KFF, Newsroom, July 11, 2018
In all but four states, insurance companies can deny private Medigap insurance policies to seniors after their initial enrollment in Medicare because of a pre-existing medical condition, such as diabetes or heart disease, except under limited, qualifying circumstances, a Kaiser Family Foundation analysis finds.
Medigap policies provide supplemental health insurance to help cover the deductibles and coinsurance for Medicare covered services. One in four people in traditional Medicare had a Medigap policy in 2015.
This new analysis of federal law and state regulations shows that only Connecticut, Maine, Massachusetts, and New York require Medigap insurers to sell policies to all Medicare beneficiaries ages 65 and older either continuously during the year or for at least one month per year. In all other states and the District of Columbia, insurers may deny a Medigap policy to seniors, except during their initial open enrollment period when they start on Medicare, or when applicants have other specified qualifying events, such as the loss of retiree health coverage.
Depending on their state, Medicare beneficiaries who miss these windows of opportunity may unwittingly forgo the chance to purchase a Medigap policy later in life if their needs or priorities change, or if they choose to switch to traditional Medicare after several years of being in a Medicare Advantage plan.
The brief provides new national and state-by-state data on Medigap enrollment, and describes federal and state-level consumer protections that can affect seniors’ access to Medigap.
Medigap Enrollment and Consumer Protections Vary Across States
By Cristina Boccuti, Gretchen Jacobson, Kendal Orgera, and Tricia Neuman
KFF, Issue Brief, July 11, 2018
Medigap plays a major role in providing supplemental coverage for people in traditional Medicare, particularly among those who do not have an employer-sponsored retiree plan or do not qualify for cost-sharing assistance under Medicaid. Medigap helps beneficiaries budget for out-of-pocket expenses under traditional Medicare. Medigap also limits the financial exposure that beneficiaries would otherwise face due to the absence of an out-of-pocket limit under traditional Medicare.
Nonetheless, Medigap is not subject to the same federal guaranteed issue protections that apply to Medicare Advantage and Part D plans, with an annual open enrollment period. As a result, in most states, medical underwriting is permitted which means that beneficiaries with pre-existing conditions may be denied a Medigap policy due to their health status, except under limited circumstances.
Federal law requires Medigap guaranteed issue protections for people age 65 and older during the first six months of their Medicare Part B enrollment and during a “trial” Medicare Advantage enrollment period. Medicare beneficiaries who miss these windows of opportunity may unwittingly forgo the chance to purchase a Medigap policy later in life if their needs or priorities change. This constraint potentially affects the nearly 9 million beneficiaries in traditional Medicare with no supplemental coverage; it may also affect millions of Medicare Advantage plan enrollees who may incorrectly assume they will be able to purchase supplemental coverage if they choose to switch to traditional Medicare at some point during their many years on Medicare.
Only four states (CT, MA, NY, ME) require Medigap policies to be issued, either continuously or for one month per year for all Medicare beneficiaries age 65 and older. Policymakers could consider a number of other policy options to broaden access to Medigap. One approach could be to require annual Medigap open enrollment periods, as is the case with Medicare Advantage and Part D plans, making Medigap available to all applicants without regard to medical history during this period. Another option would be to make voluntary disenrollment from a Medicare Advantage plan a qualifying event with guaranteed issue rights for Medigap, recognizing the presence of beneficiaries’ previous “creditable” coverage. For Medicare beneficiaries younger than age 65, policymakers could consider adopting federal guaranteed issue protections, building on rules already established by the majority of states.
On the one hand, these expanded guaranteed issue protections would increase beneficiaries’ access to Medigap, especially for people with pre-existing medical conditions. They would also treat Medigap similarly to Medicare Advantage in this regard, and make it easier for older adults to switch between Medicare Advantage and traditional Medicare if their Medicare Advantage plan is not serving their needs in later life. On the other hand, broader guaranteed issue policies could result in some beneficiaries waiting until they have a serious health problem before purchasing Medigap coverage, which would likely increase premiums for all Medigap policyholders. A different approach altogether would be to minimize the need for supplemental coverage in Medicare by adding an out-of-pocket limit to traditional Medicare.
Ongoing policy discussions affecting Medicare and its benefit design could provide an opportunity to consider various ways to enhance federal consumer protections for supplemental coverage or manage beneficiary exposure to high out-of-pocket costs. As older adults age on to Medicare, they would be well-advised to understand the Medigap rules where they live, and the trade-offs involved when making coverage decisions.
By Don McCanne, M.D.
Although most individuals are relieved when they are finally eligible for Medicare, the traditional program leaves them exposed to excessive out-of-pocket costs and so they often seek additional coverage.
If they are fortunate enough to have an employer-sponsored retiree plan, they will usually select that. If they have very low incomes, they may be eligible for dual coverage with Medicaid. Medigap plans are offered to supplement traditional Medicare, but they are quite expensive and many feel that they cannot afford them. Some decide that they will risk going without any other coverage, but others will select private Medicare Advantage plans usually because the benefits are more generous whereas the premiums are generally quite low, and may be zero.
The Medicare Advantage plans have become quite popular because of their marketing appeal, but some individuals find that their use of provider networks limits their access to other physicians and hospitals that they would prefer, plus they sometimes feel that they are being deprived of care that they feel they should have such as an expensive cancer drug that has been excluded from the plan formulary or placed on a financially inaccessible tier.
When their care becomes complex they sometimes decide that they would prefer to shift to the traditional Medicare program that does not limit them to provider networks, and purchase a Medigap plan to protect themselves against catastrophic losses. At this point they are usually out of luck. If they elected not to enroll in a Medigap plan during the initial enrollment period when they first became eligible for Medicare, with rare exceptions they will find that guaranteed issue no longer applies and that they likely will be denied coverage. The initial marketing appeal of the Medicare Advantage plan comes back to bite them since they are then locked out of the Medigap plans.
There is something unjust here. Congress and the administrations of the past couple of decades have been granting the private Medicare Advantage plans all kinds of concessions while paying them more that what comparable patients would cost in the traditional Medicare program. Yet they have failed to enact the improvements that the traditional Medicare program needs to make benefits comparable to the private plans. That is why Medigap plans exist. They are necessary to cover the financial exposure that exists in traditional Medicare, especially the risk of catastrophic loss.
But why should someone in the traditional plan have to buy an expensive supplemental Medigap plan when we, as taxpayers, are also contributing generously to the private Medicare Advantage insurers (30 percent of what they receive goes to administrative costs, profits, and extra benefits such as Silver Sneakers). Shouldn’t taxpayer support for all Medicare beneficiaries be equitable, whether in the private or public plans?
If the traditional Medicare program were funded at the same risk-based level as the private Medicare Advantage plans, we could roll all of the Medigap benefits into traditional Medicare and then there would be no need to purchase a separate Medigap plan. Furthermore, there would be no reason to consider a private Medicare Advantage plan unless you were willing to give up your choice of physicians and hospitals in exchange for a Silver Sneakers membership, or if you preferred to receive your care through an integrated health care delivery system such as Kaiser Permanente.
Better, of course, would be to establish a single payer program – an improved Medicare for all. One of the more important improvements would be to roll Plan F Medigap benefits into Medicare. However, Congress decided that in 2020 Plan F benefits will no longer be offered to new enrollees – just one more measure to chisel away at the traditional Medicare program while furthering the cause of privatization by nurturing the private Medicare Advantage plans. In fact, a new administration proposal this month will further expand benefits in the private Medicare Advantage plans while denying them to patients in the traditional program.
How about health care justice for all? We can have that by enacting and implementing an expanded and improved Medicare for all.
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