Congress wants users of Medicare supplement insurance policies, or “Medigap” policies, to feel at least a small financial pinch when they get care.
A federal law — the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) — is pushing state insurance regulators to set a minimum deductible requirement for Medigap policies starting in 2020.
State insurance regulators will talk about the new Medigap deductible requirements Thursday, during a conference call organized by the National Association of Insurance Commissioners’ Senior Issues Task Force.
One message the task force is trying to communicate is that, under current federal law, states that fail to adopt the new minimum Medigap deductible requirements by 2020 may lose the right to regulate Medigap coverage.
The task force has posted three new documents about the MACRA Medigap changes: a collection of answers to frequently asked questions, or FAQs, aimed at insurance regulators; a sample MACRA consumer alert; and a sample MACRA alert aimed at insurance agents and insurance brokers.
The First-Dollar Coverage Fight
The traditional Medicare insurance program includes many coverage gaps, both to hold down direct spending and to encourage patients to avoid unnecessary use of care.
Many people who use traditional Medicare coverage, or “Original Medicare,” buy Medigap policies to fill in most or all of the gaps.
Congress passed a law creating standardized Medigap plan types, or “letter plans,” in 1990.
The richest and most popular “letter plan,” Plan F pays all of the Original Medicare “cost-sharing amounts,” such as the Medicare Part A hospitalization program deductible and the Medicare Part B physician and outpatient services deductible.
Another, less common letter plan, Plan C, also pays the Medicare Part A and Medicare Part B deductibles.
The Skin-in-the-Game Fight
Over the years, many health policy specialists have argued that Medigap Plan C and Plan F ”first dollar” coverage encouraged waste, fraud and abuse, by making Plan F users feel as if their care was free.
First-dollar coverage opponents fought for years to require all Medigap users to pay something out-of-pocket for their care.
Health policy specialists often refer to the idea of requiring patients pay something for their care as giving patients “skin in the game,” or a financial stake in controlling health care spending.
Critics of the skin-in-the-game philosophy argue that even small out-of-pocket charges may discourage patients from getting necessary care. Skin-in-the-game critics say delays in getting what appears to be routine care could let minor health problems turn into major health problems.
MACRA Medigap Letter Plan Rules
In 2015, critics of first-dollar coverage won out over the critics of the skin-in-the-game philosophy. Congress included a provision in MACRA that bans the sale of new first-dollar coverage Medigap plans, starting in 2020.
Consumers who become eligible for Medicare before Jan. 1, 2020, can continue to buy Medigap Plan C or Medigap Plan F coverage.
Consumers who become eligible for Medicare on Jan. 1, 2020, or later will have to take responsibility for paying the Medicare Part B physician and outpatient services deductible themselves.
For 2019, the Medicare Part B deductible is $185.
Regulators and insurers have responded to the new requirements by creating two new Medigap letter plans, for people who will become eligible for Medicare on or after Jan. 1, 2020: Medigap Plan D and Medigap Plan G.
Medicare Plan D will be the same as Medigap Plan C, except that the user will have to pay the Medicare Part B deductible.
Medigap Plan G will be the same as Medigap Plan F, except that the user will have to pay the Medicare Part B deductible.
What the Senior Issues Task Force Is Saying
Here are five things the task force is saying about the MACRA changes.
1, The federal government is on top here.
The federal government usually leaves regulation of the business of insurance to the states.
Normally, states can decide for themselves whether adopt NAIC “model laws” and “model regulations,” or formal examples of what state insurance laws or state insurance regulations might look like.
But Medicare is a federal program, and the federal government is taking an aggressive approach to pushing states to adopt Medigap deductible rules that are at least as strict as the requirements in the NAIC’s own MACRA Revisions to Medigap Model Regulation, which were adopted by NAIC members in 2016.
“States that fail to adopt the changes risk losing their regulatory authority over the MACRA provisions contained in the NAIC Medigap Model Regulation that is now the federal standard,” NAIC officials warn in the Senior Issues Task Force guidance.
2. Congress eliminated some Medigap program flexibility.
Regulators in Massachusetts, Minnesota and Wisconsin have special waivers in place that let them manage their states’ Medigap programs under state rules that were already in place before 1990.
The waiver states will now have to comply with the MACRA minimum deductible requirements, even if those requirements conflict with the pre-1990 state rules, according to the task force guidance.
3. Issuers that sell Medigap Plan C or Medigap Plan F after Jan. 1, 2020, could face compliance nightmares.
The federal government could impose a fine of up to $25,000 per prohibited act, and the person or company responsible for the prohibited Medigap letter plan sales could end up going to prison for five years.
That means what states do or don’t do could have major repercussions for the companies or persons responsible for complying with the MACRA requirements.
4. The MACRA Medigap deductible requirements have holes
For regulators, one challenge is that Congress included exclusions in the minimum-deductible requirements.
Consumers who buy Medigap Plan C or Medigap Plan F policies before Jan. 1, 2020, can keep their policies, and they can buy renewal policies. That means regulators will have to take care to know which sales of first-dollar coverage are illegal and which are legal.
Congress also created an exclusion for employer-sponsored group Medicare coverage.
But there’s an exclusion in the exclusion for association-sponsored group Medicare coverage.
Regulators say in the Senior Issues Task Force guidance that an employer can still after first-dollar Medigap coverage after Jan. 1, 2020, but AARP cannot.
5. Many agents are confused.
NAIC officials write in the model agent alert that many agents are giving consumers incorrect information.
“For example,” officials write, “some insurance agents are telling their policyholders that Plans C and F will no longer be available after December 31, 2019, and must therefore purchase new coverage in order to not lose their Medicare supplement coverage. This is a false statement.”
Under federal law, insurers that sell any Medigap letter plan policies other than the relatively uncommon Plan A policies must continue sell Plan C and Plan F policies, officials say.
“ Some agents are telling their policyholders that premiums for coverage under Plans C or F will be increasing to such an extent that they should purchase other coverage,” officials write. “These are misleading statements to induce policyholders to improperly switch coverage using marketing and sales techniques that are in clear violation of the Medicare supplement insurance laws and a states’ unfair trade practices laws. If a state finds such activity, the state can take appropriate administrative action.”
Links to information about the Medicare supplement insurance regulation shift and other topics of interest to the Senior Issues Task Force are available here.
The new MACRA “frequently asked questions” document for regulator, and the new MACRA consumer bulletin, and the new MACRA producer bulletin are posted under the “Related Documents” tab.
— Read NAIC Task Force Creates Medigap Subgroup, on ThinkAdvisor.