of this Section, sold to individuals eligible for Medicare shall promptly do the following: (a) Identify himself as an insurance agent. (b) Identify the insurer or insurers for which he is a licensed agent. (c) Provide the purchaser with a clearly printed or typed identification of his name, address, telephone number, and the name of the insurer in which the insurance is to be written. (d) Determine what, if any, policy is appropriate, suitable, and nonduplicative for the purchaser considering existing coverage and be able to provide proof to the company that such a determination has been made. (e) Fully and completely disclose the purchaser's medical history on the application if required for issue. (f) Complete a Policy Check List in duplicate as follows: POLICY CHECK LIST Applicant's Name: Policy Number: Name of Existing Insurer: Expiration Date of Existing Insurance: Medicare Existing Supplement Insured's Pays Coverage Pays Responsibility Service Hospital Skilled Nursing Home Care Prescription Drugs This policy does/does not (circle one) comply with the minimum standards for Medicare supplements set forth in Section 363 of the Illinois Insurance Code. Signature of Applicant Signature of Agent This Policy Check List is to be completed in the presence of the purchaser at the point of sale, and copies of it, completed and duly signed, are to be provided to the purchaser and to the company. (g) Except in the case of refunds of premium made pursuant to subsection (5) of Section 363 of this Code, send by mail to an insured or an applicant for insurance, when the insurer follows a practice of having agents return premium refund drafts issued by the insurer, a premium refund draft within 2 weeks of its receipt by the agent from the insurer making such refund. (h) Deliver to the purchaser, along with every policy issued pursuant to Section 363 of this Code, an Outline of Coverage as described in paragraph (b) of subsection (6) of this Section. (4) Prohibited agent practices. (a) No insurance agent engaged in a home solicitation sale of a Medicare supplement policy or other policy of accident and health insurance, subject to subsection (1) of this Section, sold to individuals eligible for Medicare shall use any false, deceptive, or misleading representation to induce a sale, or use any plan, scheme, or ruse, that misrepresents the true status or mission of the person making the call, or represent directly or by implication that the agent: (i) Is offering insurance that is approved or recommended by the State or federal government to supplement Medicare. (ii) Is in any way representing, working for, or compensated by a local, State, or federal government agency. (iii) Is engaged in an advisory business in which his compensation is unrelated to the sale of insurance by the use of terms such as Medicare consultant, Medicare advisor, Medicare Bureau, disability insurance consultant, or similar expression in a letter, envelope, reply card, or other. (iv) Will provide a continuing service to the purchaser of the policy unless he does provide services to the purchaser beyond the sale and renewal of policies. (b) No agent engaged in a home solicitation sale of a Medicare supplement policy or other policy of accident and health insurance sold to individuals eligible for Medicare shall misrepresent, directly or by implication, any of the following: (i) The identity of the insurance company or companies he represents. (ii) That the assistance programs of the State or county or the federal Medicare programs for medical insurance are to be discontinued or are increasing in cost to the prospective buyer or are in any way endangered. (iii) That an insurance company in which the prospective purchaser is insured is financially unstable, cancelling its outstanding policies, merging, or withdrawing from the State. (iv) The coverage of the policy being sold. (v) The effective date of coverage under the policy. (vi) That any pre-existing health condition of the purchaser is irrelevant. (vii) The right of the purchaser to cancel the policy within 30 days after receiving it. (5) Mandatory company practices. Any company involved in the sale of Medicare supplement policies or any policies of accident and health insurance (subject to subsection (1) of this Section) sold to individuals eligible for Medicare shall do the following: (a) Be able to readily determine the number of accident and health policies in force with the company on each insured eligible for Medicare. (b) Make certain that policies of Medicare supplement insurance are not issued, and any premium collected for those policies is refunded, when they are deemed duplicative, inappropriate, or not suitable considering existing coverage with the company. (c) Maintain copies of the Policy Check List as completed by the agent at the point of sale of a Medicare supplement policy or any policy of accident and health insurance (subject to subsection (1) of this Section) sold to individuals eligible for Medicare on file at the company's regional or other administrative office. (6) Disclosures. In order to provide for full and fair disclosure in the sale of Medicare supplement policies, there must be compliance with the following: (a) No Medicare supplement policy or certificate shall be delivered in this State unless an outline of coverage is delivered to the applicant at the time application is made and, except for direct response policies, an acknowledgement from the applicant of receipt of the outline is obtained. (b) Outline of coverage requirements for Medicare supplement policies. (i) Insurers issuing Medicare supplement policies or certificates for delivery in this State shall provide an outline of coverage to all applicants at the time application is made and, except for direct response policies, shall obtain an acknowledgement of receipt of the outline from the applicant. (ii) If an outline of coverage is provided at the time of application and the Medicare supplement policy or certificate is issued on a basis that would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate must accompany the policy or certificate when it is delivered and shall contain immediately above the company name, in no less than 12 point type, the following statement: "NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued.". (iii) The outline of coverage provided to applicants shall be in the form prescribed by rule by the Department. (c) Insurers issuing policies that provide hospital or medical expense coverage on an expense incurred or indemnity basis, other than incidentally, to a person or persons eligible for Medicare shall provide to the policyholder a buyer's guide approved by the Director. Delivery of the buyer's guide shall be made whether or not the policy qualifies as a "Medicare Supplement Coverage" in accordance with Section 363 of this Code. Except in the case of direct response insurers, delivery of the buyer's guide shall be made at the time of application, and acknowledgement of receipt of certification of delivery of the buyer's guide shall be provided to the insurer. Direct response insurers shall deliver the buyer's guide upon request, but not later than at the time the policy is delivered. (d) Outlines of coverage delivered in connection with policies defined in subsection (4) of Section 355a of this Code as Hospital confinement Indemnity (Section 4c), Accident Only Coverage (Section 4f), Specified Disease (Section 4g) or Limited Benefit Health Insurance Coverage to persons eligible for Medicare shall contain, in addition to other requirements for those outlines, the following language that shall be printed on or attached to the first page of the outline of coverage: "This policy, certificate or subscriber contract IS NOT A MEDICARE SUPPLEMENT policy or certificate. It does not fully supplement your federal Medicare health insurance. If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company.". (e) In the case wherein a policy, as defined in paragraph (a) of subsection (2) of Section 355a of this Code, being sold to a person eligible for Medicare provides one or more but not all of the minimum standards for Medicare supplements set forth in Section 363 of this Code, disclosure must be provided that the policy is not a Medicare supplement and does not meet the minimum benefit standards set for those policies in this State. (7) Loss ratio standards. (a) Every issuer of Medicare supplement policies or certificates in this State, as defined in Section 363 of this Code, shall file annually its rates, rating schedule, and supporting documentation demonstrating that it is in compliance with the applicable loss ratio standards of this State. All filings of rates and rating schedules shall demonstrate that the actual and anticipated losses in relation to premiums comply with the requirements of this Code. (b) Medicare supplement policies shall, for the entire period for which rates are computed to provide coverage, on the basis of incurred claims experience and earned premiums for the period and in accordance with accepted actuarial principles and practices, return to policyholders in the form of aggregate benefits the following: (i) In the case of group policies, at least 75% of the aggregate amount of premiums earned. (ii) In the case of individual policies, at least 60% of the aggregate amount of premiums earned; and beginning November 5, 1991, at least 65% of the aggregate amount of premiums earned. (iii) In the case of sponsored group policies in which coverage is marketed on an individual basis by direct response to eligible individuals in that group only, at least 65% of the aggregate amount of premiums earned. (c) For the purposes of this Section, the insurer shall be deemed to comply with the loss ratio standards if: (i) for the most recent year, the ratio of the incurred losses to earned premiums for policies or certificates that have been in force for 3 years or more is greater than or equal to the applicable percentages contained in this Section; and (ii) the anticipated losses in relation to premiums over the entire period for which the policy is rated comply with the requirements of this Section. An anticipated third-year loss ratio that is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than 3 years. (8) Applicability. This Section shall apply to those companies writing the kind or kinds of business enumerated in Classes 1(b) and 2(a) of Section 4 of this Code and to those entities organized and operating under the Voluntary Health Services Plans Act and the Health Maintenance Organization Act. (9) Penalties. (a) Any company or agent who is found to have violated any of the provisions of this Section may be required by order of the Director of Insurance to forfeit by civil penalty not less than $500 nor more than $5,000 for each offense. Written notice will be issued and an opportunity for a hearing will be granted pursuant to subsection (2) of Section 403A of this Code. (b) In addition to any other applicable penalties for violations of this Code, the Director may require insurers violating any provision of this Code or regulations promulgated pursuant to this Code to cease marketing in this State any Medicare supplement policy or certificate that is related directly or indirectly to a violation and may require the insurer to take actions as are necessary to comply with the provisions of Sections 363 and 363a of this Code. (c) After June 30, 1991, no person may advertise, solicit for the sale or purchase of, offer for sale, or deliver a Medicare supplement policy that has not been approved by the Director. A person who knowingly violates, directly or through an agent, the provisions of this paragraph commits a Class 3 felony. Any person who violates the provisions of this paragraph may be subjected to a civil penalty not to exceed $10,000. The civil penalty authorized in this paragraph shall be enforced in the manner provided in Section 403A of this Code. (10) Replacement. Application forms shall include a question designed to elicit information as to whether a Medicare supplement policy or certificate is intended to replace any similar accident and sickness policy or certificate presently in force. A supplementary application or other form to be signed by the applicant containing the question may be used. Upon determining that a sale of Medicare supplement coverage will involve replacement, an insurer, other than a direct response insurer, or its agent, shall furnish the applicant, prior to issuance or delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of the notice shall be provided to the applicant, and an additional copy signed by the applicant shall be retained by the insurer. A direct response insurer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage.

Legislative History

(Source: P.A. 93-32, eff. 7-1-03 .)