Did Idaho's Medicare supplement insurance law cover policies sold to disabled people on Medicare, or only people on Medicare 'by reason of age'?

Plain-English summary

The Director of the Idaho Department of Insurance asked the Attorney General to interpret Idaho's Medicare Supplement Insurance Minimum Standards Act (Idaho Code, title 41, chapter 44). The Act referred repeatedly to persons eligible for Medicare "by reason of age." The question was whether that language restricted Medicare supplement policies to people on Medicare because they had reached 65, or whether it allowed insurers to also sell policies to people who became Medicare-eligible because of disability.

The AG concluded the "by reason of age" language did not restrict who could buy a policy. It simply identified the class of buyers entitled to specific consumer-protection protections (such as the "free look" period, mandatory information brochures, and disclosure requirements). The history of the National Association of Insurance Commissioners (NAIC) Model Act, on which Idaho's statute was based, made this clear. The phrase "by reason of age" was added to the Model Act to clarify which persons had to be given specific information, not to limit the universe of buyers. The NAIC focused on senior citizens because of well-documented problems with over-insurance and aggressive marketing to that group. People eligible for Medicare by reason of disability faced similar marketing pressures but had not been the primary focus of the consumer-protection regime.

On the second question, the AG concluded the Director had ample authority to regulate disability-eligible Medicare supplement policies. Idaho Code §§ 41-4403(2), 41-4404, 41-4405, 41-4407, and 41-4408 each granted regulatory authority over Medicare supplement insurance generally, without restricting it to age-eligible policies. The Director could promulgate standards, require disclosure, and enforce the Act with respect to disability-eligible policies just as he could with respect to age-eligible policies. Some specific provisions (such as the older-buyer informational brochure under § 41-4406(4)) were aimed at age-eligible buyers, but those did not exhaust the Director's regulatory authority.

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The Medicare Supplement Insurance Minimum Standards Act, codified at Idaho Code title 41, chapter 44, was enacted in 1981. Its statement of purpose said the bill was intended "to comply with Public Law 96-265, Social Security Disability Amendments of 1980 (42 USC 101 et seq.) and thereby retain Idaho's right to regulate the medicare supplemental insurance business in this state." It was a copy of the NAIC Model Act.

The "by reason of age" phrase had been added to the NAIC Model Act in 1979 after testimony from FTC representative Anne DeNovo, who explained that the addition could eliminate any requirement to provide information to persons eligible for Medicare by reason of disability, even though they faced the same supplement-insurance purchase decisions. The Model Act's drafting note acknowledged that consideration could nonetheless be given to providing information and disclosure materials to disability-eligible buyers.

The original Medicare legislation in 1965 was aimed at the over-65 population, which by 1978 numbered 23.5 million. Medicare supplement insurance abuses were primarily a senior-citizen marketing problem, and the NAIC Model Act's protections were calibrated to that population (which numbered roughly ten times the disability-eligible population at 2.4 million). But that demographic focus did not mean the underlying insurance market excluded disability-eligible buyers, who could and did purchase Medicare supplement policies.

Idaho's chapter 44 contained several provisions of general application that did not turn on the "by reason of age" language. Section 41-4403(2) gave the Director broad authority to issue rules. Sections 41-4404 and 41-4405 governed minimum loss ratios and standards. Section 41-4407 dealt with disclosure standards. Section 41-4408 imposed the "free look" requirement. The AG read these as reaching disability-eligible policies as well.

Common questions

Could insurers sell Medicare supplement policies to disabled people on Medicare?

Yes. The "by reason of age" phrasing in chapter 44 did not restrict who could buy a Medicare supplement policy. It identified the population to which certain specific consumer-protection requirements (informational brochures, the free-look period) applied.

What was the Director's regulatory authority over those policies?

Broad. Idaho Code §§ 41-4403(2), 41-4404, 41-4405, 41-4407, and 41-4408 gave the Director authority to set standards, require disclosures, and enforce the Act with respect to Medicare supplement insurance generally. The age-eligible-specific provisions (such as the brochure requirement in § 41-4406(4)) did not limit that broader authority.

Why was the Act focused on age-eligible buyers in the first place?

By 1978 there were 23.5 million people on Medicare by reason of age, compared with 2.4 million by reason of disability. The NAIC's Model Act developed in response to documented over-insurance and aggressive-marketing problems aimed at senior citizens. The age-focused language reflected that empirical reality, not a market exclusion of disability-eligible buyers.

Did Idaho's enactment intentionally cover disability-eligible policies?

The legislative purpose statement said the bill was needed "to comply with Public Law 96-265, Social Security Disability Amendments of 1980 . . . and thereby retain Idaho's right to regulate the medicare supplemental insurance business in this state." That purpose makes most sense if the regulatory regime was intended to cover the full Medicare-supplement market, including disability-eligible policies.

What about the "free look" period and informational brochures?

The free-look provision in § 41-4408 was framed in terms applicable to all Medicare supplement policies. The informational-brochure provision in § 41-4406(4) was specifically tied to "older buyers' understanding," and the AG did not extend that brochure requirement to disability-eligible policies. But the broader regulatory authority did apply.

Citations

Idaho statutes: Idaho Code §§ 41-4401 to 41-4408 (Medicare Supplement Insurance Minimum Standards Act).

Federal statutes: P.L. 96-265, Social Security Disability Amendments of 1980 (42 U.S.C. 101 et seq.).

Other authority: 1979 NAIC Proceedings I, 392, 394; 1979 NAIC Proceedings II, 333, 357; 1980 NAIC Proceedings II, 1073; 1981 Sess. Laws, ch. 68; House Report No. 213, March 29, 1965.

Source

• Landing page: https://www.ag.idaho.gov/office-resources/opinions/
• Original PDF: https://ag.idaho.gov/content/uploads/2018/04/OP87-08.pdf

Original opinion text

Full opinion text is preserved in the linked PDF. The opinion analyzed Idaho's Medicare Supplement Insurance Minimum Standards Act (Idaho Code, title 41, chapter 44) and the meaning of the recurring phrase "by reason of age." Drawing on the legislative history of the NAIC Model Act on which Idaho's statute was based, the AG concluded the phrase identified the population entitled to specific consumer-protection protections (informational brochures, free-look provisions) rather than restricting the universe of buyers. The AG further concluded that the Director's regulatory authority under §§ 41-4403(2), 41-4404, 41-4405, 41-4407, and 41-4408 reached Medicare supplement policies sold to persons eligible for Medicare by reason of disability.

DATED this 31st day of August, 1987.

JIM JONES
Attorney General
State of Idaho