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Insurance Commissioners Tell Congress Not To Change Medigap Policies

Sep 21, 2011

State insurance commissioners are sending some stern words of advice to members of Congress trying to reduce the federal deficit: don't touch Medicare supplemental insurance.

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

The letter, unanimously endorsed by the NAIC's Government Relations Leadership Council, which is authorized to handle communications with Congress on behalf of the association, warns congressional leaders 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, who heads the association's senior issues task force. The letter is expected to be released to the public later today.

Increasing cost-sharing for current Medigap policyholders would be a benefit change that violates state and federal laws requiring guaranteed, renewable benefits, said Senkewicz. It will also 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 has emerged as one of several proposals -- including one offered by President Barack Obama this week -- to reduce the federal deficit by cutting Medicare spending. In addition, the 2010 health overhaul calls for some cost shifting in the two most popular and generous Medigap plans but leaves the details to be ironed out by the NAIC and federal health officials.

The Congressional Budget Office estimates that shifting some costs to beneficiaries could save the government as much as $53 billion in Medicare spending over a decade, according to a report published last March. Obama said his more limited proposal would save $2.5 billion over that timeframe. If beneficiaries have to reach into their own pockets to pay for medical care, CBO predicts they will use less services and Medicare will have fewer claims to pay.

Medigap plans have been targeted because some studies have shown that beneficiaries with the plans 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," said Senkewicz. It would 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 avoid filing claims. Under one proposal analyzed by CBO, seniors would pay $550 before Medigap coverage kicks in, and then half of the next $4,950 costs not covered by Medicare – for a total of $3,025 – before the Medigap policy would cover all remaining medical bills during a single year.

Insurance regulators are also worried about what happens when a patient in the middle of a treatment regime is hit with new co-payments or other cost-sharing fees.

"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," said Senkewicz.

NAIC's Medigap working group also has questioned the cost-sharing proposals, said its chairman Guenther Ruch, an administrator at Wisconsin’s insurance department. The group, comprised of consumer and insurance representatives as well as state regulators, is preparing a background paper with more details about the issue.

Contact Susan Jaffe at jaffe.khn@gmail.com  

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