Guide to Health Insurance (Medicare)

TYPES OF PRIVATE HEALTH INSURANCE

A variety of private insurance policies is available to help pay for medical expenses, services and supplies that Medicare covers only partly or not at all. The basic types of policies include:

1. Medigap, which pays some of the amounts that Medicare does not pay for covered services and may pay for certain services not covered by Medicare.
2. Managed care plans [these include health maintenance organizations (HMOs) and competitive medical plans (CMPs)], from which you purchase health care services directly for a fixed monthly premium;
3. Continuation or conversion of an employer-provided or other policy you have when you reach 65;
4. Nursing home or long-term care policies, which pay cash amounts for each day of covered nursing home or at-home care;
5. Hospital indemnity policies, which pay only when you need treatment for the insured disease.
6. Specified disease policies, which pay only when you need treatment for the insured disease.

Medigap

To make it easier for consumers to comparison shop for Medigap insurance, nearly all states, U.S. territories, and the District of Columbia have adopted regulations that limit the number of different Medigap policies that can be sold in any of those jurisdictions to no more than 10 standard benefit plans.

The plans, which have letter designations ranging from "A" through "J", were developed by the National Association of Insurance Commissioners and incorporated into state and federal laws. See pages 22-24 for descriptions and comparisons of the 10 plans.

Plan A of the 10 standard Medigap plans is the "basic" benefit package. Each of the other nine plans includes the basic package plus a different combination of benefits. The plans cover specific expenses either not covered or not fully covered by Medicare, with "A" being the most basic policy and "J" the most comprehensive. Insurers are not permitted to change the combination of benefits in any of the plans or to change the letter designations.

Each state must allow the sale of Plan A, and all Medigap insurers must make Plan A available. Insurers are not required to offer any of the other nine plans, but most offer several plans, and some offer all 10. Insurers can independently decide which of the nine optional plans they will sell as long as the plans they select have been approved for sale in the state in which they are to be offered.

Some states have limited the number of plans available in the state. Delaware does not permit Plans C, F, G and H to be sold in the state. Pennsylvania and Vermont do not permit the sale of Plans F, G and I. (As this guide was being prepared for printing, however, Pennsylvania was considering a proposal that would permit the sale of all 10 plans.)

Residents of Minnesota, Massachusetts and Wisconsin will find that their Medigap plans are different than those sold in other states. This is because those states had alternative Medigap standardization programs in effect before the federal legislation standardizing Medigap was enacted. Therefore, they were not required to change their benefit plans. If you live in Minnesota, Massachusetts or Wisconsin, you should contact the state insurance department to find out what Medigap coverage is available to you.

The only areas where standardization is not in effect are Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

Comparing Medigap Plans: To make it easier for consumers to compare plans and premiums, the same format, language, and definitions must be used in describing the benefits of each of the plans. A uniform chart and outline of coverage also must be used by the insurer to summarize those benefits for you. As you shop for a Medigap policy, keep in mind that each company's products are alike, so they are competing on service, reliability and price. Compare benefits and premiums and be satisfied that the insurer is reputable before buying. And in selecting the benefits that meet your needs, remember that Medicare pays only for services it determines to be medically necessary and only the amount it determines to be reasonable.

Medigap policies pay most, if not all, Medicare coinsurance amounts and may provide coverage for Medicare's deductibles. Some of the 10 standard plans pay for services not covered by Medicare and some pay for charges in excess of Medicare's approved amount. Look for the plan that best meets your needs.

All standard Medigap plans must have a loss ratio of at least 65 percent for individual policies and 75 percent for group policies. This means that on average either 65 cents or 75 cents of each premium dollar goes for benefits.

Unlike some types of health coverage that restrict where and from whom you can receive care, Medigap policies generally pay the same supplemental benefits regardless of your choice of health care provider. If Medicare pays for a service, wherever provided, the standard Medigap policy must pay its regular share of benefits. The only exception is Medicare SELECT insurance, discussed on other place.

Besides the standardized benefit plans, federal law permits states to allow an insurer to add "new and innovative benefits" to a standardized plan that otherwise complies with applicable standards. Any such new or innovative benefits must be cost-effective, not otherwise available in the marketplace, and offered in a manner that is consistent with the goal of simplification. Check with your state insurance department to find out whether such benefits are available in your state. Your Right To Medigap Coverage: If you are 65 or older, state and federal laws guarantee that for a period of 6 months from the date you first enroll in Medicare Part B, you have a right to buy the Medigap policy of your choice regardless of your health conditions.

During this 6-month open enrollment period, you have the choice of any of the different Medigap policies sold by any insurer doing Medigap business in your state. The company cannot deny or condition the issuance or effectiveness, or discriminate in the pricing of a policy, because of your medical history, health status, or claims experience. The company can, however, impose the same preexisting condition restrictions (see page 19) that it applies to Medigap policies sold outside the open enrollment period.

Many individuals are enrolled automatically in Pan B as soon as they rum 65, or they sign up during an initial 7-month enrollment period that begins 3 months before they turn 65. If you are in this group, your Part B coverage generally starts in the month you turn 65 or shortly thereafter, depending on when you applied for Part B. Your Medigap open enrollment period starts as soon as your Part B coverage starts.

Others may delay their enrollment in Part B. For example, if after turning 65, you continue to work and choose to be continuously covered by an employer insurance plan, or if you are continuously covered under a spouse's employment related insurance instead of Medicare Part B, you will have a special 7-month enrollment period for Part B. It begins with the month your or your spouse's work ends or when you are no longer covered under the employer plan, whichever comes first. Your 6-month Medigap open enrollment period starts when your Part B coverage begins.

If you are covered under an employer group health plan when you become eligible for Part B at age 65, carefully consider your options. Once you enroll in Part B the 6-month Medigap open enrollment period starts and cannot be extended or repeated.

If you cannot defer Part B enrollment as described above, but are 65 or older and are eligible for Part B but never signed up for it, you may buy Part B during Medicare's annual general enrollment period. It runs from January 1 through March 31. If you sign-up during an open enrollment period, both your Part B coverage and Medigap open enrollment period begin the following July 1.

Your Medicare card shows the effective dates for your Part A and/or Part B coverage. To figure whether you are in your Medigap open enrollment period, add 6 months to the effective date of your Part B coverage. If the date is in the future and you are at least 65, you are eligible for open enrollment. If the date is in the past, you are not eligible.

If you are under age 65, disabled, and enrolled in Medicare Part B, you are not eligible for Medigap open enrollment unless your state requires open enrollment for persons under 65 who qualify for Medicare because of a disability. Moreover, unless your state requires otherwise, you will not be eligible for the Medigap open enrollment period when you turn 65 because you will not be enrolling in Part B for the first time.

Older Medigap Policies: Current federal requirements generally do not apply to Medigap policies in force in a state before the requirements which took effect in that state in 1992. Depending on which state you live in, you will not have to switch to one of the 10 standard plans if you have an older policy that is guaranteed renewable.

Some states, however, have specific requirements that affect existing non-standard policies. For example, some states require or permit insurers to convert older policies to the standardized plans. Check with your state insurance department to find out what state-specific requirements are in force. Even if you are not required to convert an older policy, you may want to consider switching to one of the standardized Medigap plans if it is to your advantage and an insurer is willing to sell you one.

If you do switch, you will not be allowed to go back to the old policy. Before switching, compare benefits and premiums, and determine if there are waiting periods for any of the benefits in the new policy. Some of the older policies may provide superior coverage, especially for prescription drugs and extended skilled nursing care.

If you had the old Medigap policy at least 6 months and you decide to switch, the new policy is not permitted to impose a waiting period for a preexisting condition if you satisfied a waiting period for a similar benefit under your old policy. If, however, a benefit is included in the new policy that was not in the old policy, a waiting period of up to 6 months unless prohibited by your state may be applied to that particular benefit.

Because it is unlawful for anyone to sell you insurance that duplicates coverage you already have, and because you do not need more than one Medigap policy, you must sign a statement that you intend to replace your current policy and will not keep both policies. Do not cancel the old policy until the new one is in force and you have decided to keep it (see "Free Look,".

Medigap Insurance Defined: Under state and federal laws, Medigap policies are policies designed to supplement your Medicare benefits. They must provide specific benefits that pay, within limits, some or all of the costs of services either not covered or not fully covered by Medicare. The definition does not include all insurance products that may help you cover out-of-pocket costs. For example, neither a health plan offered by a company for current or former employees, nor by a labor organization for current or former members, is Medigap insurance. Nor are limited benefit plans such as hospital indemnity insurance. They do not qualify because they are not required. to provide the same benefits that the 10 standard Medigap plans must provide.

Similarly, coverage provided to individuals enrolled in managed care plans, such as health maintenance organizations (HMOs) under contracts or agreements with the federal government, does not meet the definition of Medigap insurance even though some of the coverage may be similar. On the other hand, an HMO's supplemental insurance product sold to an individual Medicare beneficiary who is not enrolled under either an employer plan or a federal contract or agreement, does qualify as Medigap insurance.

Medicare SELECT. A Medicare supplement health insurance product called "Medicare SELECT" is permitted to be sold in Alabama, Arizona, California, Florida, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Missouri, Noah Dakota, Ohio, Texas, Washington and Wisconsin. Medicare SELECT, which may be offered in the designated states by insurance companies and HMOs, is the same as standard Medigap insurance in nearly all respects. If you buy a Medicare SELECT policy, you are buying one of the 10 standard Medigap plans. The only difference between Medicare SELECT and standard Medigap insurance is that Medicare SELECT policies will only pay or provide full supplemental benefits if covered services are obtained through specified health care professionals and facilities. Medicare SELECT policies are expected to have lower premiums because of this limitation. The specified health care professionals and facilities, called "preferred providers," are selected by the insurance company or HMO. Each issuer of a Medicare SELECT policy makes arrangements with its own network of preferred providers.

If you have a Medicare SELECT policy, each time you receive covered services from a preferred provider, Medicare will pay its share of the approved charges and the insurer will pay or provide the full supplemental benefits provided for in the policy. Medicare SELECT insurers must also pay supplemental benefits for emergency health care furnished by providers outside the preferred provider network. In general, Medicare SELECT policies deny payment or pay less than the full benefit if you go outside the network for non-emergency services. Medicare, however, will still pay its share of approved charges if the services you receive outside the network are services covered by Medicare.

Medicare SELECT will be evaluated through 1994 to determine if it should be continued and made available throughout the nation. Companies selling Medicare SELECT policies are required to provide for the continuation of coverage if the policies are discontinued. If the program is not extended, Medicare SELECT policyholders will have the option to purchase any standard Medigap policy that the insurance company or HMO offers, if in fact it issues Medigap insurance other than Medicare SELECT. To the extent possible, the replacement policy would have to provide similar benefits. Carrier Filing of Medigap Claims. Under certain circumstances, when you receive medical services covered by both Medicare and your Medigap insurance, you may not have to file a separate claim with your Medigap insurer in order to have payment made directly to your physician or medical supplier. By law, the Medicare carrier that processes Medicare claims for your area must send your claim to the Medigap insurer for payment when the following three conditions are met for a Medicare Part B claim:

1. Your physician or supplier must have signed a participation agreement with Medicare to accept assignment of Medicare claims for all patients who are Medicare beneficiaries:
2. Your policy must be a Medigap policy: and
3. You must instruct your physician to indicate on the Medicare claim form that you wish payment of Medigap benefits to be made to the participating physician or supplier. Your physician will put your Medigap policy number on the Medicare claim form.

Managed Care Plans That Contract With Medicare

As a Medicare beneficiary, you can choose how you will receive hospital, doctor, and other health care services covered by Medicare. You can receive them either through the traditional fee-for-service delivery system or through a managed care plan that has a contract with Medicare. If you choose fee-for-service care, you should consider purchasing Medigap insurance.

If you enroll in a Medicare-contracting HMO or CMP, you will not need a Medigap policy. In fact, insurers are prohibited from issuing you one because it would duplicate your HMO or CMP benefits. If you have a Medigap policy and decide to enroll in a plan, you will be asked to provide an assurance that you will give up the Medigap policy.

Should you enroll in a managed care plan and later disenroll and return to fee-for-service care, you likely will be able to buy a Medigap policy, but you may not get the policy; of your choice, especially if you have a health problem. On the other hand, both disabled and aged Medicare beneficiaries generally may enroll in a Medicare-contracting HMO or CMP without regard to any health problems they may have. For this and other reasons, managed care can be an attractive option for many beneficiaries.

A managed care plan generally arranges with a network of health care providers (doctors, hospitals, skilled nursing facilities, etc.) to offer comprehensive, coordinated medical services to plan members on a prepaid basis. If you enroll in an HMO or CMP with a Medicare contract; services usually must be obtained from the professionals and facilities that are part of the plan, except in a medical emergency.

The plan must provide or arrange for all Part A and B services (if you are covered under both parts of Medicare). Some plans also provide benefits beyond what Medicare covers, such as preventive care, prescription drugs, dental care, hearing aids and eyeglasses.

Medicare makes a monthly payment to the plan to cover Medicare's share of the cost of the services you receive. Additionally, most plans charge enrollees a monthly premium and nominal copayments as services are used. Usually there are no other charges--no matter how many times you visit the doctor, are hospitalized, or use other covered services. Medicare's deductibles and coinsurance do not apply to beneficiaries enrolled in plans with Medicare contracts.

If you enroll in an HMO or a CMP that has a "risk" contract with Medicare, Medicare will not pay for non-emergency services you receive from providers outside of the HMO or CMP. That is, you must receive all your health care benefits (except in an emergency) from the HMO or CMP in order to be covered. If you enroll in a plan that has a "cost" contract with Medicare, you can receive covered services either through the plan or outside the plan. If you go outside the plan for non-emergency services, Medicare will still pay but the plan will not. You would be responsible for the same charges that you would be liable for if you were only covered by Medicare, but you would no longer have a Medigap policy to cover those charges.

You are eligible to enroll in a managed care plan with a Medicare contract if you live in the plan's service area, are enrolled in Medicare Part B, do not have permanent kidney failure, and have not elected the Medicare hospice benefit. The plan must enroll Medicare beneficiaries in the order of application, without health screening, during at least one open enrollment period each year.

Before joining a plan, be sure to read the plan's membership materials carefully to learn your rights and the nature and extent of your coverage. If you live in an area that is served by more than one managed care plan, compare benefits, costs and other features to determine which plan meets your needs. Also, determine which type of contract the plan has with Medicare.

Group Insurance

Employer Group Insurance for Retirees. Many people have private insurance when they reach age 65 that often is purchased through their or their spouse's current employer or union membership. If you have such coverage, find out if it can be continued when you or your spouse retires. Check the price and the benefits, including benefits for your spouse. Group health insurance that is continued after retirement usually has the advantage of having no waiting periods or exclusions for preexisting conditions, and the coverage is usually based on group premium rates, which may be lower than the premium rates for individually purchased policies. One note of caution, however. If you have a spouse under 65 who was covered under the prior policy, make sure you know what effect your continued coverage will have on his or her insurance protection.

Furthermore, since employer group insurance policies do not have to comply with the federal minimum benefit standards for Medigap policies, it is important to determine what coverage your specific retirement policy provides. While the policy may not provide the same benefits as a Medigap policy, it may offer other benefits such as prescription drug coverage and routine dental care.

Special Rules for Working People Age 65 or Over. If you are 65 or over and you or your spouse works, Medicare may be secondary payer to any employer group health plan (EGHP) coverage you have. This means that the employer plan pays first on your hospital and medical bills. If the employer plan does not pay all of your expenses, Medicare may pay secondary benefits for Medicare-covered services to supplement the amount paid by the employer plan.

Employers who have 20 or more employees are required to offer the same health benefits, under the same conditions, to employees age 65 or over and to employees' spouses who are 65 or over, that they offer to younger employees and spouses. EGHP coverage of employers of 20 or more employees is primary to Medicare.

You may accept or reject coverage under the EGHP. If you accept the employer plan, it will be your primary payer. If you reject the plan, Medicare will be the primary payer for Medicare-covered health services that you receive. If you reject the employer plan, you can buy supplemental insurance but an employer cannot provide you with a plan that pays supplemental benefits for Medicare-covered services or subsidize such coverage. An employer may, however, offer a plan that pays for health care services not covered by Medicare, such as hearing aids, routine dental care, and physical checkups.

Special Rules for Certain Disabled Medicare Beneficiaries. Medicare is also secondary for certain people under age 65 who are entitled to Medicare based on disability (other than those with permanent kidney failure) and who have large group health plan (LGHP) coverage. An LGHP is a plan of, or contributed to by, an employer or employee organization that covers the employees of at least one employer with 100 or more employees. This requirement applies to those who have LGHP coverage as an employee, employer, self-employed person, business associate of an employer, or a family member of any of these people. An LGHP must not treat any of these people differently because they are disabled and have Medicare.

The term "employee" here includes both those who are actively working despite their disability (such as disabled Medicare beneficiaries engaged in a trial work period) and those who are not actively working, but whom the employer treats as employees. Medicare determines whether an individual is considered to be an employee.

Disabled persons also have the option of accepting or rejecting LGHP coverage. If they reject the plan, Medicare becomes their primary payer and the employer may not provide or subsidize supplemental coverage, except for items and services not covered by Medicare.

Special Rules for Medicare Beneficiaries with Permanent Kidney Failure. Medicare is secondary payer to EGHPs for 18 months for beneficiaries who have Medicare solely because of permanent kidney failure. This requirement applies only to those with permanent kidney failure, whether they have their own coverage under an EGHP or are covered under an EGHP as dependents. EGHPs are primary payers during this period without regard to the size of the EGHP or the number of employees. The 18-month period begins with the earlier of:

• The first month in which the person becomes entitled to Medicare Part A or
• The first month in which an individual would have been entitled to Part A if he had filed an application for Medicare benefits.

The Health Care Financing Administration pamphlet entitled Medicare Coverage of Kidney Dialysis and Kidney Transplant Services contains more information about Medicare and kidney disease. You can get a free copy from the Social Security Administration or the Consumer Information Center, Department 59, Pueblo, CO 81009.

Association Group Insurance. Many organizations, other than employers, offer group health insurance coverage to their members. Just because you are buying through a group does not mean that you are getting a low rate. Group insurance can be as expensive as or more costly than comparable coverage under individual policies. Be sure you understand the benefits included and then compare prices. Association group Medigap insurance must comply with the same rules that apply to other Medigap policies.

The following types of coverage are generally limited in scope and are not substitutes for Medigap insurance or managed care plans.

Long-Term Care Insurance

If you are in the market for nursing home or longterm care insurance, be sure you know which types of nursing homes and services are covered by the different policies available. And if you buy a policy, make sure it does not duplicate skilled nursing facility (SNF) coverage provided by any Medigap policy, managed care plan, or other coverage you have.

It is important to remember that custodial care (the type of care most persons in nursing homes require) is not covered by Medicare or most Medigap policies. The only care of this nature that Medicare covers is skilled nursing care or skilled rehabilitation care that is provided in a Medicare-certified skilled nursing facility.

For more information about long-term care insurance, request a copy of A Shopper's Guide to Long-Term Care Insurance from either your state insurance department or the National Association of Insurance Commissioners, 120 W. 12th Street, Suite 1100, Kansas City, MO 64 105-1925. You may also obtain a copy of the Guide to Choosing a Nursing Home by writing to Medicare Publications, Health Care Financing Administration, 6325 Security Boulevard, Baltimore, MD 21207.

Hospital Indemnity Insurance

Specified Disease Insurance