Keep Medigap Plans Standardized ~ Support SB 407

Keep Medigap Plans Standardized ~ Support SB 407

Approximately 11 million Medicare beneficiaries have Medicare Supplement insurance, better known as Medigap. Medigap pays some or all of Medicare’s out-of-pocket costs, namely the coinsurance and deductibles. Medigap insurance is offered through 10 standardized, easily comparable benefit packages, plans A-N, mandated under federal law. (Note: plans E, H, I and J were previously removed due to changes in federal law.)

 

This standardization of benefits wasn’t always the case, but because of federal law changes in 1990, Medicare beneficiaries can consistently compare each set of Medigap benefits/plans and premium and choose the combination best suited to their needs. Beneficiaries know, for example, that plan A covers benefits x, plan B covers benefits xy, plan C covers benefits xyz, and so on regardless of which company sells it. Companies compete on price and service but cannot change any of the benefits or benefit packages. Since Medigap benefits are based on Medicare’s payment of Medicare’s approved amount, benefit payment cannot be separately disputed.

 

Insurers’ recent action threatens Medicare beneficiaries’ ability to reliably and easily compare Medigap plans and continue to make informed choices about their coverage. It could also lock beneficiaries into rapidly escalating premium costs for their Medigap coverage. Citing broad regulatory language, insurers have begun adding non-medical “innovative benefits” to the most popular Medigap package, plan F, in an attempt to distinguish their product from others in the marketplace. These non-medical innovative benefits, vision, dental and hearing, do provide some additional benefit. But, the inclusion of these non-standard benefits inside a standard Medigap plan destroys the ability of consumers to make meaningful comparisons between numerous additional non-medical benefits of striking complexity and variation offered in various formats by multiple insurers.

 

Medicare beneficiaries must now compare the deductibles, copayments, annual limits, premiums, and other requirements of each vision, dental, and hearing benefit in each Medigap from each insurer. In addition, inserting these non-medical innovative benefits inside a Medigap will affect the entire cost of Medigap coverage, leading to premium increases, thus locking beneficiaries into an increasingly expensive Medigap with no guaranteed issue right to a lower cost plan.

 

SB 407 will prohibit the practice of embedding these non-medical benefits into the body of a standard Medigap plan, and will limit those benefits to riders that can be sold separately, priced separately, and have no effect on the overall claims cost of a Medigap plan. We urge your support to maintain the original federal intent of standardized benefit plans to cover Medicare’s out-of-pocket costs. Please contact the author, Senator Monning with a letter of support, and your State Senator at senate.ca.gov/ to voice your support of SB 407 and urge her/him to vote Yes on SB 407.

 

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Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.