CHA Responds to Proposed Health Plan Innovation Initiatives for Supplemental Insurance

Health Plan Innovations RFI
Centers for Medicare & Medicaid Innovation
Centers for Medicare & Medicaid Services
U.S. Department of Health and Human Services

Re: CMMI Request for Information on Health Plan Innovation Initiatives for Supplemental Insurance

California Health Advocates is writing in response to the Request for Information on Health Plan Innovation Initiatives issued on October 2, 2014 in which CMMI invites comments on Medigap and Retiree Supplemental health plans.

California Health Advocates (CHA) is a private nonprofit that supports the program managers of the California Health Insurance Counseling and Advocacy Program (HICAP), a federally funded State Health Insurance Assistance Program (SHIP), with technical assistance, materials and training on Medicare and supplemental insurance. CHA has first-hand knowledge of consumer experience with supplemental insurance through our work with beneficiaries, through our HICAP members, and with other advocacy groups serving seniors. I, Bonnie Burns, have decades of experience with state and federal regulation of these products through my work with the National Association of Insurance Commissioners (NAIC) during the initial standardization of Medigaps and subsequent changes, the California state legislature, and the state insurance department as changes have been made to these products.

We applaud federal consideration of support services for Medicare chronically ill beneficiaries, and we think this should be an integral part of the Medicare program, not a service Medigap carriers should provide. However we dispute an assumption in the RFI that Medigaps can have any effect on the “cost and quality of care” provided to Medicare beneficiaries and note that any benefits paid by a Medigap policy can only be paid after Medicare has approved the medical necessity of those services and approved payment for covered services.

We submit the following comments for your consideration.

Background on Medigaps

Congress mandated that Medigap benefit packages be standardized to ensure that beneficiaries could understand and select the coverage best suited to their needs. Congressional action was taken after a long history of abusive sales practices of Medigap products with a myriad of confusing benefit designs. Congress requested that the National Association of Insurance Commissioners (NAIC) form a stakeholder workgroup of regulators, insurers, and consumer groups to design ten standard benefit packages. These and other requirements were subsequently amended into the Social Security Act, the NAIC Model Act and Regulation for Medicare Supplement Insurance, and added into the laws of each states. The Model Act and Regulation have been periodically updated at the request of the Congress. I, Bonnie Burns, represented consumers on the original and subsequent stakeholder workgroups and continue to work with the NAIC on issues affecting consumers and these products.

Standardization of Medigap benefit packages eliminated most of the consumer confusion, and marketing abuses that occurred with these products prior to Congressional action. Since standardization consumers have been able to easily assess their own needs for coverage based on a simple comparison of Medigap benefit packages. We are very concerned that well intentioned innovations not destroy or erode the gains made by standardizing these products, or impose new costs on Medicare beneficiaries.

Supplemental Insurance

Supplemental insurance is designed to pay costs after Medicare and for services not covered by Medicare such as deductibles, coinsurance and copayments. Medicare beneficiaries pay for their supplemental coverage, in addition to their Medicare premiums, for protection against large unexpected health care costs beyond what Medicare will pay, and to budget their health care expenses on a manageable monthly basis.

Supplemental products pay benefits only after Medicare has made a determination that the health care services a beneficiary received were medically necessary and has approved Medicare payment. Medigap insurance by law can pay benefits only after those payment determinations have been made by Medicare. Once Medicare’s payment information is made available to Medigap and retiree plans those plans can calculate and pay their supplemental benefits.

Medigap: Medigap insurance is supplemental insurance purchased by individuals from insurance companies that are strictly regulated by federal and state laws. Medigap carriers must pay benefits based on specific cost sharing amounts described in a standardized benefit package, and cannot alter those payment amounts for any reason. Medigap carriers do not and cannot by law modify, change, or restrict their benefits. Carriers cannot use care management, care coordination, or other managed care procedures or cost containment measures to adjust their benefits. To do so would be in direct conflict with federal law and the laws or rules of the individual states. (See: The NAIC Model Act and Regulation for Medicare Supplement Insurance which is incorporated into federal law by reference.)

Retiree Coverage: Some Medicare beneficiaries are covered by group retiree plans through their or their spouse’s former employer or union. The majority of retirees pay at least some of the premium for their supplemental coverage. Coverage offered through previous employment treats Medicare benefits as primary coverage and pays secondary benefits based on each employer’s contractual health care benefits with its retirees. These benefits often wrap or coordinate benefits with Medicare’s benefits. Secondary benefits may cover some or all of the retiree’s out-of-pocket Medicare expenses. These employment based benefits are not bound by federal or state law for a Medigap policy, but by an employer’s contracted health benefits with its retirees.

Hybrid Medigap: Medicare Select Medigap polices were an early attempt to introduce a managed care PPO type arrangement into Medigap coverage. Medicare Select policies were designed as a hybrid managed care product, and could limit or restrict the Part A deductible payment when Medicare covered services were received outside of a specific Medigap network.  While larger metropolitan hospitals were more likely to be part of a Medicare Select network and waive the Part A deductible, smaller urban and rural hospitals rarely agreed to such a reduction in revenue, leaving beneficiaries with unexpected out of pocket costs. Few companies found Medicare Select to be an attractive policy design.

Our Responses to Medigap Questions in the RFI

A pilot program that helped Medicare beneficiaries better manage their daily chronic care needs and utilize existing community services and supports would be very beneficial for beneficiaries with costly, complex, chronic care needs.  These beneficiaries often need assistance managing medications and maintaining appropriate nutrition. They often need transportation to and from medical appointments and local pharmacies. They frequently need help understanding the directions of medical providers. However, we think the appropriate venue for this activity is the Medicare program, and would vigorously support such a pilot. We do not think this is an appropriate task for Medigap carriers.

Medigap carriers cannot alter the benefit determinations that have been made by Medicare by the use of care management, care coordination, or any other cost saving measure that might be applied to Medigap benefits. If Medigap companies were allowed to make their own medical necessity determination, or adjust their benefits based on a company’s cost and quality of care criteria it would cause widespread confusion for beneficiaries, defeat standardization of the federally prescribed benefit packages and violate federal and state laws. Any change to modify the terms and conditions of a Medigap would require a change in the Social Security Act and trigger the statutorily required stakeholder subgroup to consider changes to the NAIC Model. State regulators would also have to make changes in their state law.

In addition there is the potential to add cost to Medigap premiums for everyone in a Medigap risk pool by providing a service to a targeted number of people with a Medigap policy.
Would such a service be available only to people with a certain Medigap plan from a participating company or to everyone who has any Medigap from a participating company? Adding these types of services and techniques to a Medigap would necessarily involve new costs for setting up and carrying out such changes.

We are concerned that a pilot project like this would only be attractive to large carriers with their own Medicare Advantage product with the resources and systems in place to implement such a change. Smaller carriers might find it too expensive to participate in such a project and be at a disadvantage in the marketplace, leading to the eventual elimination of smaller carriers and a consolidated Medigap market consisting of a few large companies.

If CMMI proceeds with a pilot program as suggested in the RFI, any services that are part of such a projects should not be incorporated into the benefits of a Medigap policy but provided completely outside the current federal and state regulatory requirements for Medigap policies.

  • Any costs should be transparent, strictly regulated, and completely isolated from the costs used to price a Medigap policy and should not result in any new costs imposed on beneficiaries.  Standard measurements should be used to determine the value of services, improvements in health outcomes, and the monetary value and costs of services.
  • Any care coordination or supportive services should be provided as part of a completely separate set of services.  The role of Medigap carriers should be strictly limited and not conflict with regulatory rules for Medigap policies.  Medigap carriers should not play a role in the delivery of any health care services to a Medicare beneficiary, or in the selection of a health care provider.
  • Beneficiary participation should be completely voluntarily, consistent standards be adopted for all of the services in such a pilot, and participants have the option to withdraw at any time to ensure that a beneficiary is not trapped in a system that restricts treatment or providers.
  • We also recommend that the NAIC Senior Issues Task Force and its Medigap stakeholder workgroup be engaged to work through some of the issues and conflicts that might arise related to offering a service package to people with Medigap policies.

We support the idea of coordination and care management for Medicare beneficiaries, particularly those with chronic illnesses who use greater amounts of medical services and prescription drugs. This population could benefit greatly from a nurse or care coordinator who would consult with patients about their diet, help them comply with recommended health care advice, assist them in filling and taking appropriate medications, helping to arrange transportation to medical appointments and pharmacies, and initiate local community services such as Meals on Wheels. But we think this is better done through the Medicare program and not with Medigap carriers.

We appreciate the opportunity to comment on this RFI.


Bonnie Burns, Consultant
(831) 438-6677

Bonnie Burns signature

California Health Advocates
Elaine Wong Eakin, Executive Director
5380 Elvas Avenue, Suite 221
Sacramento, CA 95819

1 Section1882(t) of the Social Security Act
2 HHS-OIG has not waived anti-kickback concerns for waivers of Part B expenses.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.