Brief⁽¹⁾

S.B. 291, as amended, creates a reinsurance program for Medicare supplement policies issued to persons eligible for Medicare because of disability rather than age.

The bill directs the Kansas Health Insurance Association to administer the reinsurance program and requires each insurance company writing Medicare supplement policies in this state to participate in the program. On or before May 1, 2000, and each year thereafter, participating insurers must provide a calendar year report that includes the number of policies issued in this state covering persons eligible for Medicare by reason of disability and under age 65. The report also must include the number of persons covered, the total premium earned on such persons, and the total claims expenses incurred and paid as of March 31 of the reporting year.

By not later than July 1, the Board of Directors of the Association must assess all insurers participating in the Medicare supplement program to assure that any excess loss is distributed among the insurers in a ratio to the percentage of the market share in Kansas each insurer has of Medicare supplement policies covering persons eligible for coverage by reason of age. The Board also must assess each insurer for its pro rata share of the cost to the Board of administering the reinsurance program.

Each insurer is to pay its assessment to the Board which, in turn, will pay to each eligible insurer from the assessments the amount necessary to equalize among all Medicare supplement policy issuers a proportional share of excess losses. "Excess loss" is defined as the dollar amount of claims expenses that exceeds 65 percent of the premium earned in the reporting year on Medicare supplemental policies covering persons eligible by reason of disability and under 65 years of age. The amount of the assessments received by the insurer will not be considered as premium income to the insurer and will not be subject to the state premium tax. The assessment may not be used as an offset against premium taxes paid.

Finally, the bill places in the statutes current rule and regulation language by which insurers have been required to provide coverage, and the conditions under which coverage is to be provided, to any applicant under age 65 who becomes eligible for Medicare by reason of disability.

Senate Committee amendments extend the risk sharing of excess losses not only on those policies covering persons eligible for Medicare prior to 1996, who were eligible because of disability yet under age 65, but for those losses incurred on policies issued on such persons who have become eligible since that date.

The House Committee amendment was technical and carries out the full intention of the Senate amendment.

Background

S.B. 291, as amended, was requested by the Insurance Commissioner who explained that federal legislation, enacted in 1994 regarding open enrollment periods for age eligible persons to purchase Medicare supplement insurance, no provision was made for Medicare recipients eligible because of disability but under age 65. To accommodate the needs of the latter group, a regulation was promulgated to require companies selling Medicare supplement insurance in Kansas to offer plans to medically-disabled Kansans at age 65 rates. Since Blue Cross and Blue Shield was the major writer providing such coverage, the company suffered significant losses due to high claims experience.

S.B. 291, as amended, spreads the risk evenly among insurers writing Medicare supplement policies and makes certain that older Kansans do not bear the entire cost of the policy decision to cover disabled citizens.

The bill was supported by Blue Cross and Blue Shield of Kansas, the Health Insurance Association of America, and the Topeka Independent Living Resource Center.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html