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New 'Birthday Rules' to Help Some Medigap Users Switch Plans

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What You Need to Know

  • The Illinois and Nevada rules take effect in January, and the Idaho rules take effect in March.
  • California and Oregon already had birthday rules.
  • Connecticut, Maine, Missouri, New York state and Washington state have other types of Medigap plan-switching rules.

Three states — Idaho, Illinois and Nevada — are adding rules that could help unhappy Medicare supplement insurance users change policies without going through medical underwriting.

The new state birthday rules will give people who already have Medicare supplement insurance policies, or “Medigap” policies, a chance to switch Medigap policies for a few weeks every year, around the time of their birthday anniversaries.

Jesse Slome, the director of the American Association for Medicare Supplement Insurance, put out an alert about the new state birthday rules. He emphasized, in a comment included in the alert, that Medigap users who want to switch policies should talk to insurance agents who regularly sell Medicare plans.

“This is probably one of the least-known opportunities available to seniors,” Slome said.

Getting professional advice is important, because each state has different rules, and understanding and meeting a state’s requirements is critically important, Slome said.

What the New Birthday Rules Mean

The start of the states’ new “Medigap” policy birthday rules could give insurance agents and brokers a new chance to reach out to Medigap users.

The new rules could also help insurance producers in the affected states present Medigap policies as attractive alternatives to Medicare Advantage plans.

For the affected health insurers that issue Medigap policies, the new rules will create a framework for offering plan switches on a guaranteed-issue basis, which may reduce the odds that sudden gushers of claim risk will cause some issuers to capsize.

But, because many of the plan switchers will be people with serious illnesses, hoping to get access to the best care providers for their conditions, the new rules could also add claim cost management headaches, at a time when the COVID-19 pandemic is already complicating efforts to predict and manage health care costs.

Medigap Basics

The Medicare Part A hospitalization program pays hospital bills, and the Medicare Part B program pays outpatient and physician services bills.

Medigap policies can help consumers pay their Medicare Part A deductible and meet the traditional Medicare copayment and coinsurance requirements.

Consumers can also buy Medicare Advantage plans. Those policies tend to offer enrollees broader coverage than the traditional Medicare program, in exchange for giving the enrollees financial incentives to use in-network providers and requiring the enrollees to get preauthorization for some medical procedures.

Many producers strongly prefer selling consumers Medigap policies, because they see both the rules for producers and the coverage rules for the patients as being more flexible.

For producers, one obstacle to selling Medigap policies has been higher monthly premium costs for Medigap coverage. Another obstacles has been the difficulties unhappy Medigap users have with switching policies.

Medigap Enrollment Period Rules

Health insurers, and some voluntary public health benefits programs, use “open enrollment period” systems, or limits on when people can buy coverage without going through much, or any, medical underwriting, to encourage healthy people to pay premiums even when they feel fine.

The idea is to keep healthy people in the risk pool, by raising the possibility that they could break legs or suffer heart attacks, and have no way to get health coverage, outside the open enrollment period.

Federal law creates a one-time, six-month Medigap policy open enrollment period period after a consumer’s 65th birthday. After that, Medigap users must show they qualify for a special enrollment period to switch Medigap policies. Users can get special enrollment periods easily when they move to new markets. Otherwise, they may have to show that their Medigap plan issuer has broken federal government rules or shut down.

Idaho, Illinois and Nevada

The new Idaho birthday rule is set to take effect March 1 2022. It will create a 63-day plan switching period beginning on the policyholder’s birthday. The new policy must offer the same level of benefits as the existing coverage or a lower level of benefits. The Medigap policy user can either switch insurers or change to a new Medigap policy from the same issuer. Idaho will switch to a community rating system for Medigap enrollees, meaning that premium rates will no longer be based on the age of the applicant.

In Illinois, a new birthday rule will take effect Jan. 1, 2022. The Illinois rule will let Medigap users ages 65 through 75 have annual Medigap open enrollment periods lasting 45 days after their birthday anniversaries. The new policy must offer the same level of benefits as the existing coverage or a lower level of benefits.

In Nevada, a new birthday rule will take effect Jan. 1, 2022, and provide 60-day plan switching periods starting on the first day of a Medigap user’s birthday month. Eligible consumers can buy new coverage, with the same or lesser benefits, from either their existing carriers or new carriers, without medical underwriting. A consumer cannot use the new rules to get policies with extra, innovative benefits, such as dental insurance, vision insurance, hearing benefits or gym memberships, officials say.

Why the Quirks?

One reason the new birthday rules are complicated is that insurers and government officials have been trying to give consumers ways to switch coverage without increasing the odds that some especially generous or well-run Medigap issuers will attract large numbers of new enrollees with very high health care costs.

Another reason is that Congress created the Medigap program before the Medicare Advantage plan, and it left much more responsibility for regulating Medigap policies in the hands of the states. States have more ability to tailor Medigap rules to suit local needs, but that means producers who do business in two or more states may have to use different strategies for clients in different locations.

Medicare Advisor Resources

The AAMSI has posted a description of the three new state Medigap birthday rule provisions, and of existing Medigap birthday rule provisions in California and Oregon, on its website.

RetireGuide, a consumer information and lead-generation site affiliated with Senior Market Sales, has posted a Medigap guide that includes a summary of state Medigap plan plan switching rules.

HealthCare Inc.’s MedicareGuide consumer information and lead-generation site offers a Medigap special enrollment period guide that lists state birthday rule special enrollment period opportunities along with other special enrollment period triggers.

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