Taking Care of Mom and Dad: Be Careful of How Medigap Is Sold
Insurance companies and retiree associations deluge the senior population with ads for Medicare supplement policies. It's a booming business. One hundred forty-six companies sold roughly 11 million Medigap policies to Americans in 2002. As with most other health insurance policies, Medigap policies are sold on both an individual and group basis. Medigap policies are neither sold nor serviced by the state or federal government. Insurance agents and companies may not claim that they represent the Medicare program or any government agency, or that the policy they are selling is guaranteed, approved...or otherwise backed up by the government.
However, 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, the wrong kind or none at all.
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. This is why knowing what kind of insurance your parents currently have -- and from where it came -- is important. If they've purchased a supplemental policy, you need to know if they picked the right one at the right price. And that they haven't paid for three or four.
Your parents only need one medigap policy, because only one policy will pay benefits.
Although it is unethical and illegal to duplicate existing coverage for the sake of generating a 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 of up to two years and fines of up to $10,000.
Insurance is regulated at the state level, so state insurance departments impose regulations on Medigap companies. State departments approve the policies sold by insurance companies, but only to the extent that the company and policy meet the requirements of state law. State departments also oversee the licensing of agents who sell Medicare supplements. Some states require additional instruction in ethics for agents who serve the senior market.
