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Life Health > Health Insurance

Medigap issuers may take a hit

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The lobbyists defending the current Medicare supplement (Medigap) insurance plan design rules have warded off one blow from federal health policymakers after another, but, today, one serious hit is likely to get through.

Melissa Taylor, a lobbyist at Mutual of Omaha, delivered that message today, in Orlando, Fla., during a Medigap conference organized by the American Association for Medicare Supplement Insurance (AAMSI).

The Senate is gearing up to consider H.R. 2, a 262-page bill that could replace Medicare’s current, much-hated, repeatedly postponed “sustainable growth rate” (SGR) physician reimbursement curbs.

The package includes provisions that are supposed to let the traditional Medicare program shift to paying doctors through “value-based” systems that emphasize that quality and efficiency of care, rather than simply paying doctors a fee for each service rendered.

Drafters have tried to pay for spending increases included in the bill by including “offsets,” or measures intended to reduce other types of federal spending.

Federal law requires issuers of Medigap plans to try to help consumers shop for coverage on an apples-to-apples basis by using standardized plans designated by letters. Two of the most popular of the standardized plans are Plan C and Plan F, which pay the deductible for the Medicare Part B physician and outpatient services plan. 

One H.R. 2 spending offset would prohibit Medigap C and F plans from paying the deductible for the Medicare Part B physician and outpatient services plan. This year, the Part B deductible is $147. 

The provision would take effect starting in 2020, and it would apply only to consumers newly eligible for Medicare.

Defenders of the C and F Medigap plans argue that they help seniors with tight budgets and poor health do a better job of budgeting for health care costs.

Many health policymakers have long argued that Medigap plans that off “first-dollar coverage,” or near first-dollar coverage, drive up overall spending, by encouraging enrollees to get unnecessary care that leads to use of more unnecessary care. They have been attacking first-dollar Medigap coverage for years.

The new change may not necessarily have a big effect on insurers’ sales, or Medigap product profitability.

But Taylor said the fact that H.R. 2 includes a Medigap design provision to pay for the rest of the bill represents a big change for issuers.

In the past, she said, issuers have defeated many Medigap-related “pay fors.”

This time, six years ago, the issuers thought they had a chance to dodge another flurry of Medigap pay-for proposals. ”Then it all sort of exploded,” Taylor said. House Speaker John Boehner and House Democratic Leader Nancy Pelosi joined to negotiate a compromise bill, and the compromise bill got through the House with a 392-32 vote, Taylor said.

Given that just about every physician and every hospital in the country was supporting H.R. 2, in the hope of eliminating the SGR system, “we were really facing an uphill battle,” Taylor said.

Dotti Outland, a state government lobbyist at a unit of UnitedHealth Group Inc. (NYSE:UNH), said that, even if people in the Medigap industry have concerns about the Medigap pay-for, a failure by the Senate to pass the law and get it to President Obama today could lead to administrative nightmares.

If delays in getting the law signed let the Medicare SGR system take effect temporarily, all of the claims processed while the SGR system is in effect will be processed incorrectly, Outland said.

The last time something similar with a Medicare reimbursement legislation delay, UnitedHealth had about 1 million claims that needed to reprocess due to 24-cent errors, Outland said.

If President Obama signs H.R. 2 and changes the Medigap plan deductible rules, state regulators will have to rewrite their own Medigap laws and regulations, Outland said.

The National Association of Insurance Commissioners (NAIC) developed its Medigap model in 1990. If regulators are making any changes to the model, industry groups, consumer groups and other interest groups will view that as a chance to make many other changes to the model, Outland said.

Given how old the model is, and how it has been implemented, Outland said she would like to see regulators focus on updating the model, making the language simpler, and making the language that shows up in coverage applications and policies simpler.

Even though the year 2020 sounds as if it’s far away, the mechanics of getting major changes adopted at the state level are so time-consuming that five years “is a short period of time,” Outland said. “It will really fly by.”

See also: 2015 Medigap outlook [Infographic]

Correction: An earlier version of this article described the Medigap plans that could be affected by H.R. 2 incorrectly. The plans affected would be Plan C and Plan F plans.


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