Medigap Policy

In the United States, certain citizens receive health-care benefits through the Medicare program. This federal program does not offer 100 percent coverage of all healthcare costs or needs. These gaps in coverage leave many enrollees with unmet insurance needs and/or out-of-pocket healthcare expenses. The Medicare program is designed to meet the healthcare coverage needs of persons 65 and older, persons with a disability, and those with end-stage renal disease (ESRD) who do not have access to private insurance through an employer or spouse. Persons with these conditions often live on low, fixed incomes and have higher medical care needs. As a result, these uncovered portions of their healthcare can result in lack of access to the care they need and/or be financially devastating. Medigap policies were created to eliminate the excessive financial burden presented by the Medicare program rules.

A Medigap policy is a type of private health insurance designed to provide additional healthcare coverage for those enrolled in the Medicare program. These policies, sold by private companies, cover some of costs that are not paid by the original Medicare plan. Medigap policies are generally only available to those enrollees in both Medicare part A and part B. There are several different types that are comparable to the variety of traditional healthcare coverage options. However, Medigap policies must follow federal and state laws in their design, distribution, and coverage.

Private insurance companies are not mandated to offer this type of healthcare coverage. Those who sell Medigap policies are not required to offer this coverage to all persons enrolled in the Medicare program based on certain eligibility conditions. Federal law does not require insurance companies to sell Medigap policies to those under age 65. If a person under 65 is enrolled due to a disability or ESRD, they are not entitled to a Medigap policy unless their state law requires private insurance companies to provide this coverage. The rules governing eligibility and availability are complicated. Persons needing coverage should seek advice from the state office governing healthcare insurance or groups such as the American Association of Retired Persons (AARP) who can explain the rules on eligibility and allowed restrictions. Furthermore, insurance companies may voluntarily offer this coverage to any person enrolled in Medicare and are permitted by law to charge different premiums based on conditions. Like employer-offered healthcare coverage, some states have an open enrollment period during which persons seeking Medigap policies may receive best-price options.

All Medigap policies are administered in the same way as other private health insurance products. Monthly premiums are charged to the enrollee, and these premium amounts will vary according to the type of policy and conditions. Insurance companies can only sell standardized Medigap policies, meaning [Page 1097]that they must all have specific benefits for comparison of coverage and costs for purchasing decisions. While costs vary, this is generally the only difference between Medigap policies sold by different insurance companies. All policies must be identified as Medicare supplemental insurance and only cover the person. Coverage does not extend to the spouse and Medigap coverage does not eliminate the Medicare part B premium payment requirement.

...