Medicare supplements and California's Medigap rules

Senior health products are 15 of the 75 Accident & Health questions. The federal Medicare facts are the same everywhere; the California rules below are where national courses fall short.

Questions and answers, explained

All 12 questions above, with the correct answer and why it is correct. Everything here is on medicare supplements and california's medigap rules.

1. Under Insurance Code section 10192.11, during what period may a Medicare supplement insurer not deny coverage or charge more because of health?

   • AAny time the person is under 70
   • BThe six months beginning with the first month the person is 65 or older and enrolled in Part BCorrect
   • COnly during Medicare's annual enrollment period
   • DThe 30 days after the person first applies for Social Security retirement benefits

   Why: Section 10192.11 bars denying, conditioning or pricing a Medicare supplement differently because of health for an application made before or during the six months beginning with the first month the person is both 65 or older and enrolled in Part B.

   Reference Cal. Ins. Code 10192.11 — CA A&H objectives III.D.1.e.ii

2. Carlos, age 66, has retired and enrolled in Medicare Parts A and B. He wants to continue making contributions to the health savings account (HSA) he opened while working. Which factor now disqualifies him from making new HSA contributions?

   • ABeing older than 65 by itself
   • BHaving no earned income after retirement
   • CHaving a large existing HSA balance
   • DBeing enrolled in MedicareCorrect

   Why: To contribute to an HSA, an individual must be covered by a qualifying high-deductible health plan, have no other first-dollar coverage, not be enrolled in Medicare, and not be claimed as a dependent. Enrollment in Medicare ends eligibility for new contributions — age alone does not, and unlike an IRA, an HSA does not require earned income. Carlos may still spend his existing HSA balance tax free on qualified medical expenses.

   Reference CA A&H objectives II and III.A (Medical and disability concepts; individual medical expense insurance)

3. California gives Medicare supplement policyholders an annual window to switch plans without health underwriting. When does it begin, and what may they buy?

   • AOnly once in a lifetime, at age 75
   • BOn the policy anniversary, lasting 10 days
   • COn January 1, lasting 90 days, for any plan including one with richer benefits than before
   • DOn their birthday, lasting at least 60 days, for a plan with equal or lesser benefitsCorrect

   Why: Section 10192.11(h) gives each individual an annual open enrollment period of 60 days or more beginning on the individual's birthday, during which the person may buy any Medicare supplement policy with benefits equal to or less than the previous coverage, without health underwriting or price discrimination.

   Reference Cal. Ins. Code 10192.11(h) — CA A&H objectives III.D.1.e.ii

4. Under Insurance Code section 10192.16, how is an agent's first-year commission on a Medicare supplement policy limited?

   • AIt may be no more than 200 percent of the second-year commissionCorrect
   • BCommissions are banned on Medicare supplements
   • CIt may be any amount, as long as the insurer files its commission schedule with the commissioner
   • DIt must equal the renewal commission exactly

   Why: Section 10192.16 allows a first-year commission of no more than 200 percent of the commission for the second year, with renewal commissions the same as the second year for at least five renewal years. The limit discourages churning seniors from policy to policy.

   Reference Cal. Ins. Code 10192.16 — CA A&H objectives III.D.1.e.ii.d

5. What is HICAP in California?

   • AA state-run Medicare supplement plan sold to seniors at a discount by licensed agents
   • BA free counseling program for Medicare beneficiaries, run locally by Area Agencies on AgingCorrect
   • CMedi-Cal's long-term care program
   • DA commission program for agents

   Why: The Health Insurance Counseling and Advocacy Program (HICAP) is a federally mandated, state and federally funded program that gives free help to Medicare beneficiaries and their families with Medicare, Medicare Advantage, Medicare supplements and drug plans. The Department of Aging administers it and Area Agencies on Aging run it locally.

   Reference CA A&H objectives III.D.2

6. A senior enrolled in a Medicare Advantage plan asks an agent to also sell her a Medicare supplement policy to cover her copays. What is correct?

   • AMedicare Advantage plans are a type of supplement
   • BShe must buy two supplements to cover the Advantage plan
   • CMedicare Advantage is not a supplement and does not coordinate with oneCorrect
   • DA supplement pays all Medicare Advantage copays, so she should buy one right away

   Why: CDI's objectives state that Medicare Advantage is not a Medicare supplement plan and does not coordinate with supplements. A supplement fills gaps in Original Medicare. A person also cannot receive benefits from more than one Medicare supplement, so applications must ask about existing supplement coverage.

   Reference CA A&H objectives III.D.1.e.ii.f-g

7. A senior goes without creditable prescription drug coverage for 20 months after becoming eligible, then enrolls in Part D. What penalty applies?

   • ANo penalty, because Part D is optional
   • BA one-time fee of $100 that is paid with the first premium and then never charged again
   • CA 10 percent penalty for one year only
   • DA lifetime premium penalty of 1 percent per month without coverageCorrect

   Why: Part D enrollment is optional, but going without creditable coverage after eligibility can bring a lifetime penalty of 1 percent of the base premium for each month without coverage, here about 20 percent. Part B's late penalty is 10 percent for each full 12-month period without it.

   Reference CA A&H objectives III.D.1.g.i

8. Under the California objectives, a legal resident who is not a U.S. citizen may qualify for Medicare at 65 only after living in the U.S. for at least:

   • ATwo years, the same waiting period that applies to Social Security disability
   • BTen years
   • CFive yearsCorrect
   • DOne year

   Why: CDI's objectives state that legal residents must have been in the United States at least five years. Separately, people receiving Social Security disability qualify after two years, and people with end-stage renal disease or ALS qualify regardless of age.

   Reference CA A&H objectives III.D.1.b

9. Elsa is 67, still actively working, and covered by her employer's group health plan. The employer has 45 employees. She is also enrolled in Medicare Parts A and B. Which coverage pays first?

   • AMedicare, because she is over age 65
   • BThe two plans split each claim equally
   • CThe employer group health plan, because the employer has 20 or more employeesCorrect
   • DNeither — she must choose one coverage and drop the other

   Why: Under the Medicare Secondary Payer rules, a group health plan of an employer with 20 or more employees is primary for active employees age 65 or older and their covered spouses, and Medicare pays secondary. Choice A would be correct only if the employer had fewer than 20 employees; note that the threshold rises to 100 employees when Medicare entitlement is based on disability rather than age.

   Reference CA A&H objectives III.D (Senior health products)

10. Medicare Part A primarily provides coverage for which of the following?

    • APhysician office visits and outpatient diagnostic tests
    • BInpatient hospital careCorrect
    • COutpatient prescription drugs
    • DRoutine dental and vision care

    Why: Part A is the hospital insurance portion of Medicare: it covers inpatient hospital care, skilled nursing facility care after a qualifying stay, hospice care, and certain home health care. Physician and outpatient services fall under Part B, and outpatient prescription drugs fall under Part D.

    Reference CA A&H objectives III.D (Senior health products)

11. Rosa, age 67, has premium-free Medicare Part A. She now wants coverage for physician services and outpatient care. Which statement about the coverage she needs is TRUE?

    • AIt is provided automatically at no cost to anyone enrolled in Part A
    • BIt is available only through a Medicare Supplement policy
    • CIt requires a 24-month waiting period before benefits begin
    • DIt is voluntary and requires payment of a monthly premiumCorrect

    Why: Part B (medical insurance) covers physician services, outpatient care, and diagnostic tests; it is optional and is financed in part by monthly premiums paid by enrollees. The 24-month wait applies to Medicare eligibility for Social Security disability recipients under age 65, not to Part B enrollment for someone already eligible.

    Reference CA A&H objectives III.D (Senior health products)

12. A client wants to enroll in a Medicare Advantage (Part C) plan. To be eligible, the client must

    • Abe enrolled in both Medicare Part A and Part BCorrect
    • Bfirst exhaust all Part A hospital benefits
    • Calso purchase a Medicare Supplement policy
    • Dqualify financially for Medicaid

    Why: Part C plans are offered by private companies approved by Medicare and replace the way Part A and Part B benefits are delivered, so the enrollee must be enrolled in both and continue paying the Part B premium. Medicare Supplement (Medigap) policies cannot be used alongside a Medicare Advantage plan, so option C is wrong.

    Reference CA A&H objectives III.D (Senior health products)

Drill the whole domain

• Medical and Disability Concepts and Individual Medical Insurance (12%)
• Senior Health Products (10%)

Other topics

• California contract law: concealment, representations and warranties
• California licensing, appointments and continuing education
• California's protections for senior insurance buyers
• California free look periods and life insurance replacement
• Covered California and the Affordable Care Act on the exam
• California group health insurance, COBRA and Cal-COBRA
• California's Commissioner, unfair practices and the guarantee association
• Annuities for the California life exam

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