Fee-for-service Medicare is estimated to cover just 50 percent of the health care costs incurred by seniors and other beneficiaries, leaving many at significant financial risk for illness. It is no surprise then that nine out of ten Medicare beneficiaries obtain additional coverage to supplement their Medicare benefits and protect themselves from these substantial costs. Some 10 million beneficiaries - roughly a quarter of all those eligible for Medicare - have done so through the purchase of Medicare supplemental insurance policies, commonly called Medigap. Another common source of coverage that supplements Medicare is employer retiree plans.
The Omnibus Budget Reconciliation Act of 1990 (OBRA 90) limits Medigap policies to ten standard plans labeled A through J. Each standard plan contains a core benefit package. Plan A consists of the core benefits alone; plans B-J contain additional benefits such as coverage of copayments for care in a skilled nursing facility, benefits for at-home help, coverage of physician charges in excess of Medicare's approved amount, and limited coverage for prescription drugs. All Medigap policies currently issued must conform to one of the ten standard plans, although beneficiaries may renew non-standard plans issued before July 1992. The Balanced Budget Act of 1997 authorized the offering of a high deductible F and J policy. Beneficiaries purchasing these plans must pay a deductible amount larger than traditional Plans F or J before the standard Medigap Plan F or J benefits begin.
The 2003 Medicare Prescription Drug Improvement and Modernization Act (MMA) created the Medicare Part D prescription drug benefit, and as a result made changes to the sale of Medigap policies containing outpatient prescription drug benefits (H, I, and J). Effective on or after January 1, 2006 Plans H, I, and J may still be issued, but may no longer include prescription drug coverage. The MMA also established two new standard plan types (K& L) with benefits specified in federal law. Both new plans have the same hospitalization benefits as the original standard plans and differ from plans A through J in that they provide less coverage for physician and other part B services.
Medicare beneficiaries overwhelmingly value and express satisfaction with Medicare supplemental coverage, including Medigap plans. Annual surveys of Medicare supplemental insurance policyholders conducted by the U.S. Department of Health and Human Services consistently show a high level of satisfaction with supplemental coverage. In a 2001 survey conducted by American Viewpoint, 89 percent of beneficiaries said they were either “very satisfied” or “generally satisfied” with their Medicare supplemental insurance. To learn more about the survey, please visit the Coalition to Promote Choice for Seniors website.
Although federal law establishes a wide range of requirements for Medigap coverage, the states have primary enforcement jurisdiction over Medigap insurers and policies. State regulatory authority includes review and approval of policy forms, regulation of rating practices and rules of enrollment, review and approval of premium rates, and all other aspects of insurance regulation. States may expand open enrollment and other guaranteed rights to Medigap coverage beyond the requirements established by federal law, and, in fact, many have done so.
AHIP supports the preservation of Medicare beneficiaries' access to Medigap and other Medicare Supplemental offerings based on the concepts of choice, predictability, reliability, financial protection, and hassle-free billing. AHIP will, to the greatest extent possible, work to maintain the viability of the Medicare Supplement and Medigap insurance market.
