2Medigap Policies, what are they and how do they work?
Medicare is an insurance benefit offered to eligible individuals; however Medicare is not a comprehensive medical insurance plan. Because of this, some beneficiaries may elect to purchase a separate insurance policy that will fill in the “gaps” of Medicare’s benefit, called a Medigap. These policies are sold by private insurance companies and are specifically designed to provide supplemental coverage to Medicare. As such, a Medigap policy does not replace your Medicare, like a Medicare Advantage Plan, but rather works with your Medicare to provide more comprehensive coverage.
In 1992, Congress passed legislation which created Federal standards for Medicare Supplemental insurance policies. Federally mandated “standardization” means that all Medigap Policies sold after 1992 must contain a package of benefits which conform to one of the twelve standard plans. With the exception of Massachusetts, Minnesota, and Wisconsin, states are required to adopt these standards. These twelve plans are required to offer a core set of benefits and each one is then designated as Plan A through Plan L. According to the California Department of insurance, “standardization has made comparison-shopping among different insurance carriers for Medicare Supplement insurance relatively simple.” What this means to the Medicare beneficiary is that a Plan C, for example, will contain the same package of benefits regardless of the insurance carrier selling it.
In addition to traditional standard Medigap policies, beneficiaries may also elect to purchase a policy with an annual “high-deductible” option. The amount of the deductible is set by Medicare every year. This Medicare Supplement option is designed to aid the beneficiary in being able to purchase a Medigap policy at a lower premium. Under this type of plan, the Medigap policy will not pay for services until the deductible has been met.
Another type of Medigap policy, available is some states, is called Medicare SELECT. A Medicare Select policy is still a standardized Medigap Plan, however in order to receive full Medigap benefits you may have to use specific providers. Although you are not limited to any kind of network of providers, if you chose to see a Medicare provider who is not contracted with the plan you may have additional out-of-pocket costs. Because of this, Medicare SELECT policies may have a lower monthly premium than other types of Medigap policies.
Medicare beneficiaries are allowed certain periods to enroll into a Medigap with Guaranteed Issue. When a beneficiary has Guaranteed Issue, a company cannot refuse to sell him or her a policy based on medical history, or adjust premiums accordingly. Additionally, beneficiaries may also be eligible to have any pre-existing exclusions waived. Put another way, a plan may not be able to refuse to cover a pre-existing condition upon enrollment.
In California, Medicare beneficiaries, already enrolled in a Medigap policy, can take advantage of an annual enrollment. This annual “Open Enrollment” occurs during the beneficiaries birthday month and allows Guaranteed Issue for him or her to switch to a plan of equal or lesser benefits.
The Medicare Improvements for Patients and Providers Act (MIPPA) involves changes to Medigap policies. These changes include the elimination of several plans, (due to underutilization and redundant benefits), adding coverage for cost-sharing for preventative benefits and hospice care, as well as two new plans available beginning June 1, 2010. You can check out these changes, and more in Medicare's 2010 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare
For more information about Medigap policies, including the upcoming changes, or to compare your options, call 1-800-434-0222 to speak with a Registered HICAP Counselor, or e-mail us at ask-hicap@inlandagency.org.