Hands off Medigap, state insurance officials to tell Congress

Kaiser Health NewsSeptember 16, 2011 

WASHINGTON — State insurance commissioners are preparing some stern words of advice for members of Congress who are trying to reduce the federal budget deficit: Don't touch Medicare supplemental insurance.

Next week, the bipartisan National Association of Insurance Commissioners is expected to send a letter to Congress opposing changes that would require beneficiaries to pay a higher share of the cost of their supplemental Medigap insurance. Seven million Medicare beneficiaries pay monthly premiums for these policies, which cover a portion of medical expenses Medicare doesn't.

The letter will warn Congress that such proposals — geared to saving the federal government money — could cause various problems for beneficiaries and insurers and may even be illegal, said Mary Beth Senkewicz, Florida's deputy insurance commissioner. She heads the association's senior issues task force and is shepherding the letter through the approval process. She provided several points from the letter, which the senior issues group approved unanimously Thursday but which won't be released to the public until final approval next week.

Increasing cost-sharing for current Medigap policyholders would violate state and federal laws that require guaranteed, renewable benefits, Senkewicz said. It also would cause "serious confusion" for seniors with fixed incomes who rely on Medigap insurance to protect them from unanticipated medical costs. In the past, Medigap changes have applied only to new policies, she said.

Shifting some costs to Medigap beneficiaries is one of several proposals to reduce the federal deficit by cutting spending on Medicare. In addition, the 2010 health overhaul calls for some cost shifting in the two most popular and generous Medigap plans, but it leaves the details to be ironed out by the National Association of Insurance Commissioners and federal health officials.

The Congressional Budget Office estimates that shifting some costs to beneficiaries could save the government as much as $53 billion over a decade, according to a report published last March. If beneficiaries have to reach into their own pockets to pay for medical care, the CBO predicts, they will use fewer services and Medicare will have fewer claims to pay.

Medigap plans have been targeted because some studies have shown that beneficiaries tend to use more Medicare services. Consumer advocates counter that those seniors may be sicker than the average Medicare patient, which is why they purchased the extra coverage.

If Medigap cost-sharing rises, insurers will have "a monumental, massive change in payment systems," Senkewicz said. It could require them to recalculate monthly premiums and their future costs based on assumptions about how many beneficiaries will pay the cost-sharing to reach the thresholds for full coverage or will avoid filing claims.

Under one proposal the CBO analyzed, seniors would pay $550 before Medigap coverage kicked in and then half of the next $4,950 in costs not covered by Medicare — a total of $3,025 — before the Medigap policy would cover all remaining medical bills during a single year.

Insurance regulators also are worried about what would happen if a patient were hit with new co-payments or other cost-sharing fees in the middle of a treatment regime.

"If I have to start paying for something that had been paid for by the insurance company, if I can't afford it, I may have to stop treatment," Senkewicz said.

The National Association of Insurance Commissioners' Medigap working group also has questioned the cost-sharing proposals, said its chairman, Guenther Ruch, an administrator in Wisconsin's Insurance Department. The group, which comprises consumer and insurance representatives as well as state regulators, is preparing a background paper with more details about the issue.

Ruch and Senkewicz expressed little doubt that the letter to Congress will be approved next week.

"This is one of those rare instances where everyone seems to be in agreement," Senkewicz said.

(Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.)

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