Medigap and Medicaid

Medicare Supplement (Medigap) Policies

To “fill the gap” created by Medicare’s deductibles, co-insurance, and exclusions, many private insurers have designed policies to cover some or all of the services not covered by Medicare.

Policies intended to supplement Medicare are not sold or serviced by the federal government. They are sold by producers of private insurance companies. No producer selling Medicare supplements may state that he/she represents Medicare or any government agency.

To eliminate the confusion surrounding the many different types of Medicare supplement policies available, federal law mandates national standardization of Medigap policies. The law requires that insurers offer no more than 12 “standardized” Medigap plans developed by the National Association of Insurance Commissioners (NAIC). The 12 standard plans include a basic policy offering “core” benefits called Plan A (Parts A and B co-payments, 365 additional days of hospitalization, and the first 3 pints of blood). Each of the other 11 plans has a different combination of additional benefits, which are identified by letters B through L.

No Medicare supplement policy may be sold unless a Buyer’s Guide and an Outline of Coverage are delivered at time of application, prior to accepting any premium payment. If the policy is sold by direct response (correspondence or television), with no producer involved, the Buyer’s Guide and Outline of Coverage must be delivered no later than at the time the policy is delivered. The Outline of Coverage must be printed in at least 12-point (1/6-inch) type.

If the producer is replacing one Medicare supplement with another, the producer must also give the applicant a Notice Regarding Replacement of Health Insurance prior to delivering the policy. In addition, a producer may not sell a Medicare Supplement to anyone who already has a policy if the new policy duplicates coverage of the first one. If a Medicare Supplement policy replaces another Medicare Supplement policy that has been in force for at least 6 months, the new policy must waive any probationary or pre-existing condition clauses.

All Medigap policies must be either guaranteed renewable, non-cancellable, or both. On the first page of each policy, a Medicare supplement policy must state its renewability and/or continuation provisions. In addition, all Medicare supplement policies must have a minimum 30-day free look period.

Federal law has established a 6-month open enrollment period for buying Medigap coverage from private insurers. The law dictates that for 6 months immediately following enrollment in Medicare Part B, persons 65 or older cannot be denied a Medigap policy because of health problems. The company selling the Medicare supplement policy may, however, apply a pre-existing condition clause and probationary period for the first 6 months of the new policy’s existence.

A Medicare supplement health insurance product called Medicare SELECT is an experimental program that is currently being evaluated in some states. Medicare SELECT, which may be offered by insurance companies or HMOs, is the same as standard Medigap insurance in nearly all aspects. If you buy a Medicare SELECT policy, you are buying one of the 12 standard Medigap plans.

The difference between Medicare SELECT and a Medigap policy is that Medicare SELECT policies will only pay or provide full benefits if covered services are obtained through specified health care professionals and facilities. As a result, Medicare SELECT policies generally have lower premiums.

State Government Programs

Medicaid

Medicaid is medical welfare for those with low income and/or no assets. Medicaid is a federally assisted health insurance program that is maintained at the state government level. Its purpose is to provide or supplement medical care for those in financial need, regardless of age or disability. The coverage provided is quite extensive and generally covers all normal medical needs. Medicaid is not part of the Social Security system.

Workers’ Compensation

Workers’ comp is a liability policy. You cannot sell it with a life or health insurance license; you need a P&C license… But for some unknown reason it shows up on this exam.

Workers’ compensation is mandated by state law for all employers. If an employer has one or more employees, they must be covered. The business owner, however, may opt out of coverage.

Based on the concept of liability without fault, these laws hold the employer liable for injury or illness which “arises out of and in the course of employment.” Benefits for medical expense are automatically available in all states, but the benefit for loss or income and/or loss of limb varies by state.

Most health insurance policies are non-occupational, meaning that they cover you off the job only. Most policies state that there is no coverage for on-the-job injury or sickness if you are covered by workers’ compensation.

However, if you are not covered by workers’ compensation and you are injured on the job, your health insurance will pay the claim. This is known as occupational coverage, since coverage applies both on and off the job.

Lesson Summary

Medicare supplement (Medigap) policies are designed by private insurers to cover services not included in Medicare. Here are some key points about Medigap policies:

• Private insurers, not the federal government, sell and service Medigap policies.
• Federal law mandates national standardization of Medigap policies, with insurers offering no more than 12 “standardized” plans.
• The 12 standard plans have different combinations of additional benefits labeled Plans A through L.
• A buyer’s guide and an outline of coverage must be provided at the time of application.
• Replacement of a Medigap policy must adhere to specific notice requirements.
• Medigap policies must be guaranteed renewable, non-cancellable, or both, and include a minimum 30-day free look period.

Medicare SELECT is a Medigap insurance option with specific requirements for receiving full benefits.

Medicaid is a medical welfare program at the state level for individuals with low income and/or no assets. Some key features of Medicaid include:

• Coverage is comprehensive and extends to all normal medical needs.
• Medicaid is not part of the Social Security system.
• Medicaid covers convalescent care (long-term care).

Workers’ compensation is a liability policy mandated by state law for employers. Here are some important points about workers’ compensation:

• Employers must have coverage for employees, but business owners may choose to opt out.
• Workers’ comp is based on holding the employer liable for work-related injuries or illnesses.
• Health insurance generally does not cover on-the-job injuries if covered by Workers’ comp.
• Workers’ comp policies are sold by private commercial insurers, not government programs.

Chapter Vocabulary