Medigap Insurance:

Alternatives for Medicare Beneficiaries to Avoid Medical Underwriting

HEHS-96-180: Published: Sep 10, 1996. Publicly Released: Sep 10, 1996.

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Pursuant to a legislative requirement, GAO reviewed Medigap policies, focusing on: (1) the extent to which Medicare beneficiaries are subject to medical underwriting when they change Medigap policies; and (2) options for modifying federal Medigap requirements to ensure that medical underwriting is not a problem in such cases.

GAO found that: (1) 11 of the 25 largest Medigap insurers use medical underwriting to determine whom they will insure, 5 sell some policies without medical underwriting, and 9 sell all of their policies without medical underwriting; (2) the American Association of Retired Persons' (AARP) insurer accepts all Medicare beneficiaries who are AARP members without medical underwriting for certain Medigap policies; (3) some Medicare beneficiaries can obtain supplemental insurance from local Blue Cross/Blue Shield plans depending on where they reside; (4) federal law requires Medicare SELECT program insurers to offer participants who want to drop their SELECT policy the option of purchasing a traditional Medigap policy without medical underwriting; (5) some beneficiaries have the option of enrolling in health maintenance organizations (HMO) with Medicare risk contracts; (6) about 99 percent of Medicare beneficiaries do not change their private health insurance, but about 25 percent supplement their existing coverage; (7) few beneficiaries have made formal complaints to their state insurance departments about Medigap underwriting practices; and (8) insurers may discontinue the few policies that do not require medical underwriting in the future, since federal law does not require these insurers to offer such policies.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Section 4031 of the Balanced Budget Act of 1997 amended section 1882 of the Social Security Act, which establishes federal standards for Medigap policies, to require Medigap insurers to offer guaranteed issue policies to individuals whose employer-sponsored Medicare supplement policies are terminated, who choose to leave an HMO within 12 months of first enrolling in one, or who are forced to leave an HMO for such reasons as moving out of the HMO's service area. Insurers cannot discriminate pricing for such persons based on health status, claims experience, receipt of health care, or medical condition. However the provision does not protect persons who want to switch Medigap insurers, which was also part of the matter for consideration by the Congress.

    Matter: If Congress is concerned that the current alternatives available to Medicare beneficiaries who wish to change Medigap policies might not exist in the future, Congress could amend federal Medigap law. Such an amendment could require insurers to offer Medicare beneficiaries who have been continuously covered by Medigap insurance guaranteed-issue policies with benefit packages comparable with those of the policy they currently hold. Congress may also wish to consider extending this protection to beneficiaries whose employer-sponsored retiree health plans are terminated or curtailed and who must or choose to leave their HMO.

 

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