Now that Medicare has modernized Medicare supplement plans at the same time as the first of 78.2 million baby boomers begin turning 65, there are vast opportunities for agents serving the senior market.
MIPPA, the 2008 Medicare Improvements for Patients and Providers Act, made significant changes to the Medicare Advantage (MA) program. Most of the changes, such as the prohibition on cold calling, were largely viewed as negative by agents and brokers. These MA changes overshadowed the positive effects the law has on Medicare supplement products. In fact, MIPPA has created an opportunity for agents to reenergize their Med supp sales.
Med supp has a very high satisfaction rate among policyholders – 9 out of 10 are likely to recommend Med supp products to others. A 2009 survey from America’s Health Insurance Plans and the BlueCross BlueShield Association found that 88 percent of policyholders are satisfied with their coverage, and 62 percent are very satisfied. Additionally, the price differential between Med supp and Medicare Advantage is continuing to narrow, making Med supp an attractive alternative.
The creation of new risk pools brought about by MIPPA is further narrowing the gap. Most importantly for agents, Med Supp has no annual enrollment period and can be sold year-round.
Modernizing the plans
Over time, the standardized supplement plans have not kept up with the changes in Medicare. MIPPA modernizes Medicare supplement by adding two new plans, eliminating others, and updating benefits. The plans created in 1990 have been effectively replaced with plans created in 2010. The MIPPA changes apply to all policies with an effective date of June 1, 2010 or later. Of course, the previous plans remain guaranteed renewable.
Two new value plans, M and N, have been created. To keep the premium down, Plan M increases cost-sharing by covering 50 percent of the Part A deductible, and Plan N includes co-pays for doctor and emergency room visits.
Benefit changes include the addition of a hospice benefit to all plans, elimination of the at-home recovery and preventive care benefits, and increasing the Part B excess charge benefit in Plan G to 100 percent.
Part D coverage has caused plans H, I, and J to become redundant and they have been eliminated. The elimination of at-home recovery and preventive benefits made Plan D and E the same, and Plan E was eliminated.
The result of these benefit changes is the creation of new standardized 2010 plans. Regulators are allowing for the new plans to have a fresh-start in pricing assumption. The assumption changes will typically lower premiums making the new plans advantageous to both agents and beneficiaries.
While price is important to customers, it is not the sole reason for a buying decision. Differences between carriers become particularly important when selling products with standardized benefit packages. Reputation, customer satisfaction, and best practices in customer service and claims processing also play an important role in the purchase decision.
The other reasons for buying Med supp are the same as they have always been. The agent’s job will be to remind clients what those reasons are:
- There is no annual enrollment period
- Plans are guaranteed renewable
- Benefits don’t change year to year
- Plans can’t cancel coverage as long as premiums are paid
- Clients can change plans any time during the year (subject to underwriting)
- Generally, there are no provider networks
- Clients can choose a Select plan with network hospitals for a lower premium
Between the MIPPA changes and health care reform, some Medicare Advantage enrollees may be taking a fresh look at Med supp. Some Medicare beneficiaries are just as frustrated by the Medicare Advantage marketing restrictions as their agents. And now, health care reform will further shorten the annual enrollment period by eliminating the January through March open enrollment.
However, there are challenges with the MIPPA plans. Clients who want to replace their standardized plan with a new plan will be subject to underwriting. Agents must be prepared to discuss the underwriting process to ensure their clients know whether they are likely to qualify for a replacement plan. Clients with Medicare Advantage might have heard about the new plans and want to switch, but they are locked into MA until the next annual election period.
The sales opportunities with Medicare supplement insurance are stronger than ever. Millions of new clients are aging-in each year and will undoubtedly find the modernized, lower premium plans very attractive.
Rich Phillips is the Medicare supplement product manager at Sterling Life Insurance Company. He can be reached at 360-647-9080 or [email protected].
At a Glance: Comparing the MIPPA Modernized Plans to the Current Standardized Versions
- Plans A, B, C, F, High-deductible F
- Hospice coverage added
- Plan D
- Hospice coverage added
- At-Home recovery benefit removed
- Plans E, H, I, and J: Eliminated
- Plan G:
- Cover 100 percent of excess physician
- Remove at-home recovery
- Add hospice
- Plans K and L: Unchanged
- New Plans M and N
- M covers 50 percent of Part A deductible
- N include co-pays for doctor and ER visits