Medigap Insurance:

Better Consumer Protection Should Result From 1990 Changes to Baucus Amendment

HRD-91-49: Published: Mar 5, 1991. Publicly Released: Mar 13, 1991.

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Pursuant to a congressional request, GAO reviewed industry, state, and federal compliance with federal standards controlling Medigap insurance policies as required by the Medicare Catastrophic Coverage Act (MCCA), focusing on: (1) activities to identify and prevent abusive sales practices; (2) monitoring of Medigap advertising; (3) efforts to educate the elderly about Medigap policies; (4) state regulation of Medigap premiums; and (5) monitoring and enforcement of Medigap loss-ratio standards.

GAO found that: (1) states did not have uniform complaint data collection systems and did not maintain sufficient data to assess the extent of Medigap sales abuses, but available data showed that problems continued to exist; (2) states had varying levels of regulation and monitoring over Medigap advertising materials; (3) advertising could deceive consumers by not disclosing information about potential solicitations; (4) in December, 1989, the National Association of Insurance Commissioners (NAIC) adopted several new consumer protection amendments to combat Medigap sales abuses; (5) the federal government mailed Medicare information to the elderly, assisted NAIC in preparing a health insurance guide, and maintained a toll-free telephone service; (6) state educational efforts included the provision of literature and speakers, shoppers' guides, state-sponsored volunteer counseling services, and toll-free telephone assistance; (7) state regulation of Medigap premiums varied because of differences in filing requirements, personnel, and resources; (8) although 38 percent of 1988 insurance company loss ratios were below the Medigap minimum standard, 88 percent of premium dollars were with companies that exceeded the standard; (9) states were responsible for monitoring loss-ratio standards and taking necessary action to seek compliance; and (10) insurers generally increased Medigap premiums after the passage and repeal of MCCA.

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