What's Medicare Supplement Insurance (Medigap)

Enhance your healthcare coverage with our comprehensive guide to Medicare Supplements. Explore the ins and outs of supplemental insurance options, designed to fill the gaps in your Medicare plan. Gain valuable insights into coverage benefits, costs, and how to choose the right supplement for your unique needs. Stay informed about the latest trends and updates in Medicare Supplements, ensuring a well-rounded and personalized healthcare solution. Empower yourself with the knowledge to make informed decisions about your health and financial well-being. Discover the advantages of Medicare Supplements with our expert guidance. Explore now!

Purpose of Medicare Supplements

Medicare Supplement plans, referred to as Medigap, are policies issued by private insurance companies that are designed to fill in some of the gaps in Medicare. These plans are designed to fill the gap in coverage attributable to Medicare’s deductibles, copayment requirements, and benefit periods. These plans are not administered through the federal Social Security program, as is Medicare, but instead are sold and serviced by private insurers and HMOs. These policies must meet certain requirements and must be approved by the state department of insurance. Medicare Supplement policies pay some or all of Medicare’s deductibles and copayments.

Under the Omnibus Budget Reconciliation Act of 1990 (OBRA), Congress passed a law that authorized the NAIC to develop a standardized model for Medicare supplement policies. This model requires Medigap plans to meet certain requirements as to participant eligibility and the benefits provided. The purpose of this law was to eliminate questionable marketing practices and to provide consumers with a degree of protection and to standardize the protection afforded.

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Medicare supplement plans are sold through private insurers, not federal health insurance programs.
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Open Enrollment

Anyone who qualifies for Medicare may also purchase a Medicare Supplement and pay the necessary premium for those additional benefits. Under OBRA, Medicare supplement insurance may not discriminate in pricing or be denied on the basis of an applicant’s health status, claims experience, receipt of health care or medical condition. An open enrollment period is a 6-month period that guarantees the applicants the right to buy Medigap once they first sign up for Medicare Part B. In essence, to buy a Medigap policy, the applicant must generally have both Medicare Part A and Part B.

Medicare Supplement policies cannot be used to pay for Medicare Advantage (Part C) copayments, deductibles, or premiums. Additionally, insurers are prohibited from selling Medicare Supplement policies to anyone already enrolled in Medicaid.

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Standardized Medicare Supplement Plans

In order to standardize the coverage provided under Medicare supplement policies, the NAIC has developed standard Medicare Supplement benefit plans which are identified with the letters A through N. The core benefits found in Plan A must be offered in all the plans, and the other plans have a variety of additional benefits. Plan A must be offered by any insurer marketing Medigap plans, while the other plans are optional.

Once a person becomes eligible for Medicare supplement plans, and during the open enrollment period, coverage is offered on a guaranteed issue basis. In these situations, an insurance company must do the following:

  • Sell the patient a Medicare supplement policy;
  • Cover all pre-existing conditions incurred more than 6 months from effective date of coverage; and
  • Not charge more for a supplement policy because of past or present health problems.

Core Benefits

Medicare Supplement Plan A provides only the core benefits. The core benefits, also known as basic benefits, cover the following:

  • Part A coinsurance/copayment (NOT Part A deductible);
  • Part A hospital costs up to an additional 365 days after Medicare benefits are used up;
  • Part A hospice care coinsurance/copayment;
  • Part B coinsurance/copayment; and
  • The first 3 pints of blood (“blood deductible” for Parts A and B).

Additional Benefits

In addition to Plan A, which offers only the core benefits, most insurers also offer some or all of the additional plans. Insurers are not allowed to change the benefits offered in these supplemental plans, nor may they change the designation letter of any of the plans.

Plan B – Core benefits plus Medicare Part A deductible.

Plan D – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, and the foreign travel benefit.

Plan G – Core benefits, Medicare Part A deductible, skilled nursing facility coinsurance, 100% of Medicare Part B excess charges, and the foreign travel benefit. This plan must pay for services of activities of daily living (ADL) that Medicare doesn’t cover.

Plans C, E, F, H, I and J are no longer available. These plans will remain in force for those insureds who purchased them when they were still available.

Medicare Supplement Plans K and L are lower premium plans with higher out-of-pocket costs. The core benefits are different in these 2 plans as well:

  • Approved hospital costs for the copayments for days 61 through 90 in any Medicare benefit period.
  • Approved hospital costs for the copayments for lifetime reserve days 91 through 150.
  • Approved hospital costs for an additional 365 days after all Medicare benefits are used.
  • 50% of charges for the first 3 pints of blood in Plan K, 75% of charges for the first 3 pints of blood in Plan L.
  • 50% of Part B coinsurance amount in Plan K, 75% of Part B coinsurance amount in Plan L.
  • 50% of hospice cost-sharing and respite care expenses for Part A in Plan K, 75% of hospice cost-sharing and respite care expenses for Part A in Plan L.

Plan K includes 50% of the Medicare Part A deductible and 50% of skilled nursing facility coinsurance.

Plan L includes 75% of the Medicare Part A deductible and 75% of skilled nursing facility coinsurance.

Plans M and N provide benefits similar to Plan D, but the co-pays and deductibles might be different.

All Medicare supplement plans must offer the core benefits available in Plan A.
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Ohio Regulations and Required Provisions

Policy Provision Standards

Medicare supplement policies issued in Ohio are prohibited from containing any benefits that duplicate those provided by Medicare.

The Director is responsible for adopting specific standards for Medicare supplement policy provisions. The standards may cover, but are not limited to, the following:

  • Terms of renewability;
  • Conditions of eligibility;
  • Nonduplication of coverage;
  • Probationary periods;
  • Benefit and claims standards, limitations, exceptions, and reductions;
  • Elimination periods;
  • Replacement requirements;
  • Recurrent conditions;
  • Definitions of terms;
  • Advertising and marketing practices;
  • Compensation arrangements;
  • Reporting practices; and
  • Prohibited policy provisions.

Additionally, the Director may adopt rules necessary to conform Medicare supplement policies issued in this state to federal regulatory standards, including, but not limited to:

  • Refunds or credits for policies that do not meet loss ratio requirements;
  • Uniform methodology for calculating and reporting loss ratios;
  • Public access to policies, premiums, and loss ratio information;
  • Processes for approving or disapproving policy forms and proposed premium increases;
  • Public hearings prior to premium increase approval; and
  • Standards for Medicare SELECT policies.

Solicitation of Medicare Supplements

It is deemed an unfair or deceptive act or practice to imply that any Medicare Supplement plan is affiliated with or sponsored by the federal government, the Social Security Administration, the Centers for Medicare and Medicaid Services, or the Department of Health and Human Services. All solicitation, advertisement, or marketing materials must include the following disclaimer: “Not connected with or endorsed by the U.S. government or the federal Medicare program.”

Agents may NOT make any of the following unsolicited contacts with a Medicare-eligible person:

  • Door-to-door solicitation including leaving information such as a leaflet, flyer, or door hanger at a residence, or leaving information on someone’s car;
  • Approaching individual prospective applicants in common areas (e.g., parking lots, hallways, lobbies, sidewalks, etc.); or
  • Telephone solicitation including leaving voicemail messages.

These prohibitions do not extend to mail and other media or unsolicited contacts with prospective applicants with whom the entity or insurance agent has a business relationship.

It is also illegal for agents to do any of the following:

  • Misrepresent themselves as “counselors,” “advisers,” or other designations that obscure their actual role;
  • Offer a misleading description of benefits provided by the Medicare program or the Medicare Supplemental policy offered;
  • Induce an applicant to sign a blank form or application;
  • Use titles or initials to imply that they are affiliated with or sponsored by the federal government, Medicare program or Social Security Administration; or
  • Make any misrepresentation or incomplete comparison, by commission or omission, to induce a Medicare-eligible person to purchase, amend, lapse, forfeit, change or surrender insurance.

Standards for Marketing

The following are standards for marketing Medicare supplement policies:

  • Every insurance company must establish marketing procedures to assure that any comparison of policies by their agents will be fair and accurate;
  • Insurance companies must have marketing guidelines to assure that excessive amounts of insurance are not sold or issued;
  • There must be established a formula to determine whether a replacement policy contains benefits clearly and substantially greater than those under the policy being replaced; and
  • The first page of the policy must contain the “Notice to buyer: This policy may not cover all of your medical expenses.”

Insurance companies must make every reasonable effort to determine whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the type and amounts that they currently own. The insurance company must establish procedures to verify that they are complying with these rules.

Twisting, high-pressure tactics, and misleading advertising may not be utilized. The terms Medicare Supplement, Medigap, Medicare Wrap-Around and similar words may not be used unless the policy is in full compliance of the law.

Advertising

All advertisements of Medicare supplement insurance policies must be submitted to the Director for approval before they are used. Any advertisement not rejected within 30 days after filing is considered approved.

If the voice or image of a celebrity is used in a Medicare supplement insurance advertisement, the advertisement must disclose that the celebrity has been paid to endorse or advertise the policy. In radio or television advertising, the celebrity must verbally disclose the fact that the endorsement was purchased. In print advertising, the disclosure must appear in at least 12-point type, surrounded by a box outlined in black. The issuer may determine the language of this disclosure, provided that the language is clear and unambiguous.

Appropriateness of Recommended Purchase and Excessive Insurance

Any agent selling a Medicare Supplement must make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. The application for Medicare Supplement insurance must include a statement signed by the agent that read as follows: “I have reviewed the current health insurance coverage of the applicant and found that additional coverage of the type and amount applied for is appropriate for the applicant’s needs.”

Any sale of a Medicare Supplement policy that would give the insured more than one such policy is prohibited.

Outline of Coverage

With every Medicare Supplement policy delivered in Ohio, an outline of coverage must be delivered to the applicant at the time of application. The format and content of the outline of coverage will be determined by the Director. The outline of coverage must include

  • A description of the principal benefits and coverage provided in the policy;
  • A statement of the renewal provisions, including any reservation by the issuer of a right to change premiums, and disclosure of the existence of any automatic renewal premium increases based on the age of the policyholder or certificate holder; and
  • A statement that the outline of coverage is a summary of the policy.

Right to Return (Free Look)

Medicare Supplement policies must have a notice prominently printed on the first page of the policy stating that the applicant has the right to return the policy within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason.

Replacement

Application forms for Medicare supplement insurance policies must include a question to determine if the applicant intends to replace any existing accident and sickness policy with the Medicare supplement policy. If that is so, the insurer or its agent must furnish the applicant with a Notice Regarding Replacement prior to issuing or delivering the Medicare supplement policy.

A copy of the replacement notice generally must be left with the applicant and a signed copy also is to be retained by the insurer. The regulations specify that form to be used by insurers for replacement notices.

Required Disclosure Provisions

Medicare supplement policies must include a renewal or continuation provision that is appropriately captioned and on the first page of the policy. It must include any reservation by the insurance company of the right to change premiums and any automatic renewal premium increases based on the policyholder’s age (attained age policies). Issue age policies do not allow an increase in premium based on age; they allow an increase in premiums only because of an increase in benefits.

Insurers must also provide an outline of coverage with each Medicare supplement policy that clearly informs the applicant or insured of the basic nature and provisions of the policy.

Medicare supplement policies must not provide for the payment of benefits based on standards described as usual and customary, reasonable and customary, or similar words.

Permitted Compensation Arrangements

An insurance company may pay compensation to an agent for the sale of a Medicare Supplement policy. The term compensation includes any kind of monetary and nonmonetary remuneration or payment relating to the sale or renewal of the policy, including but not limited to bonuses, gifts, prizes, awards and finder’s fees.

The first-year commission may not be more than 200% of the renewal commission for servicing the policy in the second year. The commission provided in renewal years must be the same as the commission in the second year, and must be provided for at least 5 renewal years.

Insurance companies may not pay greater compensation to agents, and agents or producers may not receive compensation greater than the renewal compensation payable by the replacing insurance company if a policy is being replaced unless the benefits of the new policy are clearly and substantially greater than the benefits provided by the policy being replaced.

Notice of Change

At least 30 days prior to the annual effective date of any Medicare benefit change, an insurer must notify its policyholders of modifications it has made to Medicare supplement insurance policies. The notice must also inform each policyholder as to when any premium adjustment is to be made due to changes in Medicare.

Guaranteed Issue

The guaranteed issue provision stipulates that during the 6-month period after an individual eligible for Medicare coverage by age signs up for Part B, an insurance company issuing this type of plans cannot

  • Deny or condition the issuance or effectiveness of any Medicare Supplement policy available for sale in this state;
  • Discriminate in the pricing of that policy because of the health status, claims experience, receipt of health care or medical condition of an applicant; or
  • Impose an exclusion of benefits based on a pre-existing condition under the policy.

This does not prevent the exclusion of benefits during the first 6 months based upon a pre-existing condition for which the policyholder received treatment or was otherwise diagnosed during the 6 months before it became effective.

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Medicare SELECT

A Medicare SELECT policy is a Medicare supplement policy that contains restricted network provisions — provisions that condition the payment of benefits, in whole or in part, on the use of network providers. SELECT plans negotiate with a provider network of doctors, hospitals and specialist to charge lower rates for medical services. It essentially operates like an HMO. These lower rates keep costs down for the SELECT plan provider, and plan members pay lower premiums.

Each Medicare SELECT policy must be approved by the head of a state’s department of insurance. Currently, issuers are not allowed to sell new Medicare SELECT policies to individuals whose primary residence is located outside of the issuer’s service area.

Every Medicare SELECT policy must do the following:

  • Provide payment for full coverage under the policy for covered services not available through network providers;
  • Not restrict payment for covered services provided by non-network providers if the services are for symptoms requiring emergency care and it is not reasonable to obtain such services through a network provider;
  • Make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare SELECT policy to each applicant;
  • Make available upon request the opportunity to purchase a Medicare supplement policy offered by the issuer which has comparable benefits and does not contain a restricted network provision. These policies must be available without requiring evidence of insurability if the Medicare SELECT policy has been in force for 6 months; and
  • Provide for continuation of coverage in the event that Medicare SELECT policies are discontinued due to the failure of the Medicare SELECT program.

Types of Insurers

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Medicare Supplements

Enhance your healthcare coverage with our comprehensive guide to Medicare Supplements. Explore the ins and outs of supplemental insurance options, designed to fill the gaps in your Medicare plan. Gain valuable insights into coverage benefits, costs, and how to choose the right supplement for your unique needs. Stay informed about the latest trends and updates in Medicare Supplements, ensuring a well-rounded and personalized healthcare solution. Empower yourself with the knowledge to make informed decisions about your health and financial well-being. Discover the advantages of Medicare Supplements with our expert guidance. Explore now!

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