U.S. Medigap plans fall short on protections for pre-existing conditions

CHICAGO (Reuters) - (The opinions expressed here are those of the author, a columnist for Reuters.)

A technician stocks the shelves of the pharmacy at White House Clinic in Berea, Kentucky, U.S., February 7, 2018. REUTERS/Bryan Woolston

Thinking of adding a Medigap supplemental policy to your Medicare coverage? Beware: you could be charged higher rates or be turned away completely if you have a pre-existing condition.

Medigap policies fill gaps in coverage for people enrolled in traditional fee-for-service Medicare, such as copays, deductibles and limits on hospitalization benefits. The plans are sold by commercial insurance companies.

Federal law provides limited protection against medical underwriting by insurers - the practice of using health information when evaluating an application for coverage. And some states regulate it further. But these protections vary widely from state to state, according to a new study by the Kaiser Family Foundation (KFF).

Under U.S. law, there is a six-month Medigap open enrollment period that begins on the first day of the month in which you are age 65 or older and also enrolled in Medicare Part B. During this open enrollment – also referred to as the guaranteed issue period – insurers cannot charge you more for a policy due to any pre-existing conditions.

Just as important, they cannot cite pre-existing conditions as a reason to refuse to sell you a policy. A review by KFF of insurance company policies found that medical underwriting on Medigap plans can include anything from a chronic condition such as diabetes, heart disease hypertension or cancer to being advised by a doctor to have surgery, medical tests, treatments or therapies.

Four states protect Medigap applicants beyond the open enrollment period: Connecticut, Maine, Massachusetts and New York. These states all require either continuous or annual guaranteed issue protections for all beneficiaries in traditional Medicare over age 65, no matter their medical history. And 28 states require insurers to issue policies to eligible Medicare beneficiaries if a former employer changes their retiree health coverage benefits.

The KFF report points to several possible policy changes that could boost consumer protections on pre-existing conditions - for example, requiring an annual Medigap open enrollment, similar to the ones already held for Part D prescription drug and Advantage plans. And some Medicare reform plans floated in recent years have called for streamlining deductibles, reducing cost-sharing requirements for some services and capping overall out-of-pocket expenses, making Medigap protections less essential.

But for now, the wide variation in protections identified in the report underscores the importance of deciding upfront whether you want to be in traditional Medicare or Medicare Advantage - unless you are fortunate to live in one of the four Medigap haven states.

“The choices people make when they first go on Medicare can have long-term repercussions down the road,” said Gretchen Jacobson, associate director of KFF and a co-author of the study.


When you sign up for Medicare, the first choice to make is between traditional fee-for-service Medicare and Medicare Advantage.

Medicare Advantage plans are managed-care networks, usually HMOs. They bundle together Part A (hospitalization), Part B (outpatient services) and often include Part D coverage (prescription drugs). Advantage plans also cap annual out-of-pocket expenses, so Medigap supplemental policies are not sold alongside the plans.

Advantage plans can save money for beneficiaries, and enrollment is growing rapidly. However, they come with important restrictions on available healthcare providers. And roughly two-thirds of Medicare enrollees still use traditional Medicare, which remains the gold standard of coverage, since it can be used with any healthcare provider who accepts Medicare. (

Most traditional Medicare enrollees add a Part D prescription drug plan, and some form of supplemental coverage - either through a Medigap plan, from a former employer or Medicaid - because the coverage gaps are substantial. Traditional Medicare has a deductible for Part A hospitalizations ($1,340), plus deductibles and coinsurance charges for Part B outpatient services ($183) There also are daily copayments for hospital stays exceeding 60 days and for extended stays in skilled nursing facilities.

Medigap policies make these costs more predictable by spreading them throughout the year via premiums. But the cost of these plans is significant, ranging annually from as little as $2,000 to $7,000 for the most comprehensive plans. Policies come in an alphabet soup of lettered plan choices, currently including A, B, C D, F, G, K, L, M, and N.

The most comprehensive Medigap policies – C and F – cover 100 percent of Part A coinsurance charges and hospital costs up to an additional 365 days after Medicare benefits are exhausted. These plans also cover 100 percent of Part B coinsurance or copayment amounts, hospice care coinsurance, skilled nursing facility coinsurance, and deductibles for Part A and Part B. Other plans provide less generous coverage. For example, K plans cover only 50 percent of Part B copays and various other deductibles.

Federal legislation passed in 2015 phases out Medigap C and F plans for new buyers beginning in 2020, although current policyholders can keep their plans. The intended idea here is to save money for Medicare by reducing unnecessary utilization of healthcare by giving enrollees more “skin in the game.”

The phase-out of new C and F sales could boost the cost for current policyholders, Jacobson thinks. “If the pool of enrollees ages, that could lead to some sharp premium increases for them,” she said. Starting in 2020, D and G plans will be the new most-comprehensive plans.

Editing by Matthew Lewis