Taking Care of Mom and Dad: Marketing Rules

As we've said before, Medigap insurance is often sold aggressively by brokers or agents paid by commission. Abuses sometimes occur. Insurance regulators watch Medigap companies closely -- but they don't always know about every sleazy seller. No one will watch out for your parents as carefully as you do.

The terms Medicare supplement, Medicare wrap-around, etc., may not be used in marketing a policy unless the coverage and forms are approved by the state insurance department. Many states bar use of the term Medigap because it implies that all health care costs not covered by Medicare are covered by the supplement.

Marketing materials sometimes emphasize benefits that have little real value. An example: A brochure from Union Fidelity Life Insurance, a unit of Illinois-based Combined International Corp., warned that "Medicare pays nothing" after 150 days of hospitalization. The Union Fidelity plan supplemented hospital charges for up to 365 days.

Senior citizen groups pointed out that few people need such a benefit, since the average Medicare hospital stay is 7.5 days.

States usually require insurers marketing Medicare supplement insurance coverage to establish marketing procedures to assure that any comparisons of policies done by its agents are fair and accurate. Also, insurers must have written, established procedures to assure that excessive insurance is not sold or issued.

Advertisements that produce leads by using a coupon or response card must disclose that an agent may contact the applicant. Ads may not imply connection to a government agency, charitable institution or senior organization to imply the policy is endorsed by governmental agencies. And, in most cases, ads used by agents or brokers must have prior written approval of the relevant insurance company before being used.

Most states prohibit agents and insurance companies from engaging in any of the following practices in the sale and marketing of Medicare supplement policies:

• Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of insurance policies or insurers in order to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any existing insurance policy or to take out a new policy.
• High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat (explicit or implied), or undue pressure.
• Cold lead advertising. Using any method of marketing that fails to disclose conspicuously that the purpose of the marketing effort is to solicit insurance, and that the prospect will be contacted by an insurance agent or insurer.