Drew Altman, Kaiser Family Foundation
December 17, 2018
Pre-existing
conditions are in the news again, now that a federal judge's ruling could wipe
out the Affordable Care Act. But there's been a similar issue all along that's
drawn less attention: Seniors with pre-existing conditions can be denied
coverage in many cases when they apply for Medicare supplemental insurance
policies, or Medigap.
The big
picture: The Affordable Care Act prohibits most private health plans from
denying coverage to individuals based on their medical history. Medicare and
Medicaid also cover all eligible individuals regardless of their medical
history. But Medigap doesn’t have this protection, at least not fully. The
problem could be addressed, but with the expected side effect: premiums would
go up.
Background: More than 1 in 4 people in
traditional Medicare have a Medigap policy to help beneficiaries cover
out-of-pocket costs, which are not capped under Medicare.
How did Medigap
fall under the radar on pre-existing conditions? It happened because
Congress had already dealt with the issue — but in a way that left huge holes —
and the ACA was aimed at the parts of the private health insurance market that
didn't already have protections.
·
In 1990, Congress established consumer protections for Medigap,
but with limited protections for people with pre-existing conditions.
·
Medigap insurers have to issue a policy without regard to
pre-existing conditions during the first six months of enrolling in Medicare
Part B at age 65 or older, after an employer terminates retiree coverage, and
after a brief trial period in a Medicare Advantage plan, and other narrowly
defined circumstances.
·
Otherwise, Medigap insurers can and do deny applications from
seniors with pre-existing conditions.
There's no hard
data on how many people have been affected, but we know anecdotally that it
happens. Here's a good piece by
my Kaiser Family Foundation colleague Tricia Neuman about a friend who was
turned down for Medigap coverage because of his pre-existing condition.
And
pre-existing conditions aren't exactly rare among seniors. My best estimate is
that 65% of Medicare beneficiaries have a condition Medigap insurers might use
to deny coverage.
·
That's based on how many seniors have the kinds of conditions
that have been targeted by insurers: diabetes, cancer, congestive heart
failure, chronic lung/pulmonary disorders, Alzheimers and related dementias,
end-stage renal disease, coronary artery disease, rheumatoid arthritis, mental
disorders, osteoporosis and stroke.
Between the
lines: States can go beyond minimum federal protections by prohibiting
Medigap insurers from underwriting during an annual open enrollment period
(meaning they can't use pre-existing conditions to determine whether to cover
someone and under what terms).
But just 4 states do
so for seniors. And while many other states go beyond the minimum federal
requirements, the circumstances are typically narrowly defined.
Outside the 4
states, people on Medicare have a limited window of opportunity to buy a
Medigap policy, and if they miss the window, they may be denied a policy due to
a pre-existing condition. This potentially affects:
·
Some of the 6 million people in traditional Medicare without
supplemental insurance.
·
Some of the 20 million
enrollees in Medicare Advantage who may at some point in their
lives want to switch to traditional Medicare, with the added protection of a
Medigap policy.
·
Other adults on Medicare besides seniors — those under age 65
with serious disabilities with no protections for pre-existing conditions in
some states, even when they first go on Medicare.
·
People on Medicare who now have a Medigap policy who may be
unable to switch to a lower-premium policy sold by another company if they have
a pre-existing condition.
The bottom
line: The problem is fixable. Congress could require Medigap insurers
in all states to accept people on Medicare, including those with pre-existing
conditions, during an annual open enrollment period. Or it could add an
out-of-pocket limit to traditional Medicare, mitigating the need for
supplemental insurance.
But, as always,
there would be tradeoffs, in the form of increased Medigap premiums and higher
federal Medicare spending.
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