When an applicant for a new Medicare supplement policy tells the producer that another Medicare supplement policy is already in force, what do Pennsylvania's replacement rules (40 P.S. § 3108; 31 Pa. Code 89.784) require?

Why B is correct

Section 40 P.S. § 3108 addresses Medicare supplement replacement, and the Pennsylvania Insurance Department's regulation at 31 Pa. Code 89.784, together with 31 Pa. Code 89.789, requires insurers to maintain replacement procedures: identify whether the new purchase will replace existing coverage, notify the existing insurer, and give the applicant notices that compare the old and proposed coverage so the decision is informed. Replacement is regulated, not forbidden — the goal is that any exchange of policies happens with full disclosure rather than by surprise.

Why the other options are wrong

• A) Pennsylvania regulates replacement through disclosure and comparison; it does not impose an automatic denial whenever existing coverage exists.
• C) The insurer cannot simply cancel the applicant's existing policy; only the policyholder decides whether the old coverage ends, after receiving the comparison notices.
• D) No referral to the federal Medicare program is required; the replacement process runs through the insurer's procedures under 31 Pa. Code 89.784.

Memory hook

Replacement = compare and disclose: notices first, switch second.