The changes to the Medicare Supplement (MS), or Medigap, industry set for 2020 are on schedule. It appears the changes will remain intact to eliminate Plan F and Plan C availability to anyone becoming eligible on January 1st 2020 or later. The insurance carriers and state Departments of Insurance acquiesced to this law to avoid any further government meddling with Supplement plans.
What this means to an individual will vary depending on eligibility date, state of residence, current Medigap provider, and health status. We encourage individuals to not fall prey to aggressive agents looking to get business based on fears that they created, and speak with a licensed agent based on the criteria listed above and information provided below.
Changes Coming to Supplement Plans in 2020
Beginning in 2020, Section 401 of the Medicare Access and CHIP Reauthorization Act 2015(MACRA) will prohibit the sale of Medigap policies that cover Part B deductibles to newly eligible beneficiaries. This category includes individuals who become eligible due to age, disability, or end-stage renal disease on or after January 1, 2020. The prohibition also applies in waiver states.
Entities that sell such policies after that time will be subject to fines, imprisonment of no more than five years, and/or civil money penalties of no more than $25,000 for each prohibited act. For newly eligible beneficiaries, references in the law to Medigap Plans C and F will be deemed as references to Plans D and Plan G.
Here’s How the Changes May Affect You
With many people asking “Is the Medicare Supplement plan F going to be discontinued” we wanted to explain who is still and will be allowed to stay on their current plan.
- If you become eligible before Jan 1st 2020, you will be able to keep or purchase a Medigap Plan F or Plan C. This means that in 2020, there will be approximately 60 million recipients who can purchase a Supplement Plan F or Plan C. So these plans will not become closed risk pools per se, as anyone in this group can purchase a Plan F or C. This includes individuals who do not currently have a Medigap policy. Closed risk pools means no new beneficiaries can join.
- If you will become eligible on or after January 1st 2020, the law will apply. For this group, the decision is easy. Find a carrier and Medigap plan that you feel will provide the best coverage at the lowest cost possible. Do note that the Guaranteed Issue rules will now apply to Medigap Plans G and D. Plan G has become fairly popular in recent years because it was not open to Guaranteed Issue rights and therefore had more stable rate increases, and in some cases, rate decreases.
State of Residence
- Unfortunately, many people are going to be coerced into dropping their Plan F and purchasing a Plan G by agents who are either looking for easy business or just don’t understand all of the variables at play. If you live in a state that allows an open enrollment on your birthday, keeping a Plan F may make sense. This rule allows individuals to switch from one Plan F to another Plan F on their birthday or effective date (depending on state) without answering any underwriting questions. This helps individuals offset possible increases by changing carriers.
Current Supplement Carrier
- Carriers have three options to use when rating their Medigap plan:
- Most use Attained-Age, which means the rate you pay is based on your current age.
- Others use Community Rating, which means everyone within a zip code will pay the same premium for a particular carrier regardless of age.
- Another option is Issue-Age, which means your premium will be rated based on the age you were when you purchased the policy. In short, if you have an Issue-Age that you purchased when you were 65 and you are now 75, you will want to give thorough consideration to dropping that plan and purchasing a Plan G that will rate you now at 75.
- Most of us will have some moderate to serious health issues in our lifetimes. However, if you currently have a Medigap policy and are in good health, you will be able to purchase any Medigap policy you choose as long as you can pass the underwriting questions and review. Even though your health could change, this should not be used to scare you into switching Supplement plans without thoughtful consideration.
In closing, anyone who will be eligible prior to January 1st 2020 should consider their coverage choice and figure out what will work best for them. Terms like Closed Risk Pools will be used to strike fear. The only problem is that many carriers, including some of the biggest in the industry, have closed products and reopened under another variation, essentially leaving members in the prior product in a Closed Risk Pool.
This can happen in any state at any time with any carrier, so don’t get spooked. Do your homework, pick a plan and carrier you are comfortable with, and hopefully you will have a true licensed agent to advise you and not a salesperson to work with.
Medicare has neither reviewed nor endorsed this information.