Who Regulates Medicare Supplement Plans?

23% of the 65.1 million Original Medicare Beneficiaries have Medigap policies as of 2023. If you’re not one of them, you might consider enrolling in Medigap as soon as possible. Original Medicare only covers around 80% of your inpatient and outpatient medical expenses, and Medigap picks up the outstanding 20%.

As a result, you get better predictability of your annual healthcare expenses. In some cases, you might not have to pay anything other than your Medigap premium each month to get full coverage.

Medigap policies are available from private healthcare insurers like:

• Aetna
• Allstate
• Blue Cross Blue Shield
• Humana
• Cigna
• Mutual of Omaha

And many more.

But who regulates Medicare supplement plans?

While private insurers offer the policies, the Federal government is responsible for regulating the coverage these plans provide. As a result, Medigap plans offered by insurers come with standardized benefits that all insurers must provide to beneficiaries, depending on their chosen plan.

• The Medigap market varies widely from state to state, with 3% of beneficiaries in Hawaii and 51% of all beneficiaries living in Kansas.
• Federal law offers limited protection for consumers over the age of 65 looking to enroll in a Medigap scheme with a private healthcare insurer.
• A one-time, six-month open enrollment period begins on the applicant’s 65th birthday.
• Each state has the flexibility to institute a consumer protection policy for Medigap plans going beyond the minimum required Federal standards for coverage. For instance, 28 states require healthcare insurers to issue Medigap policies to eligible beneficiaries whose employer changed their retirement healthcare coverage benefits.
• Four states (CT, ME, MA, & NY) require annual or continuous guaranteed issue protections for all beneficiaries enrolled in Original Medicare aged 65 and older, regardless of their medical history. Guaranteed issue protections prevent insurers from denying Medigap policies to eligible applicants, including individuals with pre-existing health conditions, such as heart disease and diabetes.
• In all other states and Washington D.C., people switching from Medicare Advantage plans to Original Medicare may be denied Medigap policies by healthcare insurers due to pre-existing health conditions, with few exceptions. For example, if they move to a new state or are currently in the Medicare Advantage trial period.

Typically, Medigap supplemental insurance plans are regulated by the state. However, Federal requirements, guidelines, and consumer protections are also subject to minimum standards in the benefits they offer.

For instance, Federal law requires the standardization of benefits provided in Medigap plans by healthcare insurers. This rule makes it easier for prospective beneficiaries to compare the premiums and benefits across all Medigap plans from all private healthcare insurers.

Guaranteed Issue Periods

Federal law also requires private Medigap insurers to off beneficiaries “guaranteed issue” policies to applicants aged 65 and older within the first six months of enrolling in Original Medicare Part B. During these enrollment periods, private insurers cannot refuse a Medigap policy to any applicant, regardless of factors like their gender, health status, or if they have a pre-existing healthcare condition.

Furthermore, during these open enrollment periods, private Medigap insurers cannot use medical underwriting processes to set premium rates for Medigap plans. However, private insurers can implement a six-month waiting period in some states to activate benefits and coverage for new Medigap beneficiaries with pre-existing health conditions.

These rules apply, provided the beneficiary had at least six months of prior creditable continuous coverage. Some states also have the flexibility to implement consumer protection rights going beyond the minimum Federal guidelines and standards.

Other consumer protections imposed on Medigap policies by Federal law include “guaranteed renewability,” limits on broker commissions to discourage policy “churning” of policies, minimum medical loss ratios, and rules preventing the sale of Medigap policies to applicants with duplicate health policies.

Federal law provides consumers with guaranteed issue protections on Medigap policies during the one-time, six-month Medigap open enrollment period for new beneficiaries aged 65 and older when they enroll in Original Medicare Part B and in specific qualifying events.

These circumstances include when Original Medicare beneficiaries lose supplemental coverage involuntarily. For example, when the beneficiary loses coverage from their Medicare Advantage plan due to discontinuance in their service area or if an employer cancels their medical coverage.

Beneficiaries enrolled in Medicare Advantage plans have Federal guaranteed issue rights when moving to new areas where they can’t access a Medicare Advantage plan. People 65 and older who meet these qualifying criteria have 63 days to apply for a Medigap policy under the Federal guaranteed issue protections.

Trial Right

Federal law requires private insurers to sell Medigap policies with guaranteed issue rights during “trial” periods in the year for those enrolled in Medicare Advantage plans. An example is the first-year beneficiaries enrolling in Original Medicare Parts A & B.

During this trial period, beneficiaries can enroll in a Medicare Advantage plan. If they decide to leave in the first year, they have guaranteed issue rights to enroll in a Medigap plan under Federal law. Other trial periods apply to Medicare beneficiaries canceling Medigap policies to enroll in Medicare Advantage plans.

These beneficiaries get time-limited guaranteed issue rights on purchasing a Medigap policy if they decide to disenroll from a Medicare Advantage Plan in the first year to obtain coverage under Original Medicare.

States also have the flexibility to institute Medigap consumer protections going beyond the minimum Federal standards; examples would be extending the guaranteed issue requirements beyond the Medigap open enrollment period. Or they may add other qualifying criteria or events requiring private healthcare insurers to issue Medigap policies.

Typically, after a beneficiary is enrolled in Medicare Part B for over six months, they don’t have any Federal guaranteed issue protections when applying for their Medigap policy, except for specified qualifying events discussed earlier.

So, older adults enrolled in Original Medicare who miss their open enrollment period will likely be subject to a medical underwriting process, and private insurers may potentially deny them a Medigap policy due to their pre-existing health conditions.

We can help if you’re in this situation, give us a call today at 1-888-891-0229.

When it comes to choosing the best Medicare Supplement plan to fit your needs, it can get a bit overwhelming.

  Which plan letter is right for me?

  How do I make sure I’m not paying too much?

  What about yearly rate increases?

Whether it’s a Medigap plan, or you have questions about Medicare Advantage or Medicare Part D, we can help.

Call us today at 1-888-891-0229 and one of our knowledgeable, licensed insurance agents will walk you through it the easiest way possible.