If you are thinking of signing up for a Medicare Advantage (Medigap) plan for the first time this open-enrollment season, watch out for the “Hotel California” clause: Once you’re on the privatized program, you may find it hard to leave.
The reason for this is simple: When we turn 65 and become eligible for Medicare, if we stay with traditional, government-run Medicare, we are also guaranteed the right to buy supplemental “Medigap” insurance at a reasonable rate. Medigap pays for the stuff that traditional Medicare doesn’t cover. Strict regulations mean that health insurers can’t deny us insurance coverage for pre-existing conditions, and can’t charge us an arm and a leg, either.
But once we leave traditional Medicare for a private Advantage plan, we lose that guarantee.
And if we ever go back on the traditional program, we may not be able to get Medigap coverage at an affordable rate — or at all.
It’s a subject of growing importance. Already, more than half of all Medicare beneficiaries are on private Advantage plans.
“Federal law allows Medigap insurers to use medical underwriting to either deny Medicare beneficiaries a policy or charge higher premiums outside of guaranteed issue periods,” KFF warns. “Federal law also does not require Medigap insurers to issue Medigap policies to people who choose to disenroll from a Medicare Advantage plan, except under limited circumstances.”
Pre-existing conditions that could be denied coverage include “Alzheimer’s disease, asthma, cancer, congestive heart disease, diabetes with complications, end-stage renal disease (ESRD), high blood pressure, limitations of daily activities, stroke and other conditions,” KFF reports, after reviewing the Medigap terms offered by leading insurers. “Applicants may also be charged higher Medigap premiums if they have conditions such as diabetes with no complications, bipolar disorder, or osteoporosis that is treated with infusion,” it adds.
Obamacare guarantees you can get affordable coverage regardless of pre-existing conditions, “but does not apply to Medigap insurers,” KFF warns. The “guaranteed issue periods,” when you are legally guaranteed an affordable Medigap policy, are rare. The main one is the initial six-month period when you turn 65 and first become eligible for Medicare. They can also include the initial trial period on Medicare Advantage. (Note: If you sign up for a Medigap policy under these terms during the guaranteed issue period, the insurer cannot later charge the terms.) People are also allowed to switch to traditional Medicare without penalty if their Medicare Advantage plan is discontinued.
“Nine out of 10 (90%) of Medicare Advantage enrollees ages 65 and older, or 22.4 million people, do not have guaranteed issue protections to purchase Medigap beyond the initial Medicare Advantage trial period, as of 2022,” KFF reports.
Four states — New York, Massachusetts, Connecticut and Maine — offer some extra protections for residents over age 65 seeking Medigap insurance.
None of this means that Medicare Advantage is necessarily a bad thing. The privatized program has become increasingly popular, especially within poorer and historically disadvantaged communities including people of color. Last year, federal taxpayers spent an extra 22% per beneficiary subsidizing these plans, allowing the big insurance companies to make big profits and pay salesmen nice commissions, while also providing some extra benefits to plan members.
There again, Hotel California sounded pretty good, too: Mirrors on the ceiling, pink champagne on ice, the works. Just be aware it’s a lot easier to check in than it is to leave.
Find an Elder Law or Special Needs Law Attorney
Do you need an attorney to handle your Estate Planning, Probate, Special Needs, or Medicaid/Medicare issues? Find a qualified member of the Ohio Chapter of the National Academy of Elder Law Attorneys in the Ohio NAELA Directory.
