Would You Like Some Insurance With Your Insurance?

By Bram Sable-Smith
Kaiser Health News, September 21, 2016

Gap plans, used to cover out-of-pocket expenses like high deductibles, are becoming increasingly popular among consumers and businesses.

Gap insurance is in a category of insurance known as “limited benefit.” No matter how bad a person’s situation, the plan will pay out only a certain amount of money.

Now, there’s renewed interest in gap plans. With monthly premiums on health insurance going up, more people are choosing cheaper, high-deductible options. In 2016, more than 90 percent of people buying insurance under the ACA chose plans with an average deductible of $3,000 or higher.

“The cost of health insurance is going up, and businesses have been forced to deal with that by raising their deductibles or increasing out-of-pocket costs for their employees,” said (Alex Forrest, an insurance broker in South Carolina).

With a gap plan, he said, companies can offer a package of health benefits that keeps out-of-pocket-expenses for employees down.

“That’s actually just insurance for my insurance,” said freelance designer Susannah Lohr.

Health economist Deborah Chollet of Mathematica Policy Research, an independent research firm, said the insurance reforms in the ACA were designed “basically to drive these kinds of creative insurance arrangements out of the market.”

Because gap plans aren’t major medical insurance, Chollet explained, they’re not regulated by the health care law and can avoid complying with consumer protections built into the law. So the companies providing gap insurance, she said, “can ask you about your health status, they can deny you coverage, they can do all of the kinds of things that the Affordable Care Act prohibits.”

http://khn.org/news/would-you-like-some-insurance-with-your-insurance/

***

Patient Protection and Affordable Care Act
Sec. 3210. Development of New Standards for Certain Medigap Plans

(a) (1) IN GENERAL.—The Secretary shall request the National Association of Insurance Commissioners to review and revise the standards for benefit packages described in paragraph (2) under subsection (p)(1), to otherwise update standards to include requirements for nominal cost sharing to encourage the use of appropriate physicians’ services under part B. Such revisions shall be based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems and made consistent with the rules applicable under subsection (p)(1)(E) with the reference to the ‘1991 NAIC Model Regulation’… To the extent practicable, such revision shall provide for the implementation of revised standards for benefit packages as of January 1, 2015.

https://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf

***

National Association of Insurance Commissioners (NAIC)
Letter Re: PPACA Sec. 3210

December 19, 2012

Dear Secretary Sebelius,

Pursuant to section 3210 of the Patient Protection and Affordable Care Act (ACA) you have requested the National Association of Insurance Commissioners (NAIC) to review and revise the NAIC Medicare supplement insurance (Medigap) model regulation to include nominal cost sharing in Medigap Plans C and F to encourage the use of appropriate physicians’ services under Medicare Part B. Section 3210 directs the NAIC to base these revisions on evidence published in peer-reviewed journals or current examples used by integrated delivery systems.

Consistent with the process established by the Social Security Act for changes to Medigap standards, the NAIC appointed the Medigap PPACA (B) Subgroup (Subgroup) comprised of state insurance regulators, representatives from the Centers for Medicare and Medicaid Services (CMS), insurers and trade associations, consumer advocates, and other experts in the areas of Medicare and Medigap.

The NAIC has performed its requested review of the standards for Plans C and F under Section 3210 of the ACA. We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination.

Medigap is a product that has served our country’s Medicare eligible consumers well for many years, offering them security and financial predictability with regard to their Medicare costs. Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program.

We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.

The statute requires the NAIC to base nominal cost sharing revisions on “peer-reviewed journals or current examples of integrated delivery systems”. However, the Subgroup discovered that there is a limited amount of relevant peer-reviewed material on this topic. None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income). Most of the studies do not consider the same population of health insurance beneficiaries as those that purchase Medigap products.

http://www.medicarerights.org/pdf/NAIC-Letter-12-2012.pdf

***

Medigap Reform: Setting the Context for Understanding Recent Proposals

Kaiser Family Foundation, January 13, 2014

This issue brief contextualizes recent proposals to change Medigap plans in order to understand how they may affect Medicare beneficiaries, using recently available data.

Many proposals and recommendations would prohibit Medigap plans from providing first-dollar coverage by requiring plans to include deductibles for Part A and Part B services.  Such proposals are designed to discourage utilization (and reduce spending) by exposing beneficiaries to greater costs when they seek medical care.

Table 1 at this link lists proposals:
http://kff.org/medicare/issue-brief/medigap-reform-setting-the-context/

It is really a sad commentary on the dysfunctional state of our health care financing system when insurance deductibles – supposedly designed to make patients better health care shoppers – have caused such great financial burdens that a market of plans has been generated to insure against deductibles and other cost-sharing losses that frequently are no longer affordable.

Let’s take a closer look at gap plans that are designed to fill in the deficiencies in traditional coverage.

It is the high deductibles that have brought this issue into the forefront. There are two primary reasons for the growth in the prevalence and in the dollar amount of the deductibles. One is that health insurance premiums have continued to become less and less affordable. Both individuals and employers who purchase plans are looking for relief, and high-deductible plans do have lower premiums.

The other reason is that the policy community is dominated by a partnership of right-wing ideologues who insist that patients must feel financial pain when they access health care services, and centrist policymakers who worry more about premiums, figuring that public insurance subsidies (ACA) and public welfare programs (Medicaid) will protect those who are less able to afford care, while accepting, with regret, the increasing burden placed on middle-income Americans.

So is gap insurance designed to help pay deductibles a reasonable solution? If the gap policy is adequate to increase the actuarial value of the combined coverage of gap plus high-deductible plans to the levels of more traditional health plans then the combined premiums must be higher since the administrative costs of two insurers would be greater than those of one comprehensive insurer alone. Besides, under the gap plans patients could face other coverage problems since the plans do not have to comply with the regulatory and benefit requirements of qualified health plans as defined by the Affordable Care Act.

Let’s turn to a gap program with which we have considerable experience – the Medigap plans that cover some of the coverage gaps in the traditional Medicare program.

The stand-alone traditional Medicare program leaves individuals vulnerable to high out-of-pocket costs if they have significant medical problems. Many are protected with additional coverage such as retiree health benefit plans, VA health benefits, Medicare Advantage plans, or dual coverage with Medicaid. Most individuals not eligible for these plans purchase Medigap plans to avoid losses from significant gaps in the Medicare coverage. But, once again, being covered with multiple plans increases administrative costs and complexity. It would be much more efficient and less costly to have an improved Medicare program for everyone that did not necessitate additional coverage. Medigap, particularly, is a wasteful intrusion that should be eliminated by folding the Plan F Medigap benefits into the traditional Medicare program (while making other improvements in Medicare while we’re at it).

Yet the right-wing ideologues and the wimpy moderate policy wonks that follow them have been insisting that we need to reduce the benefits of the Medigap plans. Specifically they would mandate deductibles under their consumer-directed ideology – making patients more thrifty health care shoppers. Innumerable studies have show that deductibles cause patients to forgo beneficial health care services – not a policy position we should be supporting.

How pervasive this concept is was demonstrated by Sec. 3210 of the Affordable Care Act. That section required the National Association of Insurance Commissioners (NAIC) to come up with a recommendation based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems to support requiring cost-sharing to be included in the Medigap plans, in order to make patients better health care shoppers, and that the recommendations would be implemented by January 1, 2015.

Why didn’t this happen? NAIC reported that they were “unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F.”

Further, “None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).”

Unfortunately, their take-home message has been ignored by the policy community who continue to clamor for more cost sharing. Specifically, NAIC stated, “We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”

Yet the Kaiser Family Foundation report on Medigap reform includes a table with a dozen different proposals from across the political spectrum calling for controlling Medicare costs by increasing the financial burden placed on Medicare beneficiaries with Medigp plans.

We don’t need insurance to insure our insurance. We need a national health program that would ensure that everyone has affordable access to all essential health care services. That will never happen with our current system; ACA patches cannot possibly accomplish that. Single payer Medicare for all, without gaps, is what we need.