Switching Medigap Plans is Tricky

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Thomas Uttormark headshot
Thomas Uttormark

When Thomas Uttormark turned 65 in 2010, he researched his Medigap options on the Medicare.gov website and chose a plan with a premium of around $100 a month.

As his premium inched up over the next two years, he decided to apply to another insurance company to see if he could reduce the cost of his policy. Since the federal government dictates the coverage amounts under each of the 10 Medigap plans, he reasoned, his existing insurer’s Plan N provided exactly the same coverage as any other insurer’s Plan N – and the new plan might be cheaper.

“I thought it was no big deal to switch,” said the 73-year-old Uttormark.

However, switching did prove to be a big deal. His application was denied. He suspects it was due to his pre-existing conditions, which included a routine gallbladder surgery before he retired, and his cholesterol, blood pressure and acid reflux conditions, which are fully controlled with medications. The insurer didn’t give him a reason for the denial.

Uttormark ran headlong into a maze of federal regulations that determine whether, when, and how a retiree can transfer from one insurer’s Medigap plan to another insurer’s Medigap. One in four people enrolled in traditional Medicare have Medigap supplemental insurance – about 10 million retirees – and are affected by these restrictive regulations.

They are “particularly confusing,” said Casey Schwarz, the senior counsel for education and federal policy for the Medicare Rights Center in New York and Washington.

She said that people who’ve just signed up for Medicare Parts A and B routinely call her organization because they are having trouble sorting out their options and what they will be permitted to do in the future if they choose either Medigap, which is supplemental coverage for traditional Medicare, or Medicare Advantage private insurance after initially signing up for Medicare Parts A and B.

A handful of states have looser regulations than the federal rules – California, Connecticut, Maine, Massachusetts, Missouri, New York, and Oregon – and allow retirees to move more freely among various Medigap plans, though the states also have their own restrictions.

Schwarz explained that the insurance company denied coverage to Uttormark because he did not qualify for what the federal government calls “guaranteed issue.”

Under guaranteed issue, there is only one time when every Medicare beneficiaries is assured access to a Medigap policy: when they first sign up for Medicare Part B. At this time, insurers can neither deny coverage based on a pre-existing condition nor charge a higher premium if an applicant has a specific health condition.

Another guaranteed issue period applies to limited numbers of retirees. It gives retirees the right to buy a Medigap policy – even people with pre-existing conditions – if they lose their previous coverage through no fault of their own. Perhaps their current Medigap or Medicare Advantage insurer went bankrupt or left the state, or their employer ended its Medicare supplement for retirees. When this occurs, however, the retiree must select a new policy within 63 days of losing their old coverage.

Uttormark didn’t qualify for guaranteed issue because he was choosing to drop his Medigap policy for a less expensive one. Insurers can rightly “refuse to sell him a policy, can charge him more for pre-existing conditions, or refuse to cover his pre-existing conditions,” Schwarz said.

The federal rules also provide an opportunity to switch plans if retirees selected Medicare Advantage as their first form of insurance when they enrolled in Medicare. In this case, they are permitted to move into any Medigap policy sold in their area but they, too, have a restriction: they must do so within the first year of their initial Medicare enrollment.

“Medicare beneficiaries who miss these windows of opportunity may unwittingly forgo the chance to purchase a Medigap policy later in life,” the Kaiser Family Foundation said in a recent policy brief detailing the federal and state regulations.

The Medicare.gov website describes the circumstances in which beneficiaries qualify for federal guaranteed issue.

Some state regulations, which are detailed on the Kaiser Foundation website, are less stringent than what is allowed under federal rules.  Three states – Connecticut, Massachusetts, and New York – require that insurers allow all retirees to buy a new policy or move at any time among the various Medigap plans sold in that state.

Maine allows retirees to switch, but only to Plan A, the least generous plan, and only once a year. California, Missouri, and Oregon also require that insurers accept policyholders who want a different Medigap policy, but they can do so only if they are switching to a new plan with equal or less coverage than their existing plan.

Uttormark, who lives in Houston, said he’ll hang on to his current Medigap plan. He’s happy enough with the coverage and can still afford the monthly premiums – now $160. But he learned something in the process.

“I wish I’d known at the start that I was making a life-long decision” in choosing a Medigap insurer, he said. “I would have put in more effort and perhaps decided on a different plan.”

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Dave G.

I’ve participated on this website for several years and am a licensed insurance agent with Medicare a prime focus. So challenges and misunderstandings about who and when you can apply for a Medigap plan is not surprising. One common misunderstanding not mentioned in the article is thinking Medicare’s “Annual Election Period” or AEP applies to Medigap plans. This isn’t helped when even Medicare refers to the AEP as “Open Enrollment.” Medicare just sent a public email blast touting the start of it’s “Open Enrollment Period,” so it’s no wonder confusion persists. Even this article does not differentiate between your personal “Open Enrollment” period for Medigap plans and “Guaranteed Issue.” Open Enrollment for Medigap is triggered by enrollment in Medicare Part B and is 6-months long, starting on your Part B effective date. (You can sign up for a Medigap plan up to 90-days prior to your Part B effective but it won’t start until then.) You get only ONE such opportunity. Though similar, calling Open Enrollment the same as “Guaranteed Issue” is itself inaccurate.

The gentleman quoted in the article was correct about the importance of selecting a Medigap plan and carrier carefully, because you may have to live with it a long time. Still, he shouldn’t be discouraged if turned down for new Medigap coverage by one company. I’m finding carriers more willing to consider applicants. A key concern is use of certain drugs commonly used for chronic conditions (like Parkinsons or Alzheimers) will automatically result in declination, even if used “off label” i.e. for a different reason. If so, be certain to explain why the drug is taken. Insurers are also wary of pending or potential knee or hip replacements, but once done are generally OK.

Other “traps” await the unwary…most notably failing to enroll in Part B when necessary (or enrolling in it when you can safely delay it) or staying on “COBRA” benefits too long (you forfeit “guaranteed issue” rights for Medigap after 8 mos. on COBRA).

I hope this is helpful!

    Dave A.

    Dave G – Thanks for your post.

    My background is in qualified retirement plans BUT I’ll be Medicare eligible next May and am therefore in need of getting up to speed this topic. Pretty quickly.

    What books, authors, articles, websites, blogs, or other sources do you recommend to learn more about the twists and turns of Medicare?

    Thanks for sharing your thoughts.

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