July 2018 | Issue Brief Medigap Enrollment and Consumer Protections Vary Across States Cristina Boccuti, Gretchen Jacobson, Kendal Orgera, Tricia Neuman One in four people in traditional Medicare (25 percent) had private, supplemental health insurance in 2015—also known as Medigap—to help cover their Medicare deductibles and cost-sharing requirements, as well as protect themselves against catastrophic expenses for Medicare-covered services. This issue brief provides an overview of Medigap enrollment and analyzes consumer protections under federal law and state regulations that can affect beneficiaries’ access to Medigap. In particular, this brief examines implications for older adults with Figure 1 pre-existing medical conditions who Only 4 states (CT, MA, ME, NY) have guaranteed issue may be unable to purchase a protections for Medigap either continuously or annually, for all Medicare beneficiaries ages 65 and older Medigap policy or change their supplemental coverage after their ME initial open enrollment period. Guarantee issue protections (ages 65+): 4 states: Continuous or annual open enrollment NY MA 31 states: Expanded qualifying events CT Key Findings 15 states + DC: Federal minimum standards only  The share of beneficiaries with State requires Medigap insurers to offer policies to all beneficiaries age 65 and Medigap varies widely by older, either continuously or annually (4 states) state—from 3 percent in Hawaii State and federal guaranteed issue protections are limited to specified to 51 percent in Kansas. qualifying events and one open-enrollment period (46 States + DC)  Federal law provides limited NOTE: Connecticut, Massachusetts, and New York require continuous guaranteed issue for Medigap; Maine requires guaranteed issue for one month every year for at least Medigap Plan A, and has expanded qualifying events for guaranteed issue protections in the other months. SOURCE: Kaiser Family Foundation collection and analysis of publicly available information, 2017. consumer protections for adults ages 65 and older who want to purchase a supplemental Medigap policy—including, a one-time, 6- month open enrollment period that begins when they first enroll in Medicare Part B.  States have the flexibility to institute consumer protections for Medigap that go beyond the minimum federal standards. For example, 28 states require Medigap insurers to issue policies to eligible Medicare beneficiaries whose employer has changed their retiree health coverage benefits.  Only four states (CT, MA, ME, NY) require either continuous or annual guaranteed issue protections for Medigap for all beneficiaries in traditional Medicare ages 65 and older, regardless of medical history (Figure 1). Guaranteed issue protections prohibit insurers from denying a Medigap policy to eligible applicants, including people with pre-existing conditions, such as diabetes and heart disease.  In all other states and D.C., people who switch from a Medicare Advantage plan to traditional Medicare may be denied a Medigap policy due to a pre-existing condition, with few exceptions, such as if they move to a new area or are in a Medicare Advantage trial period. Medigap is a key source of supplemental coverage for people in traditional Medicare Medicare beneficiaries can choose to get their Medicare benefits (Parts A and B) through the traditional Medicare program or a Medicare Advantage plan, such as a Medicare HMO or PPO. Roughly two-thirds of Medicare beneficiaries are in traditional Medicare, and most have some form of supplemental health insurance coverage because Medicare’s benefit design includes substantial cost-sharing requirements, with no limit on out-of-pocket spending. Medicare requires a Part A deductible for hospitalizations ($1,340 in 2018), a separate deductible for most Part B services ($183), 20 percent coinsurance for many Part B (physician and outpatient) services, daily copayments for hospital stays that are longer than 60 days, and daily copays for extended stays in skilled nursing facilities. To help with these expenses and Figure 2 limit their exposure to 1 in 4 people with traditional Medicare had a catastrophic out-of-pocket costs Medigap supplemental policy in 2015 for Medicare-covered services, a Share of Traditional Medicare Beneficiaries by Type of Supplemental Coverage quarter of beneficiaries in traditional Medicare (25 percent) No Supplemental Coverage had a private, supplemental Other Coverage 23% Medigap 1% 25% insurance policy, known as Medigap in 2015 (Figure 2). Employer- Medigap serves as a key source sponsored 34% Medicaid of supplemental coverage for 18% people in traditional Medicare who do not have supplemental 2015 Total = 39 million traditional Medicare beneficiaries* employer- or union-sponsored NOTE: * Roughly one-third of the Medicare population is enrolled in a Medicare Advantage Plan and is excluded from this analysis. Coverage is assigned in the following hierarchical order: Medicaid, Employer-Sponsored, Medigap, other coverage, no supplemental coverage. retiree coverage or Medicaid, Medicaid groupings reflect enrollment in March 2015. SOURCE: KFF analysis of the centers of Medicare & Medicaid Services Medicare Current Beneficiary Survey, 2015. because their incomes and assets are too high to qualify. Medicare beneficiaries also purchase Medigap policies to make health care costs more predictable by spreading costs over the course of the year through monthly premium payments, and to reduce the paperwork burden associated with medical bills. 1 What is Medigap? Medigap is Medicare supplemental insurance, which is a type of private health insurance designed to supplement traditional Medicare. Medigap policies help cover out-of-pocket costs for services covered under Medicare Parts A and B. There are 10 different types of Medigap Plans (labeled A through N), each having a different, standardized set of benefits. Most cover some or all of the Part A deductible. Some are high deductible plans with an out-of-pocket maximum, and a few cover some overseas travel (Table 1). Three states, Massachusetts, Minnesota, and Wisconsin, have a different set of standardized plans, through a federal waiver. Medigap Enrollment and Consumer Protections Vary Across States 2 Table 1: Standard Medigap Plan Benefits, 2018 MEDIGAP POLICY BENEFITS A B C D F G K L M N Medicare Part A Coinsurance and All Costs Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes After Hospital Benefits are Exhausted Medicare Part B Coinsurance or Copayment Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes* for Other than Preventive Service Blood (First 3 Pints) Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes Hospice Care Coinsurance or Copayment Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes (Added to Plans A, B, C, D, F, and G in June 2010) Skilled Nursing Facility No No Yes Yes Yes Yes 50% 75% Yes Yes Care Coinsurance Medicare Part A Deductible No Yes Yes Yes Yes Yes 50% 75% 50% Yes Medicare Part B Deductible No No Yes No Yes No No No No No Medicare Part B Excess No No No No Yes Yes No No No No Charge Foreign Travel Emergency No No 80% 80% 80% 80% No No 80% 80% (Up to Plan Limits)* Out-of-Pocket Limit N/A N/A N/A N/A N/A N/A $5,240 $2,620 N/A N/A NOTE: These plans are effective on or after June 1, 2010. Plans E, H, I, and J are no longer offered to new applicants, as of 2010. Starting in 2020, Plans C and F will no longer be offered to new applicants. "Yes" indicates 100 percent of benefit coverage. * Plan N pays 100% of the Part B coinsurance except up to $20 copayment for office visits and up to $50 for emergency department visits. SOURCE: Centers for Medicare & Medicaid Services, How to compare Medigap policies, 2018. Medigap policy benefits were standardized through the Omnibus Budget Reconciliation Act of 1990, which also included additional consumer protections discussed later in this issue brief. 2 Of the 10 standard Medigap policies available to beneficiaries, Plan F is the most popular, accounting for over half of all policyholders in 2016, because it covers the Part A and B deductibles (as does Plan C), and all cost- sharing for Part A and B covered services.3 Medigap Enrollment and Consumer Protections Vary Across States 3 The share of all Medicare Figure 3 beneficiaries with Medigap In 20 states, at least 25 percent of Medicare beneficiaries have coverage varies widely by state— Medigap—often highest in Midwest and plains states, 2016 from 3 percent in Hawaii to 51 38% 22% 33% 36% 33% percent in Kansas in 2016 12% 0%-20% 22% 12 States 26% (Figure 3, Appendix Table). In 18% 24% 45% 38% + DC 21% 13% 24% 20 states, at least one-quarter of 51% 49% 25% 23% 35% 30% 27% 29% 21%-25% all Medicare beneficiaries have a 18% 20% 21% 46% 27% 21% 30% 24% 17 States N/A 24% 28% 23% Medigap policy. States with 22% 10% 26% 25% 24% 15% 29% 26%-30% higher Medigap enrollment tend 26% 20% 25% 10 States 21% to be in the Midwest and plains 20% 17% states, where relatively fewer 15% 20% >30% 10 States beneficiaries are enrolled in 3% Medicare Advantage plans.4 NOTE: Analysis excludes California, as the majority of health insurers do not report their data to the NAIC. Analysis includes standardization plans A-N, policies existing prior to federal standardization (Pre-Standardization), and plans in Massachusetts, Minnesota, and Wisconsin that are not part of the federal standardization program; includes plans that identified as Medicare Select; excludes plans with less than 20 covered lives. SOURCE: Kaiser Family Foundation analysis of 2016 National Association of Insurance Commissioners (NAIC) Medicare Supplement Data and CMS State/County Market Penetration Files for December 2016. Medigap coverage is Figure 4 substantially more common for A relatively small share (5 percent) of under-age 65 adults in Medicare beneficiaries ages 65 traditional Medicare have a Medigap policy, 2015 and older than it is for younger Medicare beneficiaries, many of 17% 23% 25% No Supplemental whom qualify for Medicare 31% 1% Coverage 13% because of a long-term disability. 10% Other Coverage 1% 18% Only 5 percent of traditional Medicare beneficiaries under age 39% 38% Medicaid 46% 65 had Medigap in 2015— 29% considerably lower than the Employer-Sponsored shares in older age brackets 28% 31% 17% 27% Medigap (Figure 4). The low enrollment in 5% Medigap by beneficiaries under Under Age 65 Ages 65-74 Ages 75-84 Ages 85+ age 65 is likely due to the NOTE: Numbers may not sum due to rounding. Coverage is assigned in the following hierarchical order: Medicare Advantage, Medigap, Medicaid, Employer-Sponsored, other coverage, no supplemental coverage. Beneficiaries that reported having Medicare Advantage and Medigap plans were grouped into Medicare Advantage. Medicare Advantage and Medicaid reflect enrollment in March 2015. absence of federal guarantee SOURCE: Kaiser Family Foundation analysis of the Centers of Medicare and Medicaid Services Medicare Current Beneficiary Survey, 2015. issue requirements for younger Medicare beneficiaries with disabilities (discussed later in this brief) and higher rates of Medicaid coverage for people on Medicare with disabilities who tend to have relatively low incomes. Federal law provides limited consumer protections for Medigap policies In general, Medigap insurance is state regulated, but also subject to certain federal minimum requirements and consumer protections. For example, federal law requires Medigap plans to be standardized to make it easier for consumers to compare benefits and premiums across plans. Federal law also requires Medigap insurers to offer “guaranteed issue” policies to Medicare beneficiaries age 65 and older during the first six months of their enrollment in Medicare Part B and during other qualifying events (listed later in this brief). During these defined periods, Medigap insurers cannot deny a Medigap policy to any applicant based on factors such as age, gender, or health status. Further, during these Medigap Enrollment and Consumer Protections Vary Across States 4 periods, Medigap insurers cannot vary premiums based on an applicant’s pre-existing medical conditions (i.e., medical underwriting). However, under federal law, Medigap insurers may impose a waiting period of up to six months to cover services related to pre-existing conditions, only if the applicant did not have at least six months of prior continuous creditable coverage.5 As described later in this brief, states have the flexibility to institute Medigap consumer protections that go further than the minimum federal standards. Federal law also imposes other consumer protections for Medigap policies. These include “guaranteed renewability” (with few exceptions), minimum medical loss ratios, limits on agent commissions to discourage “churning” of policies, and rules prohibiting Medigap policies to be sold to applicants with duplicate health coverage.6 (For further details on these requirements and a history of federal involvement in the Medigap market, see Medigap: Spotlight on Enrollment, Premiums, and Recent Trends, April 2013.) When does federal law require guaranteed issue protections for Medigap? Federal law provides guaranteed issue protections for Medigap policies during a one-time, six-month Medigap open enrollment period for beneficiaries ages 65 and older when enrolling in Medicare Part B, and for certain qualifying events. These limited circumstances include instances when Medicare beneficiaries involuntarily lose supplemental coverage, such as when their Medicare Advantage plan discontinues coverage in their area, or when their employers cancel their retiree coverage. Beneficiaries who are in a Medicare Advantage plan also have federal guaranteed issue rights when they move to a new area and can no longer access coverage from their Medicare Advantage plan. In these qualifying events, people ages 65 and older in Medicare generally have 63 days to apply for a supplemental Medigap policy under these federal guaranteed issue protections. Federal law also requires that Medigap polices be sold with guaranteed issue rights during specified “trial” periods for Medicare Advantage plans. One of these trial periods is during the first year older adults enroll in Medicare. During that time, older adults can try a Medicare Advantage plan, but if they disenroll within the first year, they have guaranteed issue rights to purchase a Medigap policy under federal law. Another trial period applies to Medicare beneficiaries who cancel their Medigap policy to enroll in a Medicare Advantage plan. These beneficiaries have time-limited guaranteed issue rights to purchase their same Medigap policy if, within a year of signing up for a Medicare Advantage plan, they decide to disenroll to obtain coverage under traditional Medicare. States have the flexibility to institute Medigap consumer protections that go further than the minimum federal standards, such as extending guaranteed issue requirements beyond the open enrollment period or adding other qualifying events that would require insurers to issue policies, as discussed later in this brief. Medigap Enrollment and Consumer Protections Vary Across States 5 When does federal law not provide guaranteed issue protections for Medigap? Broadly speaking, after 6 months of enrolling in Medicare Part B, older adults do not have federal guaranteed issue protections when applying for Medigap, except for specified qualifying events described earlier (Table 2). Therefore, older adults in traditional Medicare who miss the open enrollment period may, in most states, be subject to medical underwriting, and potentially denied a Medigap policy due to pre-existing conditions, or charged higher premiums due to their health status. Table 2: When do people seeking a Medigap policy have guaranteed issue protections under federal law? Guaranteed issue rights Beneficiaries’ coverage status Federally-required NOT federally-required  In first 6 months of enrolling in  After the first 6 months of In traditional Medicare Medicare Part B at age 65 or older enrolling in Medicare Part B  When their plan withdraws from their area In a Medicare Advantage  When moving to a new area not  After one year of enrollment in Plan or PACE covered by their plan any plan  When voluntarily disenrolling from a plan within a trial perioda  When their employer changes Has employer-sponsored (but does not drop) retiree  When their employer cancels their supplemental (retiree) coverage benefits supplemental coverage coverage  When beneficiaries drops retiree coverage  Medigap insurance company goes  When beneficiaries voluntarily Medigap bankrupt or no longer offers Medigap drop Medigap coverage coverage  When Medicaid coverage or Has Medicaid  Noneb eligibility is lost or changedb Under age 65 in Medicare  Nonec  In all casesc NOTE: Beneficiaries typically have a 63-day period of guaranteed-issue rights for Medigap when a Medicare Advantage plan withdraws from their area or when an employer group plan (including COBRA) or union cancels coverage. Beneficiaries have guaranteed issue rights if their Medicare Advantage or Medigap insurer commits fraud. aTrial rights apply to beneficiaries who canceled their Medigap policy to join a Medicare Advantage plan and to beneficiaries who enrolled in Medicare Advantage during their first year on Medicare and disenrolled within a year. bBeneficiaries may suspend Medigap for up to two years if they become eligible for Medicaid, in which case they have no new medical underwriting or waiting periods for pre-existing conditions when they restart their Medigap. cWhen beneficiaries under age 65 turn 65, they have the same federally-guaranteed issue protections for Medigap as people age 65 and older, regardless of whether or not they had Medigap when they were under age 65. SOURCE: KFF analysis of federal requirements for Medigap insurers. Medigap Enrollment and Consumer Protections Vary Across States 6 Medical Underwriting. Insurance companies that sell Potential medical conditions for which Medigap policies may refuse to sell a policy to an applicant a Medigap Insurer may deny coverage with medical conditions, except under circumstances without guaranteed issue protections described above. The Text Box on this page provides - ALS (Lou Gehrig’s Disease) examples of health conditions that may lead to the denial of - Alcohol/drug abuse - Alzheimer’s disease or other dementias Medigap policies, derived from underwriting - Chronic lung/pulmonary disorders (e.g. manuals/guides from multiple insurance companies selling chronic bronchitis, COPD, cystic fibrosis) Medigap policies. Examples of conditions listed by insurers - Cirrhosis as reasons for policy denials include diabetes, heart - Congestive heart failure - Diabetes (insulin dependent) disease, cancer, and being advised by a physician to have - Emphysema surgery, medical tests, treatments, or therapies. - End Stage Renal Disease (ESRD) - Fibromyalgia Barriers for Beneficiaries Under Age 65 with - Heart disease Disabilities. Under federal law, Medigap insurers are not - Hepatitis - Immune disorders (e.g. RA, MS, Lupus, required to sell Medigap policies to the over 9 million AIDS) Medicare beneficiaries who are under age of 65, many of - Kidney disease requiring dialysis whom qualify for Medicare based on a long-term disability. - Mental/nervous disorder (However, when these beneficiaries turn age 65, federal - Myasthenia gravis - Organ transplant law requires that they be eligible for the same six-month - Osteoporosis (if severe/disabling) open enrollment period for Medigap that is available to new - Stroke beneficiaries age 65 and older.) - Advised by a physician to have surgery, medical test, treatment, or therapy - Implantable cardiac defibrillator Beneficiaries Choosing to Switch from Medicare - Use of supplemental oxygen Advantage to Traditional Medicare. There are no federal - Use of nebulizer guarantee issue protections for individuals who choose to - Asthma requiring continuous use of 3+ switch from a Medicare Advantage plan to traditional medications including inhalers Medicare and apply for a Medigap policy, except under NOTE: Uninsurable health conditions vary by plan. This list is not an extensive list of all possible limited circumstances described in Table 2. In most states, conditions/reasons for denial. therefore, beneficiaries who want to switch from their SOURCE: Kaiser Family Foundation collection and analysis of numerous insurance companies’ 2016-2017 Medicare Advantage plan to traditional Medicare may be Medicare supplemental underwriting manuals/guides. subject to medical underwriting and denied coverage when they apply for a Medigap policy because they do not have guaranteed issue rights, with some exceptions (e.g., if they have moved or if they are in a limited trial period). In states that allow medical underwriting for Medigap, Medicare Advantage enrollees with pre- existing conditions may find it too financially risky to switch to traditional Medicare if they are unable to purchase a Medigap policy. Without Medigap, they could be exposed to high cost-sharing requirements, mainly because traditional Medicare does not have a limit on out-of-pocket spending (in contrast to Medicare Advantage plans).7 Medigap Enrollment and Consumer Protections Vary Across States 7 Some states require guaranteed issue and other consumer protections for Medigap beyond the federal minimum requirements States have the flexibility to institute Medigap consumer protections that go further than the minimum federal standards. While many states have used this flexibility to expand guarantee issue rights for Medigap under certain circumstances, 15 states and the District of Columbia have not, relying only the minimum guarantee issue requirements under federal law (Table 3). Only four states require Medigap Figure 5 insurers to offer policies to Only 4 states (CT, MA, ME, NY) have guaranteed issue Medicare beneficiaries age 65 protections for Medigap either continuously or annually, for all Medicare beneficiaries ages 65 and older and older (Figure 5). Three of these states (Connecticut, ME Massachusetts, and New York) Guarantee issue protections (ages 65+): have continuous open 4 states: Continuous or annual open enrollment NY MA enrollment, with guaranteed issue 31 states: Expanded qualifying events CT 15 states + DC: Federal minimum standards only rights throughout the year, and one state (Maine) requires State requires Medigap insurers to offer policies to all beneficiaries age 65 and insurers to issue Medigap Plan A older, either continuously or annually (4 states) (the least generous Medigap plan State and federal guaranteed issue protections are limited to specified shown earlier in Table 1) during qualifying events and one open-enrollment period (46 an annual one-month open States + DC) NOTE: Connecticut, Massachusetts, and New York require continuous guaranteed issue for Medigap; Maine requires guaranteed issue for one enrollment period. Consistent month every year for at least Medigap Plan A, and has expanded qualifying events for guaranteed issue protections in the other months. SOURCE: Kaiser Family Foundation collection and analysis of publicly available information, 2017. with federal law, Medigap insurers in New York, Connecticut, and Maine may impose up to a six-month “waiting period” to cover services related to pre-existing conditions if the applicant did not have six months of continuous creditable coverage prior to purchasing a policy during the initial Medigap open enrollment period.8 Massachusetts prohibits pre-existing condition waiting periods for its Medicare supplement policies. Some states provide additional guaranteed issue rights for current Medigap policyholders. Two states (CA and OR) allow beneficiaries to switch each year to a different Medigap plan with equal or lesser benefits within 30 days of their birthday, and another state (MO) allows policyholders to switch to an equivalent plan within 30 days before or after the annual anniversary date of their policy. Medigap policyholders in Maine can switch to a policy with equal or less generous benefits at any time during the year (not only during the annual open enrollment period) if there is less than a 90 day gap in coverage. Some Medigap insurers may also provide guaranteed issue rights to their policies that go beyond the state requirements. In Illinois, Blue Cross Blue Shield of Illinois and Health Alliance provide ongoing guaranteed issue rights for all beneficiaries ages 65 or older. Many other states have expanded on the federal minimum standards in more narrow ways by requiring Medigap insurers to offer policies to eligible applicants during additional qualifying events (Table 3). For example, 28 states require Medigap insurers to issue policies when an applicant has an involuntary change in their employer (retiree) coverage. (This qualifying event is more expansive than federal law, Medigap Enrollment and Consumer Protections Vary Across States 8 which applies only when retiree coverage is completely eliminated.) Nine states provide guaranteed issue rights for applicants who lose their Medicaid eligibility.9 While federal law does not require Medigap insurers to issue policies to Medicare beneficiaries under the age of 65, 31 states require insurers to provide at least one kind of Medigap policy to beneficiaries younger than age 65 (typically through an initial open enrollment period). 10 Medigap Enrollment and Consumer Protections Vary Across States 9 Table 3: Medigap Guaranteed Issue Requirements for Medicare Beneficiaries Ages 65+, by State, 2017 Qualifying Events For Guaranteed Issue Rights Beyond Federal Guaranteed Issue Minimum Federal Standards Minimum Rights Standards (continuous or Upon Loss of Upon Retiree Only annual) Medicaid Other* Benefit Changes Eligibility Total State Counts 16 4 28 9 14 Alabama Yes     Alaska No No Yes No Yes Arizona Yes     Arkansas No No Yes No No California No No Yes Yes Yes Colorado No No Yes No Yes Connecticut No Continuous n/a n/a n/a Delaware Yes     District of Columbia Yes     Florida No No Yes No Yes Georgia Yes     Hawaii Yes     Idaho No No Yes No No Illinois No No Yes No No Indiana No No Yes No No Iowa No No Yes No No Kansas No No Yes Yes Yes Kentucky Yes     Louisiana No No Yes No Yes Maine1 No One month/year Yes Yes Yes Maryland Yes     Massachusetts No Continuous n/a n/a n/a Michigan Yes     Minnesota No No Yes No No Mississippi Yes     Missouri No No Yes No No Montana No No Yes Yes Yes Nebraska No No Yes No No Nevada No No Yes No No New Hampshire Yes     New Jersey No No Yes No No New Mexico No No Yes No No New York No Continuous n/a n/a n/a North Carolina Yes     North Dakota Yes     Ohio No No Yes No No Oklahoma No No Yes No Yes Oregon No No Yes Yes Yes Pennsylvania No No Yes No No Rhode Island Yes     South Carolina Yes     South Dakota Yes     Tennessee No No No Yes No Texas No No Yes Yes Yes Utah No No No Yes No Vermont No No Yes No No Virginia No No Yes No No Washington No No No No Yes West Virginia No No Yes No No Wisconsin No No Yes Yes Yes Wyoming No No No No Yes NOTE: 1In Maine, Medigap insurers must offer guaranteed-issue policies, at least for Plan A during one month of their choosing each year. *Examples of "Other" qualifying events include: beneficiary's health plan changes its benefits, a participating hospital leaves the network of a beneficiary's health plan. SOURCE: Kaiser Family Foundation analysis of state insurance regulations, 2017. Medigap Enrollment and Consumer Protections Vary Across States 10 Some states provide stronger consumer protections for Medigap premiums than others States also have the flexibility to establish rules on whether or not Medigap premiums may be affected by factors such as a policyholder’s age, smoking status, gender, and residential area. Federal law allows states to alter premiums based on these factors, even during guaranteed issue open enrollment periods. There are three different rating systems that can affect how Medigap insurers determine premiums: community rating, issue-age rating, or attained-age rating (defined in the Text box below). States can impose regulations on which of these rating systems are permitted or required for Medigap policies sold in their state. Of the three, community rating provides the strongest consumer protection for Medigap policies because it does not allow premiums to be based on the applicant or policyholder’s age or health status. However, insurers in states that require community rating may charge different premiums based on other factors, such as smoking status and residential area. In states that allow attained age rating, older applicants and policyholders have considerably less protection from higher premiums because premiums may increase at unpredictable rates as policyholders age. PREMIUM RATING SYSTEMS Community rating: Insurers must charge all policyholders within a given plan type the same premium without regard to age (among people age 65 and older) or health status. Insurers can raise premiums only if they do so for all policyholders of the given plan type. Insurers may still adjust premiums based on other factors, including smoking status, gender, and residential area. Issue-age rating: Insurers may vary premiums based on the age of the policyholder at the time of purchase, but cannot increase the policyholder’s premium automatically in later years based on his/her age. Additionally, insurers may charge different premiums based on other factors, including health status, smoking status, and residential area. Attained-age rating: Insurers may vary premiums based on the age of the policyholder at the time of purchase and increase premiums for policyholders as they age. Additionally, insurers may charge different premiums based on other factors, including health status, smoking status, and residential area. Currently, eight states (AR, CT, MA, ME, MN, NY, VT, and WA) require premiums to be community rated among policyholders ages 65 and older. This means that Medigap insurers cannot charge higher premiums to people because they are older or sicker, and therefore, must charge an 80-year old policyholder the same as a 70-year old policyholder regardless of health status (Table 4). Insurers may still adjust premiums based on other factors, including smoking status, gender, and residential area. A state’s community rating requirement does not, in itself, guarantee that applicants will be issued a policy Medigap Enrollment and Consumer Protections Vary Across States 11 in the state. However, as described earlier, four of the states that have community rating (CT, MA, ME, NY), have guarantee issue protections and require insurers to issue Medigap policies to eligible applicants either continuously during the year, or during an annual enrollment period. Table 4: Medigap Premium Rating Rules Community Rating Required Issue Age Rating or Attained Age Rating Arkansas Alabama Kentucky Oklahoma Connecticut Alaska Louisiana Oregon Maine Arizona Maryland Pennsylvania Massachusetts California Michigan Rhode Island Minnesota Colorado Mississippi South Carolina New York Delaware Missouri South Dakota Vermont District of Columbia Montana Tennessee Washington Florida Nebraska Texas Georgia Nevada Utah Hawaii New Hampshire Virginia Idaho New Jersey West Virginia Illinois New Mexico Wisconsin Indiana North Carolina Wyoming Iowa North Dakota Kansas Ohio NOTE: The 8 states listed in the left-hand column prohibit issue age and attained age rating. States that require issue age rating do not allow attained age rating; but states that allow attained age rating, typically allow issue age ratings. All states permit insurers to use community rating. SOURCE: Kaiser Family Foundation collection and analysis of publicly available information, 2017. The remaining 38 states and the District of Columbia do not require premiums to be community rated; therefore, Medigap premiums in these states may be subject to issue-age and attained-age rating systems, depending on state regulation. Medigap insurers are permitted to offer community rated policies in these states, but most do not.11 Additionally, Medigap insurers may increase premiums due to inflation, regardless of the premium rating system.12 Discussion Medigap plays a major role in providing supplemental coverage for people in traditional Medicare, particularly among those who do not have an employer-sponsored retiree plan or do not qualify for cost- sharing assistance under Medicaid. Medigap helps beneficiaries budget for out-of-pocket expenses under traditional Medicare. Medigap also limits the financial exposure that beneficiaries would otherwise face due to the absence of an out-of-pocket limit under traditional Medicare. Nonetheless, Medigap is not subject to the same federal guaranteed issue protections that apply to Medicare Advantage and Part D plans, with an annual open enrollment period. As a result, in most states, medical underwriting is permitted which means that beneficiaries with pre-existing conditions may be denied a Medigap policy due to their health status, except under limited circumstances. Federal law requires Medigap guaranteed issue protections for people age 65 and older during the first six months of their Medicare Part B enrollment and during a “trial” Medicare Advantage enrollment period. Medicare beneficiaries who miss these windows of opportunity may unwittingly forgo the chance to Medigap Enrollment and Consumer Protections Vary Across States 12 purchase a Medigap policy later in life if their needs or priorities change. 13 This constraint potentially affects the nearly 9 million beneficiaries in traditional Medicare with no supplemental coverage; it may also affect millions of Medicare Advantage plan enrollees who may incorrectly assume they will be able to purchase supplemental coverage if they choose to switch to traditional Medicare at some point during their many years on Medicare. Only four states (CT, MA, NY, ME) require Medigap policies to be issued, either continuously or for one month per year for all Medicare beneficiaries age 65 and older. Policymakers could consider a number of other policy options to broaden access to Medigap. One approach could be to require annual Medigap open enrollment periods, as is the case with Medicare Advantage and Part D plans, making Medigap available to all applicants without regard to medical history during this period. Another option would be to make voluntary disenrollment from a Medicare Advantage plan a qualifying event with guaranteed issue rights for Medigap, recognizing the presence of beneficiaries’ previous “creditable” coverage. For Medicare beneficiaries younger than age 65, policymakers could consider adopting federal guaranteed issue protections, building on rules already established by the majority of states. On the one hand, these expanded guaranteed issue protections would increase beneficiaries’ access to Medigap, especially for people with pre-existing medical conditions. They would also treat Medigap similarly to Medicare Advantage in this regard, and make it easier for older adults to switch between Medicare Advantage and traditional Medicare if their Medicare Advantage plan is not serving their needs in later life. On the other hand, broader guaranteed issue policies could result in some beneficiaries waiting until they have a serious health problem before purchasing Medigap coverage, which would likely increase premiums for all Medigap policyholders. A different approach altogether would be to minimize the need for supplemental coverage in Medicare by adding an out-of-pocket limit to traditional Medicare.14 Ongoing policy discussions affecting Medicare and its benefit design could provide an opportunity to consider various ways to enhance federal consumer protections for supplemental coverage or manage beneficiary exposure to high out-of-pocket costs. As older adults age on to Medicare, they would be well- advised to understand the Medigap rules where they live, and the trade-offs involved when making coverage decisions. Medigap Enrollment and Consumer Protections Vary Across States 13 DATA SOURCES AND METHODS We analyzed data from the Centers for Medicare and Medicaid Services (CMS) 2015 Medicare Current Beneficiary Survey (MCBS) to examine the characteristics of Medicare beneficiaries, by source of supplemental coverage. The MCBS is a nationally representative longitudinal survey of Medicare beneficiaries, which provides information on beneficiary characteristics, coverage, service utilization, and spending. We used data from the National Association of Insurance Commissioners (NAIC) Medicare Supplement Insurance files for our analysis of Medigap enrollment by plan type and by state. These data include the number of policyholders as of December 31, 2016 for each state, insurance company, and type of plan sold. The number of covered lives represent a snapshot of enrollment at that time, rather than average enrollment over the course of the year. This analysis used data from 49 states and the District of Columbia excluding California because only a small share of companies reported California data to the NAIC. We also excluded data from all US territories and plans reporting fewer than 20 enrollees. In this analysis, Medigap policies issued prior to Medigap standardization in 1992 are treated as a single additional type of plan, “Pre-Standardized.” In addition, policies sold in the three states exempted from Medigap standardization (MA, MN, and WI) are also grouped together as “Waivered.” This issue brief was funded in part by The Retirement Research Foundation. Laura Kanji interned with the Kaiser Family Foundation and contributed significantly to the data collection and analysis of state insurance regulations. Medigap Enrollment and Consumer Protections Vary Across States 14 Appendix Table: Number and Share of Medicare Beneficiaries with a Medigap Policy, 2016 Share of all Traditional Number of Medigap Share of All Beneficiaries State Medicare Beneficiaries in Beneficiaries in Medigap Medigap Alaska 12,881 15% 15% Alabama 197,535 20% 27% Arkansas 176,662 29% 36% Arizona 282,623 24% 38% California n/a n/a n/a Colorado 175,770 21% 33% Connecticut 154,390 24% 33% DC 9,449 10% 12% Delaware 57,472 30% 34% Florida 831,573 20% 33% Georgia 343,639 21% 32% Hawaii 8,736 3% 6% Iowa 290,255 49% 59% Idaho 72,810 24% 36% Illinois 745,608 35% 45% Indiana 363,080 30% 41% Kansas 231,674 46% 54% Kentucky 212,505 24% 33% Louisiana 138,624 17% 25% Massachusetts 304,012 24% 31% Maryland 226,815 23% 26% Maine 71,292 22% 30% Michigan 418,914 21% 33% Minnesota 115,430 12% 27% Missouri 312,279 27% 38% Mississippi 148,569 26% 30% Montana 70,138 33% 41% North Carolina 466,027 25% 36% North Dakota 46,862 38% 48% Nebraska 166,692 51% 58% New Hampshire 92,613 33% 37% New Jersey 452,538 29% 35% New Mexico 57,471 15% 22% Nevada 84,016 18% 27% New York 461,459 13% 21% Ohio 609,567 27% 44% Oklahoma 185,745 26% 32% Oregon 141,662 18% 32% Pennsylvania 657,714 25% 42% Rhode Island 47,346 23% 37% South Carolina 247,745 25% 33% South Dakota 62,984 38% 49% Tennessee 287,321 22% 35% Texas 772,368 20% 30% Utah 70,941 20% 30% Virginia 391,440 28% 34% Vermont 49,001 36% 39% Washington 272,306 22% 31% Wisconsin 279,958 26% 42% West Virginia 90,815 21% 29% Wyoming 45,150 45% 47% NOTE: Analysis excludes California, as the majority of health insurers do not report their data to the NAIC. Analysis also excludes plans with less than 20 covered lives. SOURCE: Kaiser Family Foundation analysis of 2016 National Association of Insurance Commissioners (NAIC) Medicare Supplement Data and CMS State/County Market Penetration Files for December 2016. Medigap Enrollment and Consumer Protections Vary Across States 15 Endnotes 1 J. Huang, G. Jacobson, T. Neuman, K. Desmond, and T. Rice “Medigap: Spotlight on Enrollment, Premiums, and Recent Trend” The Kaiser Family Foundation, April 2013. https://kaiserfamilyfoundation.files.wordpress.com/2013/04/8412-2.pdf 2 “The Omnibus Budget Reconciliation Act of 1990 (OBRA-90),” HR 5835, Public Law No: 101-508, November 1990. Available at: https://www.congress.gov/bill/101st-congress/house-bill/5835. 3 The share of beneficiaries with Plan C and F is expected to decline in the future due to a change in law that prohibits insurers from issuing new policies that cover the full Part B deductible, as Plans C and F currently cover. Existing C and F policies will be grandfathered and therefore, renewable by current policyholders, but not sold to new purchasers. “Medicare Access and CHIP reauthorization Act of 2015 (MACRA),” HR 2, Public Law No: 114-10, April 2015. Available at: https://www.congress.gov/bill/114th-congress/house-bill/2/text. 4 Jacobson, G, Damico A, Neuman T, and Gold M. “Medicare Advantage 2017 Spotlight: Enrollment Market Update,” Kaiser Family Foundation, June 2017. Available at: https://www.kff.org/medicare/issue-brief/medicare-advantage- 2017-spotlight-enrollment-market-update/ 5 Pre-existing conditions apply to conditions for which medical advice was given or treatment received within a “look back period” of six months before the effective date of coverage. For further details on federal requirements for Medigap with respect to pre-existing conditions, see https://www.medicare.gov/Pubs/pdf/02110-Medicare- Medigap.guide.pdf. 6 “The Omnibus Budget Reconciliation Act of 1990 (OBRA-90),” HR 5835, Public Law No: 101-508, November 1990. Available here: https://www.congress.gov/bill/101st-congress/house-bill/5835. 7 Neuman, Tricia, “Traditional Medicare…Disadvantaged?” Kaiser Family Foundation, March 2016. Available at: https://www.kff.org/medicare/perspective/traditional-medicare-disadvantaged/; Jacobson G, Rae M, Neuman T, Orgera K, Boccuti C. “Medicare Advantage: How Robust Are Plans’ Physician Networks?,” Kaiser Family Foundation, October 2017. Available at: http://files.kff.org/attachment/Report-Medicare-Advantage-How-Robust-Are-Plans- Physician-Networks. 8 Pre-existing conditions apply to conditions for which medical advice was given or treatment received within a “look back period” of six months before the effective date of coverage. Continuous coverage means that the applicant had no break in coverage greater than 63 days over the prior six-month period prior to purchasing the Medigap policy. In New York, Medigap insurers must reduce the waiting period by the number of days that applicants had continuous creditable coverage. 9 Under federa law, Medicare beneficiaries may suspend Medigap for up to two years if they become eligible for Medicaid, in which case they have no new medical underwriting or waiting periods for pre-existing conditions when they restart their Medigap. 10 Centers for Medicare & Medicaid Services and the National Association of Insurance Commissioners, “2017 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare,” 2017. Available at: https://www.medicare.gov/Pubs/pdf/02110-Medicare-Medigap.guide.pdf. 11 J. Huang, G. Jacobson, T. Neuman, K. Desmond, and T. Rice “Medigap: Spotlight on Enrollment, Premiums, and Recent Trend” The Kaiser Family Foundation, April 2013. https://kaiserfamilyfoundation.files.wordpress.com/2013/04/8412-2.pdf 12 Some states may allow Medigap insurers to charge higher premiums if they offer added coverage options, such as dental or vision coverage. 13 Neuman, Tricia, “Traditional Medicare…Disadvantaged?” Kaiser Family Foundation, March 2016. Available at: https://www.kff.org/medicare/perspective/traditional-medicare-disadvantaged/ 14 Proposals to add an out-of-pocket limit have been discussed by the Medicare Payment Advisory Commission. See, for example, its chapter, “Reforming Medicare’s benefit design,” Report to the Congress: Medicare and the Health Care Delivery System (June 2012). http://medpac.gov/docs/default-source/reports/jun12_ch01.pdf?sfvrsn=0 Medigap Enrollment and Consumer Protections Vary Across States 16