Medicare supplement (Medigap) insurance customers are voting with their wallets: Many are still clinging to the richest plans the federal government will let them buy.
The richest plan type, Plan F, and the second richest type, Plan G, accounted for 70% of Medigap enrollment in 2018.
That was up from 68% in 2017, and up from 65% in 2015, according to a new Medigap enrollment report from America’s Health Insurance Plans (AHIP).
About 9.3 million people had Plan F or Plan G coverage in 2018, up from 7.4 million in 2015.
- A copy of the AHIP Medigap report is available here.
- An article about the new Medigap deductible rules is available here.
Economists see offering bare-bones policies as a great way to give patients “skin in the game,” and encourage them to shop carefully for care.
But, in 2018, the skimpiest Medigap plans, Plan A plans, covered just 120,514 people, down 17% from the number they covered in 2017.
Overall Medigap enrollment increased 3.7% between 2017 and 2018, to 14 million.
About 33.7% of the 41.5 million who had traditional Medicare fee-for-service coverage, rather than Medicare Advantage plans, were using Medigap coverage, according to AHIP’s figures.
AHIP based its new Medigap enrollment trends report on 2018 data from the National Association of Insurance Commissioners and 2018 data from the California Department of Managed Health Care.
The traditional Medicare Part A hospitalization program covers hospital bills.
The traditional Medicare Part B program covers outpatient and physician services.
Consumers who have both, but no other coverage, face deductibles, and many complicated copayment and coinsurance requirements.
Some consumers fill in the gap by buying Medicare Advantage plans, or plans that provide a comprehensive, provider-network-based alternative to “original Medicare” coverage.
Other consumers fill in the gaps with Medigap coverage. Congress tried to standardize Medigap plans in 1990, by requiring issuers of new plans to stick with benefit designs based on a limited number of “letter plan” templates.
Medigap Plan A, for example, is different from the Medicare Part A hospitalization plan. A Medigap Plan A policy is an insurance policy that pays the Medicare Part A coinsurance and hospital costs, Medicare Part B coinsurance or copayment amounts, up to three pints of blood, and the Part A hospice care coinsurance or copayment amount.
A Medigap Plan F policy offers all of the benefits that a Plan A policy offers. A Plan F policy also covers the Medicare Part A deductible, the $198 Medicare Part B deductible, 80% of the cost of some foreign travel emergency care, and 100% of “Part B excess charges.”
Medicare Part B sets limits on what physicians can charge. In some states, physicians can charge patients up to 15% more than what Medicare Part B normally allows. A Medicare Plan F policy excess charges benefit helps the patient pay those extra physician charges.
Plan F and Plan G can help Medicare enrollees who would have a hard time paying the excess charges out of their own pockets get access to more physicians.
The War on Plan F Coverage
Some economists, health finance specialists and members of Congress believe Plan F coverage is dangerous. They contend that Plan F coverage insulates patients against the true cost of care so well that the patients are likely to get unnecessary care, or especially expensive care.
Congress responded to that concern by passing a law that could eventually phase out sales of Plan F coverage.
(Related: MACRA and the Medigap Letter Plans)
Under the current rules, people who became eligible for Medicare before this year will be able to buy Plan F coverage for the rest of their lives.
People who became eligible for Medicare Jan. 1, 2020, or later will have to make do with Medicare Plan G coverage.
A Medicare Plan G policy covers everything a Plan F policy covers, except for the $198 Medicare Part B deductible.
Insurers have been ramping up sales of Plan G coverage over time. The share of Medigap users with Plan G coverage rose to 17%, from 8% in 2015.
But Plan G coverage took just 4 percentage points of market share gain away from Plan F coverage. The other 5 percentage points of market share gain came from skimpier types of plans, such as Medigap Plan C plans.
— Read Medigap Plan G Sales Rise 39%: Mark Farrah Associates, on ThinkAdvisor.