Merritt Personal Lines Manual: Hard Marketing and Some Shady Sales Tactics
During the 1980s and 1990s, Medigap prices increased steadily. This forced many people -- and companies -- to opt for a managed care approach to covering seniors' health care issues.
Since Plan C is Plan C, no matter which company is offering it, when you shop around for coverage, you'll be looking at price, service and reliability. It's also vital to find an insurance company you feel comfortable with -- and one that is reputable and in good shape financially. Your state insurance department can alert you to any problem companies.
A major caveat: You only need one Medicare supplement policy, because only one policy will pay benefits. Although it is unethical and illegal to duplicate existing coverage for the sake of generating a premium and commission, agents have been known to do so.
There are serious penalties for agents who duplicate or "pile on" supplemental coverage, including the loss of their license to sell insurance, jail terms for up to two years and fines of up to $10,000.
Still, these policies are profitable. Insurance companies and retiree associations deluge the senior population with ads for Medicare supplement policies. Agents selling Medicare supplements don't always practice the professionalism and ethical conduct they should. Often, the combination of these factors results in poor decision-making with regard to supplemental coverage -- buying too much coverage or the wrong kind or none at all.
In addition, more direct marketing abuses have occurred. One common scenario: An impressionable older person ends up buying six or seven supplemental policies -- when one is all he or she needs. As a result, Medicare supplemental policies are heavily regulated by the government...and consumers have been assured by law of certain important legal rights.
Keep in mind that, even though agents are by law required to exercise great care in recommending and selling Medicare supplement policies, they are paid by commissions on the policies they sell. They may be motivated to sell you higher cost policies that you may not need.
The first step in determining whether you need a Medicare supplement policy is clearly understanding what types of health care costs are and are not covered by Medicare.
Medicare pays only for services determined to be medically necessary by federal health care experts. Even then the services are covered only to the extent that Medicare determines charges to be reasonable.
In March 1998, a Las Vegas couple filed a lawsuit in Clark County District Court seeking to collect damages for 350,000 customers of Columbia/HCA Healthcare Association nationwide.
The lawsuit stemmed from allegations that the National Association of Senior Friends, a nonprofit group affiliated with Columbia/HCA, sold memberships that promised Columbia/HCA would waive charges for deductible expenses for Medicare patients.
Joseph Miller and his wife, Hazel, claimed that they had paid the $25 annual membership fee in April 1997. The membership was supposed to entitle them to a waiver of Medicare deductible payments -- but Columbia Sunrise MountainView Hospital refused to honor the promise.
The Millers' attorneys claimed breach of contract and unjust enrichment. They also sought class-action certification, so they could represent 350,000 other people who had been sold Senior Friends memberships.
"If there's a theme to this, it's giving old people the expectation that they're protected and leaving them empty-handed," one of the lawyers said. "In my opinion, it's putting their hands in the cookie jar."
Pamela Carnevale, director of Senior Friends' local chapters, said Columbia/HCA lawyers interpreted provisions of a federal health care reform law to prevent hospitals from waiving the deductible payments.
Columbia/HCA stopped waiving the payments from Senior Friends members in January 1997. The hospital company had since received a legal clarification from a federal health care agency and planned to resume waiving the payments.
Federal law never contained any requirements that forced hospitals to stop waiving deductibles for Senior Friends members. It was the hospitals' choice to say no.
"We're just thrilled that it's (the waiver program is) back again," said Mark Howard, chief executive of Sunrise MountainView. "Was it a great benefit? Absolutely."
