Hassle-Free Health Coverage: Medicare Supplements
Even with Part A and B coverage, the financial risks related to deductibles and copayments can be financially overwhelming for a retiree living on a modest fixed income.
This is particularly true should you develop a major chronic ailment and have to come up with tens of thousands of dollars out of your own pocket.
Medicare is not going to pick up the tab for all of your healthcare needs. The government estimates that Medicare really only pays about half of the costs needed to cover the elderly and there are large gaps in coverage. For instance, Medicare doesn't cover the cost of hearing aids or eye glasses, items virtually essential to seniors today.
As a consequence, insurance companies stepped in to fill those gaps in coverage. Approximately 89 percent of all Medicare recipients supplement their coverage with what are commonly referred to as Medicare Supplement policies or "Medigap" insurance.
The Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) enhanced other protections for Medicare supplement consumers. Under this law, Medicare supplement insurance may not be denied on the basis of the senior citizen's health status, claims experience, or medical condition during the first six months a Medicare beneficiary age 65 or older first enrolls in Part B of Medicare. This is known as the open enrollment requirement.
During this period, you may purchase a Medicare supplement policy without providing a proof of insurability. After this period of time, evidence of insurability will have to be provided.
To clarify benefits and standardize the types of policies offered, Congress passed a law effective August 1, 1992, directing all insurance companies to standardize the policies they offer as Medicare Supplements. As a result, 10 standard plans were developed by the National Association of Insurance Commissioners (NAIC) and are the only plans that may be sold as Medicare Supplement policies.
The best part is that you can't be turned down, for any reason, as long as you're 65 and apply within six months after you first enroll in Medicare Part B. The policies are guaranteed renewable, meaning you have the right to renew the policy with no change in terms, as long as you pay the premium.
The only catch is your insurance company can -- and often does -- increase your premium when claims costs exceed premium revenue.
Medicare Supplement policies have letter designations, corresponding to the level of benefits provided, beginning with the basic plan labeled "A" and progressively increasing in benefits to the most comprehensive plan labeled "J."
Each state must allow companies to sell Plan A and all Medigap companies must make Plan A available if they sell the more extensive and expensive plans. However, companies are not required to make all 10 plans available. They can sell just a few -- as long as Plan A is one of them.
The policies are designed specifically to work with Medicare, to provide supplemental accident and sickness insurance for hospital, medical or surgical expenses. Most, if not all, pick up Medicare's coinsurance charge to you -- and may even pay your deductible.
Many charges not covered by Medicare, such as prescription drugs for out-patients, are included in some of the plans. (However, coverage for prescription drug costs may be subject to an annual limit.) The more comprehensive plans also cover the copayment required for hospital and skilled nursing facility stays. They also cover the 20 percent of approved charges you would ordinarily pay under Part B of Medicare.
