CHA Weighs in on Medigaps & Innovative Benefits

Bonnie Burns, our Training and Policy Specialist and also long-time consumer representative of the National Association of Insurance Commissioners (NAIC), submitted this letter to the Chair of the NAIC Senior Issues Task Force, Lori Wing-Heier. Burns addresses the conundrum of the introduction of “innovative benefits” in some standardized Medigap policies in various states and how this seriously dilutes the simplification of policies required by federal law for easy consumer comparison.

June 3, 2019


Lori K. Wing-Heier, Chair
NAIC Senior Issues Task Force
Attn: David Torian, Health Policy Analyst and Counsel


Dear Chairwoman Wing-Heier:

Innovative benefits embedded in or attached as a rider to Medicare Supplement insurance (Medigap) have proliferated around the country in recent years. The NAIC has a responsibility under the NAIC Model Regulation, and under federal law, to monitor innovative benefits approved by states, and to evaluate whether any of these benefits should be considered as an addition to the standardized benefits that comprise current Medigap benefit packages. We are particularly concerned when innovative benefits are embedded inside a standardized Medigap, confusing consumers with a partially standardized contract, and one that cannot be compared with others with or without additional benefits. Riders, while an imperfect alternative, at least don’t affect the underlying standardized benefit package for Medicare out-of-pocket expenses or the premiums for those benefits.


California Health Advocates (CHA) is a not-for-profit organization dedicated to providing quality Medicare, Medicare Supplement, and long-term care insurance information, training, and education. CHA supports the local Health Insurance Counseling and Advocacy Programs (HICAP) with materials and training, and is one of the federally designated State Health Insurance and Assistance Programs (SHIP). CHA has been engaged for decades both in the creation of standardized Medigap policies that became effective in 1992, and the protection of standardization that provides quality, reliable and easily understandable supplement insurance for Medicare beneficiaries.


The proliferation of benefits, deductions, and discounts added to or attached to Medigaps has begun to seriously dilute the simplification required by federal law, and to introduce consumer confusion in choosing coverage that cannot be adequately understood or compared when these added changes vary in coverage type and amounts, premiums, benefits, copayments, deductibles, annual limits, and network or sole source requirements. In addition, rules surrounding the administration of these benefits, or any appeal rights that may exist, are dependent on the state they are issued in, making administration and enforcement of any rights dependent on individual state laws.


The Model Regulation, and the Compliance Manual, differentiate between an innovative benefit and a discount with the distinction that a discount is not an innovative benefit. Yet, it appears that at least some additions to Medigaps reported to the NAIC may in fact be discounts and combined with other benefits. Limited, routine dental and vision benefits seem to be a common addition, while hearing benefits appear to be a discount from a public cost and not an insured benefit.


Riders that eliminate the high deductible provision in a High Deductible Plan after a certain number of years are another common addition, as is a premium deduction in return for only using a specified network of hospitals that waive the Part A deductible. Some companies have for years rewarded their purchasers by granting them the free use of a gym program such as Silver Sneakers, and financing the cost, if any, with their administrative expenses. More recently gym benefits are being added as an innovative benefit.


The state of Washington has denied the addition of some innovative benefits as shown on the NAIC chart of state reported Approved Medigap new or innovative benefits (6/14/17). Their reasoning was as follows:

“It has been our policy not to approve Medicare Supplement plans containing
“innovative benefits” as we find that they are generally not “consistent with the
goal of simplification of Medicare Supplement policies.” In addition, we do not
find that the physical examination, dental, vision, and hearing benefits contained
in this plan are “not otherwise available” in the marketplace.”


We agree with Washington state’s conclusion that at least some of these innovative benefits are not consistent with simplification and are generally available evidenced by the fact that companies offer these benefit as free standing products, unrelated to Medigap in our state and others. In other instances limited dental, vision, and hearing benefits of various configurations and cost are offered as specific riders to Medigaps.


A SITF subgroup recently spent months working on a bulletin, agent and consumer alerts, and a clarification of Medigap sales and marketing rules related to one simple change to Medigaps taking effect in 2020 that limits sales of certain Medigaps to newly eligible beneficiaries. The proliferation of benefits, changes, and additions to Medigaps should generate a similar concern to regulators as consumers are faced with Medigaps that are now only partially standardized. In addition, companies are already filing Medigaps with these same additions or benefits for the newly eligible in 2020, complicating yet another factor in sales and marketing to those newly eligible beneficiaries.


While we understand the need for Medigap carriers to compete with Medicare Advantage plans they should not do so buy roiling the marketplace with changes that undo the requirement for federal simplicity of the standardized benefit packages. We would be happy to participate in a discussion of the many non-medical benefits or services that MA plans are allowed to offer to discover which of those might be attractive to Medigap issuers as innovative benefits.


In addition Congressional Ways and Means Committee Chairman Richard E. Neal (D-MA) has asked NAIC President Eric Cioppa for information on ways to expand long-term services and supports (LTSS) through Medigap, citing the NAIC’s legislative mandate to assist Congress in developing specifications for these plans.


The NAIC has a responsibility to monitor the changes that are occurring in the states and the authority to consider whether any of these “innovative” benefits should be considered for inclusion as a benefit of a standardized plan. It also has the responsibility to clarify the difference between an innovative benefit and a discount, and the rules for including them in a Medigap. Given the request by Chairman Neal we believe it is time for the SITF to begin the discussion of innovative benefits, including the notion of including LTSS as a Medigap benefit.



Bonnie Burns, CHA Consultant
NAIC Consumer Representative


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.