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MEDIGAP INSURANCE AFTER JANUARY 1, 2006

By John J. Campbell, Esq., CELA

            Medicare, often referred to as America’s national health insurance plan for the elderly, was originally modeled after traditional medical insurance plans.  Benefits are limited to certain services and are subject to deductibles and coinsurance payments.  For many Medicare beneficiaries in the traditional Medicare program, these deductible and coinsurance amounts can be significant.  As a result, many Medicare beneficiaries depend on Medicare supplemental insurance policies to fill in the “gaps” in Medicare coverage.  These “Medigap” policies have been subject to standardization requirements under federal and state laws for many years.

             Medigap policies sold in all but 3 “waiver states” must currently conform to one of 10 standardized policies, referred to by the letters “A” through “J”.  Each policy offers different combinations of supplemental coverage that can range from the fairly basic (A) to the fairly comprehensive (J).  As a result, the Medigap policies sold in most states are exactly the same, regardless of which insurance company may offer these policies.

             The Medicare Prescription Drug, Modernization and Improvement Act of 2003 (MMA) contained provisions that affect Medigap insurance.  These provisions change coverage under Medigap A-J policies; and create two new Medigap policies (designated K and L policies) with minimum benefits that differ from Medigap A-J policies.  The provisions of the MMA also provide for an initial enrollment period (IEP) and open enrollment periods for Medigap coverage.  The MMA also provides for when a Medicare beneficiary may be guaranteed the right to obtain Medigap insurance, regardless of health, age or pre-existing conditions. 

             The MMA required the adoption of new uniform standards for all Medigap policies.  On March 25, 2005, the Centers for Medicare and Medicaid Services officially approved the new Medigap standards drafted by the National Association of Insurance Commissioners as being the official model regulation under the MMA.  All non-waiver states must adopt this regulation by no later than September 8, 2005.  The model regulation was published in 70 FR 15393, March 25, 2005, and can be viewed online through the Government Printing Office website:  http://www.gpoaccess.gov/fr/advanced.html         

            Under the new model regulation, basic core coverage under Medigap policies A-J is the same as those issued before that date.  All Medigap A-J polices issued after December 31, 1005 are required to provide the following minimum basic benefits: 1) Medicare Part A coinsurance amounts for days 61-90 of inpatient hospital stays in any spell of illness; 2) Medicare Part A coinsurance amounts for all of the beneficiary’s 60 lifetime hospital inpatient reserve days; 3) Coverage of 100% of Medicare covered costs for an additional 365 lifetime inpatient hospital days after Medicare Part A benefits are exhausted; 4) Coverage of Medicare Part B coinsurance amounts (after the $110 Medicare Part B deductible); and 5) The reasonable cost of the first 3 pints of blood. 

             The Medigap A policy includes only these basic benefits.  Medigap policies B-J offer increased benefits in different packages.  Beginning January 1, 2006, new Medigap policies containing prescription drug coverage (Medigap H, I or J policies) may no longer be sold. 

             Medigap policies under the new regulation do not provide coverage to fill the gaps not covered under a Medicare Part C Advantage Plan or under a Medicare Part D prescription drug plan.  The inability of any Medigap policy to provide supplemental coverage for Medicare Part D prescription drug benefits is especially instrumental to any beneficiary’s decision whether to enroll in Medicare Part D.  Further, since the prescription drug benefits under Medigap H, I & J policies are less valuable than Medicare Part D basic coverage, these policies are not considered “creditable coverage” under the MMA.  Therefore, delaying Part D enrollment in favor of maintaining prescription drug coverage under an existing Medigap H, I or J policy will result in late enrollment penalties if the beneficiary later decides to enroll in Medicare Part D.

             The new Medigap K and L policies, which became available as of January 1, 2006, must also provide minimum, standardized benefit packages.  Some of the basic benefits differ from those under Medigap A-J policies, including a limitation on coverage for the first 3 pints of blood.  Further, many of the extended benefits under each of these policies are limited until annual out-of-pocket amounts are met. 

             Medigap K policies must provide the following minimum basic benefits:

1)   Medicare Part A coinsurance amounts for days 61-90 of inpatient hospital stays in any spell of illness;  

2) Medicare Part A coinsurance amounts for the beneficiary’s 60 lifetime hospital inpatient reserve days;

3) Coverage for an additional 365 lifetime inpatient hospital days after Medicare Part A benefits, including all lifetime reserve days, are exhausted;

4) Coverage of 50% of the Medicare Part A deductible amount until the annual out-of-pocket amount is met;

5) Coverage of 50% of the Skilled Nursing Facility coinsurance for days 21-100 until the annual out-of-pocket amount is met;

6) Coverage of 50% of Medicare Part A coinsurance for hospice and respite care until the annual out of pocket amount is met;

7) Coverage for 50% of the reasonable cost of the first 3 pints of blood until the annual out-of-pocket amount is met;

8) Coverage for 100% of Medicare Part B coinsurance for preventive services (after payment of the $110 Medicare Part B deductible);

9) Coverage for 50% of the Medicare Part B coinsurance for other Part B covered services until the annual out-of-pocket amount is met; and

10) Coverage for 100% of all Medicare Part A and Part B coinsurance amounts for the rest of the calendar year after the annual out-of-pocket amount is met.  The annual out-of-pocket amount under Plan K is $4,000 for all Medicare Part A and Part B expenditures.

             Medigap L policies must provide the following minimum basic benefits:

                   1) Medicare Part A coinsurance amounts for days 61-90 of inpatient hospital stays in any spell of illness;  

2) Medicare Part A coinsurance amounts for the beneficiary’s 60 lifetime hospital inpatient reserve days;

3) Coverage for an additional 365 lifetime inpatient hospital days after Medicare Part A benefits, including all lifetime reserve days, are exhausted;

4) Coverage of 75% of the Medicare Part A deductible amount until the annual out-of-pocket amount is met;

5) Coverage of 75% of the Skilled Nursing Facility coinsurance for days 21-100 until the annual out-of-pocket amount is met;

6) Coverage of 75% of Medicare Part A coinsurance for hospice and respite care until the annual out of pocket amount is met;

7) Coverage for 75% of the reasonable cost of the first 3 pints of blood until the annual out-of-pocket amount is met;

8) Coverage for 100% of Medicare Part B coinsurance for preventive services (after payment of the $110 Medicare Part B deductible);

9) Coverage for 75% of the Medicare Part B coinsurance for other Part B covered services until the annual out-of-pocket amount is met; and

10) Coverage for 100% of all Medicare Part A and Part B coinsurance amounts for the rest of the calendar year after the annual out-of-pocket amount is met.  The annual out-of-pocket amount under Plan L is $2,000 for all Medicare Part A and Part B expenditures.

Medigap A-L policies are compared in the following chart:

*Medigap F and J policies are also available with high deductible options.

**The prescription drug benefits may no longer be offered after December 31, 2005.

***100% of all Part A & Part B Coinsurance after annual out of pocket ($4,000 for K; $2,000 for L).

            New Medicare beneficiaries continue to be able to purchase a guaranteed issue Medigap policy within their open enrollment period, which extends for 6 months after the first day of the month in which the beneficiary is age 65 or older and is enrolled in Medicare Part B.  During the open enrollment period, the beneficiary is entitled to purchase a Medigap A, B, C, F, K or L policy, regardless of health or preexisting conditions.  Further, Medigap policies may not impose preexisting condition exclusions upon beneficiaries who have maintained at least 6 months of creditable coverage without a gap in coverage of more than 63 days. 

            The different policies generally become more expensive as the coverage package becomes more comprehensive.  Also, while the policies are standardized by law, the amount the issuing company can charge for premiums is not.  In other words, a Medigap J policy through one insurer may be more expensive than the same policy through another insurer.  Once the particular type of policy (A-J, K or L) is decided upon, compare price and service in order to choose a company.

            Federal law permits anyone who enrolls in Medicare Part B to purchase a Medigap policy.  However, federal law does not require that fee-for-service Medigap policies be offered to beneficiaries under age 65 who are eligible for Medicare Part B due to disability; or who are not enrolled in Medicare Part B at age 65.  The ability of disabled Medicare beneficiaries under age 65 to purchase a Medigap policy depends on the state in which the beneficiary lives.

            In Colorado, the current state Medigap regulations extend the 6 month initial open enrollment period for guaranteed issue of Medigap policies to all Medicare beneficiaries who enroll in Medicare Part B after September 1, 2003, including beneficiaries under age 65 (which includes beneficiaries entitled to Medicare due to 24 months of SSDI eligibility and due to end state renal disease) and beneficiaries over age 65.

    Mr. Campbell, the founder and principal attorney of the Law Offices of John J. Campbell, P.C., has practiced law since 1986 and has concentrated in the practice of Elder Law since 1996; and is certified as an Elder Law Attorney by the National Elder Law Foundation.*  Mr. Campbell is licensed to practice law in Colorado and is also licensed and on inactive status in Missouri.  He is a member of the Colorado Bar Association, the Arapahoe County Bar Association, the Missouri Bar Association, the National Alliance of Medicare Set-Aside Professionals, the National Academy of Elder Law Attorneys and the Academy of Special Needs Planners.   Mr. Campbell has published numerous articles and has presented numerous seminars on issues relating to Elder Law across the country.

*The State of Colorado does not certify attorneys as experts in any field.

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