New Law Rewrites Book on ‘Medigap’ Coverage

During the past decade, health insurance horror stories have multiplied. Nowhere has the situation looked more frightening than in the Medicare supplement, or “Medigap,” market.

Senior citizens, many of whom are struggling to get by on fixed incomes, have been taken in time and again by unscrupulous insurance agents selling duplicative coverage, worthless policies and insurance to those who have no need of it. Meanwhile, some elderly folk who desperately needed so-called Medigap policies have been denied insurance precisely because of their dire need for it.

But thanks to little-known provisions in the 1990 budget law, some of these horror stories are about to end. Indeed, some changes that will preclude selling duplicate coverage and denying insurance to many of those who most need it went into effect in November. And still other changes, which will make it easier for seniors to shop for coverage, will get underway by the middle of next year.

Senior citizens need to be aware, however, of exactly what the new law is and how it affects them. Some will have to act immediately to preserve their rights.

Three substantial changes were brought about by this law. First, it barred insurance agents from selling multiple Medigap policies, all covering the same costs, and provided for substantial fines to be levied against those who broke the ban. Secondly, it called for a standardization of Medigap policies, so that seniors would have a better shot at comparison shopping.

One of the problems consumers have faced in the past is the incredible variety in Medigap coverage. Those who had difficulty reading, or understanding, the fine print of their policies could find themselves with either too much coverage or not enough.

But by next July, most states must adopt standardized policies. That means that all insurers will sell only 10 basic plans, starting with Plan A, which just handles prescriptions and Medicare deductibles, and ending with Plan J, which covers everything from foreign travel emergencies to preventive care to skilled nursing care.

Finally, the law provided for an “open enrollment” period, where seniors can secure Medigap coverage regardless of previous infirmities. Previous ailments are a frequent reason that seniors get turned down for Medicare supplement coverage.

The open enrollment period lasts for only six months after the individual enrolls in Medicare Part B. (Medicare is broken into two parts. Part A covers hospital expenses; Part B covers doctor’s costs. Usually, individuals enroll in Part B after they retire and private medical plans expire.)

Unfortunately, the open enrollment period is not retroactive. That means that if you enrolled in Medicare Part B more than six months ago, you are not affected by this new law. If you retired within the last six months, you may be covered by the law, but you must act fast.

You have only six months from the date of enrollment in Medicare Part B to secure Medicare supplement insurance under the open enrollment period. Those who enrolled in August, for example, have roughly two months to get this coverage before insurers have the right to turn them down for pre-existing medical conditions.

It is important to note, too, that insurers can impose a waiting period before coverage for pre-existing conditions kicks in, but now they can only do so once. In other words, if you have had a heart condition, your insurer may say it will not pay for heart-related medical expenses for six months.

Before the current law went into effect, if you later switched insurers, the new insurer could impose a second waiting period, said Jim Firman, president of the United Seniors Health Cooperative in Washington. No longer. Now if you switch insurers, the waiting period is waived, he said.

There is one more catch with the open enrollment period. You need to be sure that you chose insurance coverage carefully because once this period is over, you may have a hard time switching into a different plan.

During the open enrollment period, you have the right to buy any insurance plan offered by any insurer. But once that stretch is over, you can be turned down for coverage just as you could before the law passed. Even if you decide you want less coverage later, your insurability is no longer guaranteed, Firman notes. The best bet is to choose well during the open enrollment period and stick with what you chose.

Those who are looking for more guidance on choosing Medigap coverage should know that the United Seniors Health Cooperative has put out a 72-page book and eight-page supplement on buying Medigap insurance and the effect of the new law. To get a copy, send $10 to USHC, 1331 H Street N.W., Washington, D.C. 20005-4706.