Expense Discounts for Medicare Supplemental Policies

On June 7, 2017, the Vermont Division of Insurance published Insurance Bulletin 194, which relates to expense discounts for Medicare supplemental insurance policies. According to the bulletin, Vermont law generally requires insurers to community-rate Medicare supplemental plans, and prohibits insurers from medically underwriting or screening to set the premium amount for a Medical supplemental plan. Those general rules prohibit insurers (and other entities, such as hospital or medical service corporations and HMOs) from offering reduced premiums or other discounts relating to a person’s age, gender, marital status, household or other demographic criteria. However, the Division of Insurance has determined that expense discounts offered to encourage timely or advance payment of premium, and that are directly related to an actual cost savings to the insurer, don’t violate the general state prohibition described above. The bulletin also contains examples, stating that expense discounts may include premium reductions for advance payment of a full year’s worth of premiums, for paperless billing, for electronic funds transfer and for other activities directly related to premium payment. Since the expense discounts are electable by the policyholder and not subject to the discretion of the insurer, they’re allowed (even though they may result in premiums that vary among policyholders).

The bulletin contains no new employer compliance obligations, but employers with Medicare supplemental plan offerings may want to be aware of the bulletin. As a reminder, employers with 20+ employees are subject to the Medicare Secondary Payer Regulations and may not offer a Medicare supplemental plan for active employees or spouses.

Insurance Bulletin 194 »