Medicare is divided into two coverage components, Part A and Part B, and both programs have gaps in coverage that may be covered by supplemental insurance. Medicare Supplement Insurance, also known as “Medigap” insurance, provides such supplemental health insurance coverage for Medicare beneficiaries. Individuals in traditional Medicare may want to obtain Medicare Supplement (“Medigap”) insurance because Medicare often covers less than the total cost of the beneficiary’s health care.
The Gaps In Medicare Coverage
Medicare Part A Gaps
Medicare Part A (also known as Hospital Insurance) covers inpatient hospital, inpatient skilled nursing facility, home health, and hospice services. The following is a partial list of gaps in coverage that are not reimbursed by Medicare:
- Hospital deductible per spell of illness;
- Hospital coinsurance payments (Medicare covers the first 60 days in full after the deductible has been met; days 61 to 90 require a copayment, and days 91 to 150 – the “lifetime reserve days” – a higher copayment still);
- Hospital services beyond 150 days per spell of illness;
- Skilled nursing facility coinsurance payments (Medicare covers the first 20 days in full; days 21 to 100 require a daily copayment);
- Skilled nursing facility services beyond 100 days per spell of illness;
- Home health aide services that are provided on more than a part-time or intermittent basis;
- Home health nursing and aide services when there is no longer a skilled care component;
See co-payments and deductibles for the current year here.
Medicare Part B Gaps
Medicare Part B (also known as Supplementary Medicare Insurance) provides coverage for a variety of outpatient and physician services. It also pays for durable medical equipment, prosthetic devices, supplies incident to physician’s services, and ambulance transportation. The following is a list of gaps in coverage that are not reimbursed by Medicare:
- Part B deductible (an annual deductible must be met before Medicare will make payment for covered services);
- Part B 20% coinsurance payment (Medicare pays 80% of the approved charge for all Part B services and items, an amount that varies according to the services and items provided);
- Balance billing above the Medicare-approved charge (many physicians and providers charge more than the amount Medicare approves);
See co-payments and deductibles for the current year here.
Filling in the Gaps
Medicare beneficiaries fill in Medicare’s coverage gaps in a number of different ways, including:
- Government Programs (Medicaid/QMB/SLMB);
- Group Retirement Policies (Non-Standardized);
- Non-Standardized Individual Medigap Policies (Issued Prior to July 31, 1992);
- Standardized Individual Medigap Policies (Issued After July 31, 1992).
Medicare beneficiaries who are also eligible for Medicaid (Title 19) do not need Medigap insurance since Medicaid will cover the cost of their health care expenses. People who do not qualify for Medicaid but are within 100% of the federal poverty level are eligible for coverage under a program known as the Qualified Medicare Beneficiary Program (QMB). QMB program benefits include:
- Payment of Medicare premiums.
- Payment of Medicare annual deductibles.
- Payment of Medicare coinsurance amounts.
Thus individuals who qualify for the QMB program generally also do not need, and should not pay for, Medicare Supplement Insurance. The qualifying income figures change in April each year. Contact the Department of Social Services office in your area to find out more about Title 19 and QMB eligibility and enrollment.
Individuals who do not qualify for QMB because of excess income may qualify for the Specified Low-Income Medicare Beneficiary Program (SLMB) or Qualified Individual Program (QI). People who have incomes within 120% – 135% of the federal poverty level are eligible for SLMB or QI coverage. However, SLMB and QI only pay for the Medicare Part B monthly premium. Therefore, SLMB and QI individuals may still want to purchase Medigap insurance if they can afford to do so. Like QMB, the qualifying income figures change in April each year and the programs are administered by the Department of Social Services.
Some employers offer health insurance coverage to their retirees. Retirees who are covered by such group plans may not need to purchase an individual policy. While a retiree may choose to switch to an individual plan, this may not be a good choice because group retiree plans usually do not cost anything to the individual and the group coverage is often as good or better than most individual Medigap policies. Thus the individual should compare his company’s policy costs and coverage with the ten Medigap policies. The retiree should also consider the stability of his company. If it is conceivable that the company will falter, that his costs will rise, or that coverage will diminish, the individual may wish to purchase an independent policy. Remember, however, that if a new policy is purchased the old policy must be dropped.
Most Medicare beneficiaries are not eligible for Medicaid or QMB, however, and may want to obtain Medigap insurance. Approximately two-thirds purchase Medigap policies. As of July 31, 1992, Medigap policies were standardized throughout the United States. This mandatory standardization was a result of legislation passed by Congress through the Omnibus Budget Reconciliation Act of 1990. There are ten specific benefit plans which federal law permits to be sold as Medigap policies. Two new plans were added in 2006. States may allow all or some of these plans to be marketed. Insurance companies may sell all or some of the plans which the individual state allows them to market. However, there is a basic benefit package, known as the “core benefit” plan, which must be allowed in all states and which must be offered by any company which sells Medigap insurance.
The Standard Medigap Policies
The Medicare Prescription Drug, Modernization and Improvement Act (MMA) contains provisions which affected Medigap insurance. This new law, which went into effect on January 1, 2006, changed coverage under Medigap plans H, I, and J and created two additional Medigap plans, designated K and L.
A few minor, recent changes took place starting in 2015. Plans D & G removed its coverage of at-home recovery. Plan G now covers 100 percent of Part B excess charges.
The Medicare Improvement for Patients and Providers Act of 2008 (MIPPA) required alterations in the Medigap plans sold after June 1, 2010. MIPPA reduced the number of standardized plans from 12 to 10—Plans E, H, I, and J were taken away. After the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) was enacted, plans H,I, and J offered benefits to other plans—these plans were taken away because they were perceived to be duplicates. Plan E became unnecessary because of other MIPPA changes. Additionally, MIPPA took away the “at-home recovery” and “preventative care” benefits Medigap plans could offer. At the same time, a new hospice benefit that covers all cost-sharing for Part A eligible hospice care and respite care expenses was added.
The new plans, M and N, offer options with lower anticipated premiums and higher beneficiary cost sharing. Plan M covers skilled nursing facility copayments, pays 50 percent of the Medicare deductible, and covers medically necessary emergency care in a foreign country. Plan N covers skilled nursing copayments, medically necessary coverage abroad, as well as 100 percent of the Medicare Part A deductible. Plan N also covers the following: 1.) the lesser of the Medicare Part B coinsurance or copayment for each covered emergency room visit or $50 and 2.) the less of the Medicare Part B coinsurance or copayment for each covered health care provider office visit or $20. The aforementioned copayment for an emergency room visit is waived if the insured is admitted to any hospital and the emergency visit is subsequently covered as part of a Part A expense. Finally, CMS has determined that certain office visits or evaluative and management visits such as laboratory services, x-rays, as well as visits concerning durable medical equipment are not subject to cost sharing.
Hospice care has been added to Plan K in recent years.
Although individual Medigap policies have been standardized since 1992, some seniors are still covered by previously issued non-standardized plans. These policies are no longer available for purchase. However, individuals may continue to keep their old policies and many people have chosen to do so. Individuals covered by an old policy should consider changing to a new “standardized” plan, and should compare the benefits and costs of each of the policies. Then an informed decision can be made. An individual who purchases a new standardized policy can only have one Medigap policy and must therefore drop the old, non-standardized plan. This protects people from the unnecessary costs of duplicate coverage.
The twelve standardized benefit policies are labeled A through L. Policy A contains the basic or “core” benefits. The other eleven 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 new Medigap policies sold beginning July 31, 1992:
- Part A Hospital Coinsurance for Days 61-90;
- Part A Hospital Lifetime Reserve Coinsurance for Days 91-150;
- 365 Lifetime Hospital Days Beyond Medicare Coverage;
- Parts A and B Three Pint Blood Deductible;
- Part B 20% 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. Additional benefits are:
- Part A Skilled Nursing Facility Coinsurance for Days 21-100;
- Part A Hospital Deductible;
- Part B Deductible;
- Part B Charges above the Medicare Approved Amount (if provider does not accept assignment);
- Foreign Travel Emergency Coverage;
- At-Home Recovery (Home Health Aid Services);
- Preventive Medical Care.
Policies B through L vary considerably. Beneficiaries should review the policy packages carefully and decide which coverages are appropriate for them. The chart below illustrates the various coverages for Medigap policies A through L.
MEDIGAP STANDARD MEDICARE SUPPLEMENT PLANS – SEE ARTICLE BELOW ON CHANGES TO MEDIGAP POLICIES
Days 61 to 91
Days 91 to 150
|Hospital Payment in full:
365 additional days
|Part A and Part B blood deductible:
First three pints of blood
|Part B 20% coinsurance:
Physician and other services
Part A Hospital Deductible
Part B Annual Deductible
Part B Excess Charges:
|Foreign Travel Emergency:
$250 deductible, 80% of the cost of emergency care during the first two months of the trip, $50,000 lifetime limit
|Preventive Medical Care:
$120 maximum annually for preventive services ordered by your doctor
|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.||●|
* Plan K covers 100% of cost sharing for Medicare Part B preventive services and 100% of all cost sharing under Medicare Parts A and B for the balance of the calendar year once an individual has reached the out-of-pocket limit on annual expenditures of $4,620 in 2010. ** Plan L covers 100% of cost sharing for Medicare Part B preventive services and 100% of all cost sharing under Medicare Parts A and B for the balance of the calendar year once an individual has reached the out-of-pocket limit on annual expenditures of $2,310 in 2010.
There are many issues which must be considered before purchasing Medigap insurance. For example, what specific benefits does the individual require? How much will the premiums cost?
Are the benefits worth the cost? Will the individual be able to afford the premiums in the future? What if he/she decides to switch to a Medicare Advantage plan and then wants to, or has to, switch back?
Consumer Protections Under Federal Law
Certain consumer protections are provided pursuant to federal law and protect Medicare beneficiaries across the country. Connecticut provides additional protections. Some of those protections are described below.
Guaranteed issue means that an insurance company is required to sell a policy and may not force an individual to prove “insurability” by making the person pass an insurance physical examination.
All newly entitled Medicare beneficiaries have a right to guaranteed issue of any Medigap policy which is offered for sale for the first six months after their Medicare entitlement begins. This right only applies to Medicare beneficiaries who are 65 years of age or older. Insurance companies are not required by federal law to offer the same range of Medigap policies to Medicare beneficiaries with disabilities that they offer for sale to Medicare beneficiaries over age 65. Some states require insurance companies to sell designated Medigap policies to Medicare beneficiaries with disabilities. Connecticut requires insurance companies to offer Plans A, B and C to Medicare beneficiaries with disabilities, if they offer these policies for sale to older Medicare beneficiaries. Connecticut also requires that insurance companies which offer plans A-L sell these plans at all times to Medicare beneficiaries who are over age 65.
Since 1997, pursuant to the Balanced Budget Act of 1997, Medicare beneficiaries who are at least 65 years old are also guaranteed issuance of certain Medigap policies if they apply within 63 days after disenrollment from a Medicare managed care plan. The circumstances under which these rights exist are as follows:
- A Medicare beneficiary who enrolled in a Medicare managed care plan upon first becoming eligible for Medicare who subsequently disenrolled within 12 months is guaranteed issue of any Medigap policy offered for sale in her state.
- If such a beneficiary enrolled in a Medicare managed care plan which withdrew from the geographic area within the first 12 months of the individual’s enrollment and the individual enrolled in another Medicare managed care plan, the time in which the beneficiary may disenroll and purchase any Medigap plan is extended for a second 12 month period, for a total of 24 months.
- A Medicare beneficiary who dropped a Medigap policy upon enrolling for the first time in a Medicare managed care plan but who subsequently disenrolled from the managed care plan within 12 months is guaranteed issuance of the same Medigap policy from the same insurance company if that policy is still being offered for sale. Otherwise, such an individual is entitled to guaranteed issuance of Medigap Plans A, B, C or F.
- If such an individual enrolled for the first time in a Medicare managed care plan which withdrew from the geographic area within the first 12 months of the individual’s enrollment, the time in which these special Medigap rights apply is extended for a second 12 month period, for a total of 24 months.
- A Medicare beneficiary who moved out of the area or whose Medicare managed care plan terminated service to her area, became bankrupt or violated or misrepresented a provision of the plan is guaranteed issuance of Medigap Plans A, B, C or F. These same rights apply to Medicare beneficiaries whose employer stops providing retiree health insurance.
- NOTE: Connecticut beneficiaries over age 65 have the right to purchase Policies A – L from any company selling those policies in Connecticut.
IMPORTANT NOTE: The Centers for Medicare and Medicaid Services (CMS) has stated that the above Balanced Budget Act provisions do NOT apply to Medicare beneficiaries whose Medicare entitlement is based on their disability or upon End Stage Renal Disease. According to CMS, these provisions apply only to Medicare beneficiaries who are at least 65 years old.
Upon purchasing a Medigap policy, a Medicare beneficiary has 30 days in which to change her mind, cancel the policy and receive a refund of the previously paid premium.
A pre-existing condition exclusion means that health insurance may not cover the costs incurred as a result of a medical condition a person had prior to obtaining the health insurance coverage. The ability of insurance companies to impose pre-existing condition exclusions has been severely constricted since the enactment of a federal law called “HIPAA.” Under HIPAA, if an individual had health insurance coverage for a period of at least 6 months prior to their initial open enrollment period for Medicare, no pre-existing condition exclusion may be imposed. Most types of health coverage offer this “creditable coverage,” including employee or union group health insurance, retiree health insurance, Medicare Parts A and B and Medicaid (Title 19).
For Medigap purposes, creditable coverage is conferred for the number of months an individual was covered by another Medigap policy or was enrolled in a Medicare HMO. Thus, if an individual was previously in another Medigap plan or Medicare managed care plan for at least six months, no pre-existing condition limit can be imposed by a new Medigap plan.
Prohibition on Duplicate Policies
Another important provision of the law is that insurance companies and agents are prohibited from selling a beneficiary a second Medigap policy. An insurance agent is required to disclose this provision to Medicare beneficiaries and must obtain a written acknowledgment. A new policy may be sold to replace an existing policy, but this fact must also be acknowledged in writing. However, an individual may keep or purchase another medical insurance policy which is not a Medigap policy. Such policies include hospital indemnification coverage which only provide benefits for hospitalization and nothing else. When an insurance company or independent insurance agency sells such a policy, they must disclose to the purchaser the specific coverage and certify that the policy is not a Medigap policy.
Agents must also ask if the beneficiary is eligible for Medicaid coverage. A policy holder who becomes eligible for Medicaid may have premiums suspended for up to two years. If Medicaid eligibility is terminated during this period, the individual will be able to return to his prior Medigap policy.
Additional Protections for Connecticut Consumers
In Connecticut, any insurance company which sells Medigap plans A through L must sell them to any Medicare beneficiary over the age of 65 at any time, regardless of age, gender, medical condition or previous health insurance claims history. Insurance companies are prohibited from refusing coverage under these plans based upon a person’s medical conditions or medical history. This means that insurance companies are not allowed to medically underwrite plans A through L for any Medicare beneficiary over the age of 65. Thus, no health insurance company may require a health insurance examination of an older Medicare beneficiary prior to authorizing the sale of these Medigap plans.
What to Consider When Purchasing Medigap Insurance
There are many considerations when purchasing Medigap insurance. The most important considerations are the person’s medical needs and financial abilities. The individual should look at his or her current needs and abilities and also try to anticipate future concerns.
Obtaining Coverage and Switching Policies
Remember that under federal law an individual age 65 or older may enroll in any of the twelve policies during the six-month period after first being covered by Part B. Connecticut beneficiaries over age 65 are guaranteed the ability to purchase Medigap plans A-L beyond this six-month period.
Remember that prior coverage under another Medigap policy or Medicare Managed care plan counts toward the six-month waiting period for coverage of pre-existing conditions. Finally, some companies have liberal rules about letting a person switch from one policy to another policy offered by that company.
The next major consideration in selecting a Medigap policy is cost. A person must be able to afford the particular policy he or she desires. There is a great deal of price difference from policy to policy.
There is also a big difference in price from company to company for the same policy. For example, monthly premiums for companies selling Policy C in Connecticut range from $138.50 to $310.00 yet all the policies offer the exact same benefits. Thus, before purchasing one of the higher priced policies, the buyer should be certain that he desires something else about the company besides the policy’s benefits (for example, a reputation for timely claims processing).
Deductible Amount for High Deductible Medigap Policy Options (Plans F & J)
The high deductible amount for Medigap plans F and J is updated each year and is based on the August CPI-U figures released by the Bureau of Labor Statistics. The full text of the announcement is available on the CMS website at: https://www.cms.gov/Medicare/Health-Plans/Medigap/FandJ.html.
This figure represents the out-of-pocket expense, excluding premiums that a beneficiary must incur before the policy begins paying any benefits. Under the high deductible option, policies pay 100% of covered out-of-pocket expenses once the deductible has been satisfied in a year. Note, the high deductible option for benefit packages F or J was added by Section 4032 of the Balanced Budget Act of 1997, Sec. 1882(p) of the Social Security Act, 42 U.S.C. 1395ss(p).
Articles & Updates
- Barriers to Medigap Coverage for Beneficiaries Under Age 65 Oct 26, 2016
- Putting a Donut Hole Back in Medicare: Proposals to Increase Medigap Costs Put Vulnerable Beneficiaries at Risk Dec 20, 2012
- Medigap Rates Dec 1, 2011
- Medigap – Fact & Fiction Oct 13, 2011
- Health Reform Mandates Changes for Medigap Policies Jan 7, 2011