Module 6 - Medicare Supplement Policies (Medigap)

**NOTE**

The 63 day time period complies with HIPAA regulations regarding the time period between the old insurance coverage to the new insurance coverage. If the time period is exceeded, the guaranteed issue is generally no longer valid.

Core Benefits

The core benefits found in Medigap plans are: a) Medicare Part A Coinsurance hospital costs up to an additional 365 days after Medicare Benefits are exhausted, b) Medicare Part B Coinsurance or co-payment (Plan K pays 50%, Plan L pays 75%, and Plan N pays 100% of the Part B coinsurance except up to a $20 co-payment for office visits and up to a $50 co-payment for emergency department visits.), c) Medicare 3-pint annual blood deductible (Plan K pays 50% and Plan L pays 75%), d) Medicare Hospice Care coinsurance or co-payment (Plan K pays 50% and Plan L pays 75%), and e) Medicare Preventive Care coinsurance.

Medigaps subject to Creditable Coverage (HIPAA Regulation)

The exclusion for preexisting conditions on a Medigap policy is subject to CREDITABLE COVERAGE. Creditable Coverage is any previous health insurance coverage that can be used to shorten the preexisting condition waiting period. This is a requirement under the Health Insurance Portability and Accountability Act (HIPAA). As long as there is not a gap of longer than 63 days between the creditable coverage and application for the Medicare Supplement, an applicant for a Medigap may use their creditable coverage to either shorten or eliminate the pre-existing condition waiting period.

Medigap Ratings

There are two (2) types of pricing plans allowed: 1) ATTAINED AGE RATING - With this type of plan, the premium will increase as the insured gets older. 2) ISSUE AGE RATING - With this plan, the policyowner will always pay the premium that the company charges for the original issue age for all its insureds of the same issue age.

Guaranteed Coverage for Certain Medicare Advantage (MA) Enrollees

A Medicare Supplement policy cannot be sold to an individual who is enrolled in a Medicare Advantage (MA) plan. The policy CANNOT be used to pay any "gaps" in the MA coverage. There are specific rules that apply to a Medicare Supplement if the Medicare Beneficiary is enrolled in the Original Medicare program and switches to a MA plan or vice versa. (See module)

Other Points about Medigap Plans

As mentioned earlier in the text, Medigap Plan N pays 100% of the Part B coinsurance except for a co-payment of up to $20 for some office visits and up to a $50 co-payment for emergency room visits that don't result in an inpatient admission.

Foreign Travel Emergency Care Coverage

Emergency medical care is covered outside of the U.S. by Medigap policies C, D, F, G, L and N (after a $250 foreign travel deductible) providing 80% of the Medicare beneficiary medical costs. The emergency must occur in the first 60 days of the trip. The policy has a $50,000 lifetime benefit.

Open Enrollment

Federal regulations and NC insurance regulations guarantee that for a period of 6 MONTHS from the date a recipient enrolls in Medicare Part B and is at least age 65 or older, the enrollee can buy a Medicare Supplement policy and cannot be denied a policy or charged a higher premium due to existing health problems. During the open enrollment period, the recipient can purchase any Medicare Supplement policy from any admitted insurer doing business in NC.

Standard Plans

Federal regulations limit the number of Medigap policies available to be sold. There are currently 10 plans available. Each plan has a core of benefits common to all of the plans. Each plan after Plan A (Basic Plan) will have varying benefits. Note: Some people may have old plans referred to as plans E, H, I, and J that are no longer sold. Individuals that purchased these policies are currently allowed to keep them.

Medigap Duplicate Coverage

Federal regulations make it unlawful to sell duplicate Medicare Supplement Coverage. Persons who apply for a Medicare Supplement must sign a statement that they do not have an existing Medicare Supplement or they will replace their existing policy.

Medigap and Medicaid Eligibility

If a Medicare Supplement insured begins receiving Medicaid benefits, the insured may, within 90 days, request a suspension of premiums and benefits under the policy for up to 2 years. Medicare Supplement coverage may be automatically reinstated (without conditions) if the insured loses Medicaid eligibility and notifies the insurer within 90 days of the lost Medicaid eligibility.

Group Medigap Conversion Regulation

If a group Medigap is terminated by the group policyholder and is not replaced, the group insurer must offer certificate holders individual policies. If the member terminates membership in the group, the insurer must offer the certificate holder conversion to an individual policy. Insurers may offer continuation of coverage under the group policy at the option of the group policyowner.

Replacement of Individual Medigap Coverage

If a sale involves replacement of a Medicare Supplement, a Notice Regarding Replacement must be given to the applicant. The replacing insurer cannot establish a new or extend any period for a preexisting condition, waiting period, exclusions, elimination period or probationary period in the new policy.

63-Day Guarantee Issue Period for Medicare Standard Supplement Plans

In addition to the previously discussed 6 month open enrollment period for Medigap, an individual may enroll in Medicare Supplement plans A, B, C, F, K or L without a preexisting condition waiting period if: a) An individual whose coverage under an employer group health plan that provides health benefits to supplement Medicare is terminated. b) People with Medicare enrolled under a Medicare Supplement policy that terminates due to bankruptcy or insolvency of the insurance company. c) People with Medicare enrolled in a MA program or Medicare SELECT policy that is discontinued because the organization terminates its Medicare contract, the person with Medicare moves outside the plan's service area, or the person with Medicare disenrolls from the plan with due cause.

**NOTE**

Insurers may NOT change any of the benefits in any of the plans. The plans are sold as is. The only difference between insurers would be the premiums charged.

Insurers must offer Medigap Plan A

Insurers operating in the Medicare Supplement market in North Carolina must offer Plan A. Insurers are not required to offer the other plans. All of the other plans may be offered at the discretion of the insurance company. If an insurer offers other Medigap plans, then it must also offer plans C and F.

Group Medigap Replacement Regulation

Insurers replacing existing group Medigaps must cover everyone in the existing group and there cannot be exclusions for preexisting conditions already covered under the replaced (existing) policy.

Medicare SELECT

Medicare SELECT is a type of Medigap policy that requires the insured to use hospitals, and in some cases, doctors within its network to be eligible for full insurance benefits (except in an emergency). Medicare SELECT can be any of the standardized Medigap Plans A through N. Medicare SELECT policies generally cost less than other Medigap policies. However, if the insured does not use a Medicare SELECT hospital or doctor for non-emergency services, he or she will have to pay some or all of what Medicare doesn't pay. Medicare will pay its share of approved charges no matter which hospital or doctor is chosen.

Standards for Marketing Medigap

Medicare Supplement insurers must establish programs to assure that duplicate coverage is not sold, excessive insurance is not sold, information about possible future premium increases is disclosed in the policy, policies are made available to the public, and to insure that agents act ethically and legally avoiding twisting (a deceptive trade practice), high pressure tactics and cold lead advertising.

Enrollment in Original Medicare Required when Purchasing Medigap

Medicare Supplements cannot be purchased or sold (by an insurer) unless the applicant for the policy is enrolled in Parts A and B. Individuals enrolled in a MA Plans (Part C) cannot enroll in or keep an existing Medicare Supplement policy. Note: Remember that most people will not have a premium for Part A but will have a premium for Part B. Also, Medicare Supplements are issued as individual policies - they are not issued as Family Plans or Joint Policies.

Other Points about Medigap Plans

Medigap Plan F also offers a high-deductible plan (in place of the regular F plan). This means the insured must pay out-of-pocket for Medicare-covered costs up to the deductible amount of $2,240 in 2018 before the Medigap plan pays anything. The advantage of the high deductible plan is a lower monthly premium.

Other Points about Medigap Plans

Medigap Plans K, L, and M pay only a percentage of some of the benefits listed. If a person has a Medigap Plan K, the most that he or she will pay out-of-pocket in 2018 is $5,240. If he or she has a Medigap Plan L, the most out-of-pocket will be $2,620 in 2018. After the out-of-pocket limit is met and the Medicare Part B 2018 annual deductible of $183 is paid, the policy will pay 100% of the Medicare approved costs.

Mandatory Loss Ratio

NC Insurance Regulations require all Medigaps sold in NC to have a loss ratio (premiums paid out in benefits) of at least 65% for individual Medigap policies and 75% for group Medigap policies. Policyowners must be given a refund if their policies fall below the required loss ratio. Medigaps sold by mail order are deemed to be individual policies.

**NOTE**

Preexisting conditions are health conditions that had been diagnosed or had been medically treated within the 6 months prior to the application for the policy. This is referred to as the "six and six" rule. The insurance company can only "look back" 6 months prior to the application for coverage and waive coverage for the 6 months after policy issue.

Employer Group Plans and the need for a Medigap

Typically, a Medigap is NOT necessary if an individual is covered under an employer group or union health plan. There are rules regarding the enrollment in a Medigap after the employer plan or union plan ends. There are a variety of situations in which a person may not have had a Medigap due to the coverage under the employer plan or union plan. Most situations will allow the Medicare Beneficiary the opportunity to enroll in Plans A, B, C or F from any insurer in the state. Remember, the gap between the coverage under the employer or union plan and enrollment in the Medicare Supplement cannot be greater than 63 days. Open enrollment is up to 6 months after enrollment in Medicare Part B. During the open enrollment period, the applicant is guaranteed that the policy will be issued. The policy may have a higher premium than one issued for a person that does not have a disability or ESRD. When an insured who has been issued a policy due to disability or ESRD turns age 65, he or she will have a new 6 month open enrollment period and may purchase any of the standard Medicare Supplement Plans.

Medicare Supplement Policy AKA Medigap

Also known as a Medigap Policy, is a health insurance policy sold by private insurance companies to fill in the coverage gaps in Original Medicare. The coverage gaps include deductibles and coinsurance requirements. The policies must follow federal and state laws. Medicare Supplements do NOT cover gaps in Medicare Advantage (MA) plans (Part C) or provide coverage for Medicare-approved Prescription Drug Plans (Part D). Medicare Supplement policies CANNOT cover anything that Medicare would NOT approve payment for such as elective cosmetic surgery.

Agent Compensation for the Sale of a Medigap

An insurance agent or broker who sells a Medicare Supplement cannot earn more than 200% in first year commissions relative to the second year's renewal commissions. The renewal commission must be the same in years 2 through 6. Commissions for replaced policies cannot be any greater than the renewal commissions paid by the insurer for similar policies.

Medigaps and Prescription Drug Coverage

Any Medicare Supplement policy issued effective January 1, 2006 CANNOT have a prescription drug benefit.