Clients often ask us for help with planning for health coverage in retirement. The rules can be confusing, and making assumptions can be costly. Cardan Capital Partners Co-Founding Partner Marti Awad recently teamed with Carol Janz Booth of Group Insurance Analysts Inc., to share some insights about making proactive choices when it comes to your Medigap coverage.
The Medicare Access and CHIP Reauthorization Act of 2015, otherwise known as MACRA, took effect Jan. 1, 2020. This new law has several effects — but we’re going to take a look at what MACRA means for those who have a Medigap insurance plan or for those who will be eligible to enroll.
First, let’s review the basics of a Medigap plan.
The Medigap plan basics
Medigap insurance — also called a Medicare Supplement — is a private plan sold by private companies that provides coverage to help fill the gaps in original Medicare Parts A and B. After Medicare has paid its portion, a Medigap insurance policy covers some or all of the expenses that Original Medicare does not. Medigap insurance is not required and is paid for by the policyholder.
Medigap insurance is an alternative to a Medicare Part C Advantage plan. You can purchase one or the other — but not both.
Medigap plans are standardized. There are 11 plan types, identified by letters A through N, and all plans of the same letter are identical in benefits across companies. So, for example, a Plan G has the same benefits as every other company’s Plan G.
Medigap plans offer freedom to choose your providers and doctors. Medigap plans do not have a network for physicians or hospitals, and they do not require a referral to see a specialist. You may see any doctor or provider as long as they participate in Medicare and accept new patients.
Portability is another key feature of a Medigap plan. It is transferred with you from state to state should you move, own a second residence or need treatment in another state. There are no geographic limits on where you receive the care as long as the care is received in the United States. Some policies offer coverage outside the U.S.
Premium costs of Medigap plans can vary widely from insurer to insurer for the exact, same coverage. The only two differences between any of the plans are the monthly premium you pay to the insurance company and the out-of-pocket costs for care. The greater the coverage, the higher the premium — and the monthly premiums may increase over time after the policy is purchased.
Cost-sharing is an important concept to understand when owning or purchasing a Medigap plan. Some plans require you to pay a Medicare Part B deductible first — and several insurance companies offer these plans with a high-deductible option for clients who would like to pay lower premiums. Some plans require copays (a flat dollar amount), and others use coinsurance (a percentage dollar amount) to split costs between you and the insurance company.
You can enroll in a Medigap plan any time after you turn 65 and have enrolled in Medicare Part B. Depending on your residence, plans may be available if you are on Medicare because of a disability. Your enrollment is “guaranteed” if you enroll within six months after you turn 65. It is critical that you pay attention to this option. The six-month period is called the Open Enrollment Period, and the insurance company cannot consider your medical history or any pre-existing condition during this period. There are also other enrollment periods that may provide guarantee coverage, such as a Special Election Period. These are due to special circumstances or events in your life, such as moving or losing other insurance coverage. It is important to understand your election periods because you could be denied or delayed coverage outside these enrollment windows. You may also have to pay a higher rate based on your health.
If you decide later to change your existing supplemental policy to another plan, even one offered by the same insurance company, medical underwriting will be required. Again, your health information may be used to accept or deny coverage and to increase your policy’s premium rate.
Medigap plans must be guaranteed renewable, which means as long as you pay the premium on time, the policy is renewed automatically from year to year. Policies often incur an annual rate increase, which is communicated to the policyholder each year in writing when the policy comes up for renewal. It is a common misconception that there is an annual Medigap open enrollment period. This is NOT the case. Again, you can purchase Medigap coverage at any time. However, during the Medigap Open Enrollment Period (the six months after you turn 65) coverage cannot be denied or based on your health record.
The Medicare Annual Election Period is only for Medicare Part C Advantage Plans and Part D drug coverage, and it often creates confusion for those Medigap policyholders who presume they can swap out their plans to a different carrier or different plan without adverse consequences.
Medigap plans do NOT include a Part D prescription drug plan. If you choose a Medigap plan, you will need to enroll in a stand-alone Part D drug plan.
How MACRA changed Medigap
Now that the Medigap basics have been reviewed, let’s take a look at how legislation enacted in 2015 (MACRA) changed Medigap plans as of Jan. 1, 2020.
One change was that for individuals newly eligible for Medicare, the Part B annual deductible no longer can be covered by a Medigap plan. For 2020, the deductible is $198. The purpose was to curb overutilization of health care by ensuring that Medicare beneficiaries have to spend at least some of their own money in out-of-pocket charges when they seek medical treatment. As a result, Medigap Plans C and F were no longer offered for those newly eligible as of the beginning of this year. However, individuals who already had Plans C and F were able to keep their current versions of those plans.
As an alternate to Plan F, you may want to consider Medigap Plan G because its benefits are identical — except that you’ll have to pay the Medicare Part B deductible each year. For Plan C, you may want to consider Plan D. It’s important to note that the Part B deductible is re-determined annually.
Speculations about the future of Medigap Plan F and Plan C for current policyholders are pure conjecture. What will happen to an increase in rates over time? No one knows. However, we do know annual increases are to be expected with Medigap plans across the board, and IF a plan is discontinued, the law gives policyholders a “guarantee-issue” period to select another plan.
A Special Enrollment Period (SEP) is coming to Colorado beginning January 1, 2021 ending June 30, 2021
Under newly established regulations a Special Enrollment Period (SEP) applies for Colorado residents currently enrolled in a Medigap Plan C, standard Plan F, or high-deductible Plan F. During this period, you can unenroll from your current policy and enroll in a new Medicare supplement policy without being subjected to any of the underwriting requirements – in other words, this is a guarantee-issue period. The SEP is intended to provide some premium relief to policyholders in these old plans due to rising monthly premiums, and shrinking member pools.
If you meet the basic eligibility requirements:
- Plan F policyholders can enroll in a Plan G with either their current insurer OR a different insurer. Those with a high-deductible Plan F can enroll in a high-deductible Plan G, similarly.
- Plan C policyholders can enroll in a Plan D with either their current insurer OR a different insurer.
Who doesn’t qualify for this SEP? Those who became newly eligible for Medicare on or after January 1, 2020. Furthermore, Colorado’s SEP does not apply if you are enrolled in Medigap policies other than Plan C, Plan F, or a high-deductible Plan F. If you move to CO from another state during this time and meet all the eligibility criteria, you may utilize this SEP. You may be required, however, to provide proof of your current coverage upon applying.
Ask your Medicare Broker about enrolling during this upcoming SEP, if eligible.
AHIP (American Health Insurance Plan) Medicare Training, 2018. www.medicare.gov
The content contained in this article is meant for educational purposes and is not an endorsement of Group Insurance Analysts Inc. Information presented is not meant to be a complete discussion of Medicare or Medigap nor plan-specific benefits. All expressions of opinion are as of its publishing date and are subject to change.