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Medicare Supplement Insurance Plans Explained

Medicare Explained

Medicare has evolved over the decades since Linden Johnson signed it into law and so have the Supplemental Plans that go along side Original Medicare. In 1992, The Centers for Medicare and Medicaid Services, otherwise known as CMS, met with State Insurance Commissioners and made the decision to federally standardize Medicare Supplement Plans. Before this time, Medicare Supplemental plans were all different and the end consumer had a much more opaque view of health insurance as it relates to Medicare. This all changed with the adoption of these identical policies sold to seniors on Medicare. All but just a few states decided to adopt this standardized model.

These federally standardized plans are designed to fill in the “gaps” and help pay amounts left off by original Medicare. In the early 1990’s, some of these Medicare Supplement Insurance plans in Texas, and several states throughout the U.S., also known as Medigap plans, had prescription drug coverage integrated within them. The reason CMS wanted to integrate prescription drug coverage is because the Medicare Modernization Act former President Bush signed into law, which added what is now the Medicare Part D program, had not been signed into law. Part D did not become effective until the Mid 2000’s, so many Seniors purchased these federally standardized Medigap plans to not only assist with Hospital and Medical charges left off by Medicare, but also to offset the rising cost of prescription drugs.

Just a few short years after Medicare Part D was signed into law, Congress and CMS decided to modernize the Medicare Supplement Insurance Portfolio. The old plans that had prescription drug coverage along with home healthcare and preventative services were shelved and rendered obsolete. This is because Part D was now offered to Seniors on Medicare along with enhanced Home Health Care services and Preventative as an integration into Medicare Part B. No longer would Seniors need to have extra insurance to cover prescriptions, preventative, and home health services as these services were now part and parcel to Medicare, particularly part B and D.

Original Medicare is a national Fee- For- Service health insurance program, so these medigap plans are designed to go behind Medicare and help cover the amounts that Medicare leaves off. So, these Medicare Plans are typically accepted anywhere across the country where original Medicare is accepted making referrals to see specialists unnecessary. This non network arrangement with original medicare and medigap is in stark contrast to the Medicare Advantage Program that requires HMO or PPO networks. This makes these plans extremely valuable as the policy holder has complete freedom to choose providers across all geographical areas within the country. Additionally, Medigap plans are uaranteed renewable contracts meaning the policy holder is guaranteed to renew a Medicare Supplement policy for the rest of one’s life and can never be cancelled for any reason other than non-payment of premium.

If one were to purchase a Medigap policy in Texas , for instance, and subsequently moved to Tennessee, the coverage would not need to be re written because of this guaranteed renewable status. This has far reaching implications for seniors because this coverage can never be changed or modified so long as the policy holder pays the premiums on time each month. If congress or the national association of insurance commissioners ever decided to change the first dollar coverage under the current Medigap policies, it would have no effect on seniors opting to renew their existing plan F, or plan G for example. It would only be necessary for new enrollees to purchase a new modified supplement plan, but existing policy holders could renew their existing coverage indefinitely without changes to their coverage of any kind. This makes owning a Medicare Supplement an extremely valuable piece of protection.

Medicare insurance brokers or carriers offering this coverage are barred from underwriting these insurance plans during one’s open enrollment period to Medicare. Medicare Open Enrollment lasts 6 months prior to and 6 months following one’s Medicare Part B effective date. During this time, a beneficiary can select any federally standard Medigap plan with guaranteed acceptance. However, once this period has expired, one must answer a series of medical questions on an application for insurance and their acceptance may not be guaranteed. This is why we always educate our clients on choosing wisely during this open enrollment period because there may never be another opportunity to shop around for another plan if one’s health conditions preclude moving to another carrier. However, if the client purchases during the open enrollment period and subsequently gets sick or injured, the medicare insurance company they are with will not be allowed to rate their policies or drop them for any reason other than non-payment of premium.

These Medigap plans can and will increase the premiums usually on an annual basis. Medicare Insurance companies are only allowed to increase premiums on a class basis and cannot single individual policy holders out for rate increases. This is also a very valuable aspect to the Medicare Supplement plans and is unique to insurance in general. If a certain insurance carrier wishes to obtain a rate increase, they must first present their case to the insurance commissioner in their respective state and show the commissioner a 65 cent loss on every dollar of premium collected.

Then the insurance commissioner of Texas, for example, could grant a rate increase. But, this insurance carrier could not increase rates on only certain individuals but must spread those losses out over everyone owning a medigap policy in that particular state. This is good news for seniors with medigap plans as they can rest assured knowing they would never be priced out of a policy or forced to drop a plan just because they filed some hefty hospital and medical claims.

Our Medicare agents are licensed in Texas, Louisiana, Oklahoma, Tenessee, New Mexico, and Arkansas. We shop the market to match you with the right company at the right price based on your demographics and where you live. Give one of our licensed and AHIP certified agents a call today to see how much you could be saving each month on your medicare supplement plan.

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