Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - Medicare Supplement Underwriting 101✍

3. Compliance Chatter 📢 - CMS and HHS’s proposed rule revises the Medicare Physician Fee Schedule for CY 2025

4. Sponsor Snapshot 🚀 - brought to you by the 2024 Medicare Enrollment State Pages

5. Data Visual of the week 📊 - Medicare Enrollment State Pages sample: Texas! 🤠

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

Medicare Supplement Underwriting 101 ✍

As of year-end 2023, over 14.1 million individuals had a Medicare supplement (Med supp) policy to fill in the benefit gaps of Original Medicare coverage. 

This cohort represents 21% of all Medicare beneficiaries. Most of these individuals likely obtained a Med supp policy without having to answer any health questions or go through underwriting. 

Medicare beneficiaries have a 6-month “Open Enrollment” period to apply for a Med supp policy, which begins the first month they have Medicare Part B and they are 65 or older (this window is also applicable to individuals eligible for Medicare under the age of 65 if they reside in a state with under age 65 Med supp coverage). 

Unlike the Annual Enrollment Period associated with Medicare Advantage, this Med supp Open Enrollment is a one-time opportunity for beneficiaries. Unless a policyholder lives in a state with special rules, they would need to go through some form of medical underwriting if they wished to change their Med supp carrier and/or benefit package. 

With that basic background out of the way, what does the underwriting process look like for a Med supp policy? Let’s dive in…

Application

The Med supp application is the first step that carriers take in assessing an applicant’s health status to determine if they qualify for coverage. 

Med supp applications utilize a series of yes/no questions that cover a wide range of health conditions and confinement situations. 

Some of these questions ask about an applicant’s current situation, “Are you currently (or within the last 30 days have you been) ____?”:

• hospitalized

• in a nursing facility

• in an assisted living facility

• in hospice

• or receiving home health care

Other questions inquire about an applicant’s entire medical history:

• “Have you ever been diagnosed with or tested positive for or received treatment from a physician or an appropriately-licensed clinical professional acting within his/her scope for Acquired Immune Deficiency Syndrome (AIDS), AIDS Related Complex (ARC), or Human Immunodeficiency Virus (HIV) infection?”

 A third style of question integrates the use of lookback periods:

• Within the past two (2) years, have you had any of the following: “Heart attack, cardiac angioplasty, bypass surgery, or stent placement or replacement?”

• In addition to the health status questions, applications typically collect:

  • tobacco use

  • height/weight

  • current prescription drug lists

  • current physicians

A positive response to the tobacco use question often leads to a higher premium rate. 

Some carriers will decline coverage to individuals if their height/weight falls within certain ranges while others may offer coverage to these individuals, but at a higher premium rate. 

The application also requires authorization be granted to the carrier to obtain information from authorized third-parties and health information obtained during the underwriting process.

Underwriting Guidelines

Carriers maintain a set of underwriting guidelines, which offer agents guidance when assisting in the completion of an application. 

These guidelines contain a list of uninsurable conditions and medications. If an applicant has any of these conditions or uses the medications, the agent will inform them and not take or submit the application. 

If an application is submitted, the carrier will confirm that the applicant’s responses do not fall into an uninsurable situation.

Prescription Drug Screen

Most carriers incorporate a prescription drug screen into their underwriting process. 

Carriers utilize third party services that obtain information from pharmacies, health insurance companies, and pharmacy benefit managers to provide the carriers with data related to an applicant’s current and past prescription drug use. 

This information allows the carrier to confirm the applicant’s responses on the application as well as identify use that was not disclosed on the application.

Telephone Interview

After the information has been compiled from the application and prescription drug screen, it is assigned to an underwriter for final review. 

Depending on the application responses and results of the prescription drug screen, the underwriter may elect to conduct a phone interview with the applicant. 

This interview allows the underwriter to confirm responses from the applicant, inquire about unclear responses, and identify specific conditions that prescription drugs are being used to treat.

Physician’s Statements

While the authorizations within the application allow for carriers to obtain statements directly from the applicant’s physicians, this is not common practice in the current Med supp market. 

Carriers have found the cost to obtain this information on a wide scale too high relative to the additional value it adds beyond the other tools and processes utilized.

Final Decision

After all of the information is compiled, the underwriter will arrive at a final decision to either issue or decline the coverage. In the event of a decline, the applicant can request the information that led to the denial. Additionally, after receiving that information, the applicant has the option to appeal the decision with the carrier.

Modern Processes

In recent years, there has been a strong push to make underwriting processes more efficient while reducing expenses. 

By making processes more efficient, agents will be more willing to offer a carrier’s product. The reduction of expenses allows carriers to offer more competitive premium rates. Both elements are critical in the hyper-competitive Med supp market. 

Carriers are striving to incorporate underwriting tools that allow for automated underwriting decisions to be made, with minimal touches from an underwriter. Carriers are developing or relying on third parties to utilize predictive analytics to create a series of underwriting rules that can be applied automatically to an application. 

These underwriting rules utilize application rules, prescription drug screens, and other available medical information to generate a “risk score” for the applicant. If this score meets the carrier’s requirements, the coverage is issued.

Final Thoughts

With the majority of Med supp policies being issued to individuals that do not have to provide health information to carriers, it is imperative that carriers obtain a level of underwritten business to offset the higher expected claims experience of the non-underwritten cohort. Obtaining this balance is key to maintaining reasonable premium rates for the policyholder while allowing for profitability targets to be met by the carrier.

Are there any unique tools that you have seen carriers implement to the Med supp underwriting process? 

What future improvements do you believe would be beneficial?

DATA VISUAL of the Week 📊

This week’s data visual comes from the NEW 2024 “Medicare Enrollment State Pages” by Telos Actuarial.

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

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• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)