Health Reform Mandates Changes for Medigap Policies

Medigap insurance (Medicare supplemental health insurance) is meant to work in tandem with the original Medicare program by paying for beneficiary cost-sharing and some other services not usually covered by Medicare. Thus, Medigap insurance serves as a key component of health insurance protection for individuals who rely upon the original Medicare program to finance their health care.

Effective June 1, 2010, the standardized Medigap policies that may be sold are changing. These changes were mandated by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Pub. Law 110-275. This Alert describes the changes and discusses additional Medigap changes contained in thePatient Protection and Affordable Care Act of 2010 (PPACA or the Affordable Care Act of 2010), Pub. Law 111-148 (March 23, 2010). At the end of the Alert, we have included a list of changes to each standardized Medigap policy as well as a chart of the changes.

STANDARDIZED PLANS OFFERED BEFORE JUNE 1, 2010

In all states except Minnesota, Massachusetts, and Wisconsin, federal law requires insurers to sell Medigap policies that are one of 14 standard supplemental plans.[1] These plans are labeled with the letters A through L, with two of the plans, F and J, also offering a high deductible option.[2] The labeling by letter was designed to make it easier for consumers to compare plans.

Medigap policies pay most, if not all, of traditional Medicare’s coinsurance amounts and may provide coverage for deductibles. Some of the standardized plans pay for services that are not covered by Medicare, such as some preventive screening services, extended hospital coverage, and emergency medical care while traveling outside the United States. When describing the benefits of each of the Medigap policies, insurance companies must use the same format, language, and definitions to make it easier for consumers to compare policies.[3]

Plan A contains the basic or “core” benefits. The other policies contain the core benefits plus one or more additional benefits. The following is a list of the benefits that are contained in the core policy and that must be contained in all Medigap policies sold since July 31, 1992:[4]

1. Part A hospital coinsurance for days 61 to 90 ($275 per day in the year 2010);
2. Part A lifetime reserve coinsurance for days 91 to 150 ($550 in 2010);
3. 365 lifetime hospital days beyond Medicare coverage;
4. Parts A and B three pint blood deductible;
5. Part B 20 percent coinsurance.

Additional benefits are offered in Policies B through L. Each plan offers a different combination of these benefits in addition to the core benefits.

1. Part A hospital deductible ($1,100 in 2010);
2. Part B deductible ($155 in 2010);
3. Part B charges above the Medicare approved amount (if the provider does not accept assignment);
4. Skilled nursing facility care coinsurance;
5. Foreign travel emergency coverage;
6. At-home recovery (Home health aide services). Not available in plans sold on or after June 1, 2010;
7. Prescription drug coverage (Basic or extended);
8. Preventive medical care (Not available in plans sold on or after June 1, 2010).

“Medicare Select” plans that require use of a limited network of providers are also available in some states. Any of the standardized policies may be a Select plan. Although the premiums for Select plans may be lower than premiums for other Medigap policies, Select plans will only cover beneficiary cost-sharing in non-emergency situations if the beneficiary uses a Select plan network provider.

NEW MIPPA STANDARDIZED PLANS TO BE OFFERED AFTER JUNE 1, 2010

As indicated above, MIPPA made changes to the standardized Medigap policies that may be sold on or after June 1, 2010. MIPAA authorizes a reduction in the number of standardized plans offered from 14 to 11. Plans E, H, I, and J are eliminated. Plans H, I, and J became duplicative of other plans after the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Pub. L. 108-173 (Dec. 8, 2003) added a prescription drug benefit to Medicare. Plan E became unnecessary as a result of the other MIPPA changes. MIPPA also eliminates the “at-home recovery” and “preventive care” benefits as additional benefits Medigap plans can offer on or after June 1, 2010. Effective June 1, 2010, a new hospice benefit, which will cover all cost-sharing for Part A eligible hospice care and respite care expenses, will be added as a core benefit available with every Medigap plan offered for purchase. Before June 1, 2010, Plan G paid 80 percent of the excess charges that a provider who does not accept Medicare assignment is allowed to charge. The excess charge benefit in the new Plan G is increased to 100 percent.

Two new plans, M and N, have been added. These plans offer new options with higher beneficiary cost-sharing and lower anticipated premiums. Plan M offers the basic core benefits required of every Medigap plan and additionally covers skilled nursing facility copayments; medically necessary emergency care in a foreign country; and 50 percent of the Medicare Part A deductible.

Plan N offers the basic core benefits required of every Medigap plan and additionally covers 100 percent of the Medicare Part A deductible, skilled nursing facility copayments, and medically necessary emergency care in a foreign country. Plan N also includes copayments for covered services as follows: (1) the lesser of $20 or the Medicare Part B coinsurance or copayment for each covered health care provider office visit and (2) the lesser of $50 or the Medicare Part B coinsurance or copayment for each covered emergency room visit. However, this copayment for an emergency room visit is waived if the insured is admitted to any hospital and the emergency visit is subsequently covered as a Part A expense.

In order to help define what constitutes an office visit for purposes of determining whether the beneficiary must pay the Plan N cost-sharing amount, CMS has identified the codes for services that fall within the appropriate category. These are codes for office visits or evaluation and management visits. Codes for laboratory, x-ray, durable medical equipment or other services are not subject to the cost-sharing payment. However, if the physician bills for multiple Medicare-covered office visits in one day, the coinsurance or copayment amount is applicable to each Medicare-covered office visit.

SALE OF NEW POLICIES

After June 1, 2010, only Medigap policies conforming to the new requirements may be sold. Beneficiaries who currently have a Medigap policy will be allowed to keep and renew their existing Medigap policies after that date. However, these policies may become more expensive over time as the number of policy holders decreases.

According to the National Association of Insurance Commissioners (NAIC), the entity that develops the standardized Medigap policies, it is up to each individual insurance company to decide whether it will offer beneficiaries who have existing policies with the company the opportunity to purchase one of the new policies without medical underwriting. If the insurance company does not exercise this option, a beneficiary may still apply for a new policy, but the application would be subject to medical underwriting unless other protections apply.

If an insurer provides a period for policyholders to change to a new plan, or sells a new policy to replace a policy of equivalent or lesser coverage, the insurer must waive pre-existing condition time periods, waiting periods, and probationary periods for people whose previous policy was in effect for at least six months.

Agents are prohibited from selling duplicate Medigap policies. One of the new policies cannot be sold to someone who already has a policy unless the new policy will replace the existing policy.

There are also some changes to requirements concerning the plans that an insurance company must offer. An insurance company that wants to sell a Medigap plan in a state must offer at least Plan A. For the 2010 standardized policies, an insurance company that wishes to offer any plan in addition to Plan A must also offer either Plan C or Plan F. Offering a high deductible Plan F does not meet this requirement.

ADDING COST SHARING TO MEDIGAP POLICIES

As noted previously, Medigap policies were designed to fill in the gaps in traditional Medicare by paying co-insurance, co-payments, and, in some instances, deductibles. Thus, many beneficiaries in original Medicare who have a Medigap policy pay virtually nothing towards the cost of their care.

Over the last decade, however, Congress has moved toward requiring beneficiaries to pay more of their Medicare costs by reducing coverage offered by some Medigap policies. The trend began in 1997, when Congress authorized the Medicare Select plans, which limit supplemental coverage to providers in the plan’s network. The MMA of 2003 authorized the sale of Plans K and L, which pay only 50% and 75%, respectively, of the Part B coinsurance, the skilled nursing facility coinsurance, and the Part A deductible. As explained above, new Plan N requires the beneficiary to pay a portion of the Part B coinsurance for some services after meeting the Part B deductible.

PPACA continues this trend. It authorizes the Secretary of Health and Human Services (the Secretary) to ask the NAIC to review the benefit packages of Plans C and F. The NAIC is to update these benefit packages by adding nominal cost sharing to encourage the use of appropriate physicians’ services under Part B. In making the revisions, NAIC is to look at evidence published in peer-reviewed journals or current examples used by integrated delivery systems. To the extent practicable, the revised benefit packages are to be implemented as of January 1, 2015.[5] Right now, Plans C and F are the most popular Medigap plans. Once the changes are implemented, Plan G will offer the most comprehensive set of benefits.

CONCLUSION

In 2007, 17% of Medicare beneficiaries had a Medigap policy that provided their only supplemental coverage to Medicare.[6] The changes to the benefit structure of the standardized Medigap policies that become effective for new plans sold after June 1 reflect changes to the Medicare program and service utilization. All new plans will provide protection against cost-sharing in the hospice benefit. The preventive services benefit is no longer needed since Medicare coverage of preventive services and costs has expanded, and both MIPPA and PPACA give the Secretary greater authority to expand Medicare coverage of preventive services. The at-home recovery benefit was underutilized and had limited availability in the old plans. Policies were eliminated because they duplicated coverage under other policies. New policies M and N were added to provide beneficiaries the opportunity to purchase plans with lower premiums and higher cost-sharing.

The opportunity to sell new Medigap policies brings with it the opportunity for marketing abuses. Advocates should ensure that a client who purchases a new Medigap policy after June 1, 2010, has done so because the client believes the new policy best suits his or her needs and not because of pressure from sales tactics and other marketing abuses.

SUMMARY OF INDIVIDUAL PLAN CHANGES

Plans A, B, C, F, K and L remain the same in 2010. Plans E, H, I, and J have been discontinued; their benefit packages are replicated in other plans. Plans M and N are new in 2010.

2010 Policies by Plan [7]

• Plan A: Core benefits only (no change)
• Plan B: Core benefits plus 100% of the Part A deductible (no change)
• Plan C: Core benefits plus 100% Part A deductible, SNF coinsurance, 100% Part B deductible, and foreign emergency care (no change)
• Plan D: Core benefits plus 100% Part A deductible, SNF coinsurance, and foreign emergency care (removed at-home recovery)
• Plan E: No longer available (included same as D with preventive care)
• Plan F: Core benefits plus 100% Part A deductible, SNF coinsurance, 100% Part B deductible, 100% Part B excess charges and foreign emergency care (no change)
  High deductible option: Same benefits with $1,500 deductible, adjusted annually from 1999 by CPI.
• Plan G: Core benefits plus 100% Part A deductible, SNF coinsurance, 100% Part B excess charges, and foreign emergency care (1990 was 80% of Part B excess and included at-home recovery)
• Plan H: Discontinued (was same as D but with drugs)
• Plan I: Discontinued ( was same as G but with drugs)
• Plan J: Discontinued (was same as F but with drugs)
• Plan K (no change):
  • 100% Part A hospital coinsurance for 61^st through 90^th day;
  • For days 91 through 150, 100% coinsurance amount for each Medicare lifetime inpatient reserve day used;
  • 100% of Part A eligible expenses after benefit exhausted, including lifetime reserve days;
  • SNF: 50% of coinsurance for 21^st through 100^th day, until out-of-pocket limit is met
  • Hospice care (NEW): 50% of cost-sharing for all Part A eligible expenses until out-of-pocket limit met
  • 50% of reasonable cost for three pints of blood
    • Part B:
    • 50% of cost-sharing after deductible paid (until meet out-of-pocket limit)
    • 100% of cost-sharing for Part B preventive services after deductible paid
  • 100% of all cost-sharing under Part A and B for balance of year after out-of-pocket met
• Plan L (no change):
  • 100% Part A hospital coinsurance for 61^st through 90^th day;
  • For days 91 through 150, 100% coinsurance amount for each Medicare lifetime inpatient reserve day used;
  • 100% of Part A eligible expenses after benefit exhausted, including lifetime reserve days;
  • SNF: 75% of coinsurance for 21^st through 100^th day, until out-of-pocket limit is met
  • Hospice care: 75% of cost-sharing for all Part A eligible expenses until out-of-pocket limit met
  • 75% of reasonable cost for three pints of blood
  • Part B:
    • 50% of cost-sharing after deductible paid (until meet out-of-pocket limit)
    • 100% of cost-sharing for Part B preventive services after deductible paid
  • 100% of all cost-sharing under Part A and B for balance of year after out-of-pocket met
• Plan M (NEW): Core plus 50% Part A deductible, SNF coinsurance, and foreign emergency care.
• Plan N (NEW): Core plus 100% Part A deductible, SNF coinsurance, and foreign emergency care
  • Co-payments:
    • Lesser of $20 or Part B coinsurance/co-payment for office visit (including specialists)
      • • Lesser of $50 or Part B coinsurance/co-payment for emergency room visit
          • Co-payment waived if patient admitted to hospital and the emergency visit is subsequently covered under Part A.