Medigap Insurance: Expected 1990 Premiums After Repeal of the Medicare Catastrophic Coverage Act and 1988 Loss Ratio Data

GAO discussed the repeal of the Medicare Catastrophic Coverage Act, and its effects on: (1) 1990 Medigap insurance premiums; (2) 1988 Medigap payments to policyholders, or company loss ratios; and (3) state and federal requirements for Medigap policies. GAO noted that: (1) insurance companies estimated that they would increase premiums by 19.9 percent in 1990, and that the repeal would be responsible for about half of that increase, while inflation, increased health service utilization, and prior claims experience would account for the other half; (2) Blue Cross/Blue Shield member organizations expected an average 29-percent premium increase among non-group members in 1990; (3) 34 percent of commercial companies had 1988 loss ratios for individual policies that were below the 60-percent minimum standard, but 98 percent of Blue Cross/Blue Shield individual policies met or exceeded the minimum standard; (4) 66 percent of commercial group plans and 24 percent of Blue Cross/Blue Shield group plans were below the 75-percent minimum loss ratio standard in 1988; and (5) following the repeal, insurance commissioners revised Medigap policies to protect consumers against abusive sale and marketing practices, and required that policies cover Medicare part B coinsurance expenses.