Taking Care of Mom and Dad: OBRA 1990

The Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) enhanced the protections for Medicare supplement buyers. Under the law, Medicare supplement insurance may not be denied on the basis of an applicant's health status, claims experience or medical condition during the first six months a Medicare beneficiary age 65 or older first enrolls in Medicare. This is known as the open enrollment requirement.

OBRA also protects consumers in other ways:

• It prohibits the sale of Medicare supplement insurance to anyone who already has another health insurance policy that provides coverage for the same benefits. Insurance companies must ask applicants about their existing coverage when taking applications.
• It requires insurance companies to suspend insurance benefits upon request of a policyholder during any period of time he or she is entitled to benefits under Medicaid.
• It requires all Medigap policies to cover pre-existing conditions after the coverage has been in force for six months.
• It holds that, if a Medicare supplement policy replaces another which has been in effect for at least six months, the new policy must waive any time periods applicable to preexisting conditions, waiting periods, elimination periods and probationary periods.

Perhaps most importantly, OBRA required that Medicare supplement policies be standardized. This was done because the staggering number of different Medicare supplement policies available from different insurance companies in different states was beyond confusing. Congress concluded that standardizing the policies would be the best way to improve consumer protection.

The National Association of Insurance Commissioners (NAIC) developed 10 standard Medicare supplement policies, one of which is a core benefit or no frills policy with basic benefits that must be included in all Medicare supplement policies. No more than these 10 standard Medicare supplement policies may be offered for sale.

The 10 Medicare supplement policies developed by the NAIC are identified by letters A through J. Insurance companies may not change the letter designations assigned to the 10 policy forms, but they may add other names or titles.

Plan A is the basic policy offering core benefits. The other nine policy forms (Plans B through J) contain the core benefits plus various additional benefits. A state may limit the number of available plans to fewer than 10, but Plan A must be one of them. Insurers aren't required to offer all 10 plans but each must offer Plan A.