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Insurance Commissioners Frown on Medigap Proposals

By Jane Norman, CQ HealthBeat Associate Editor

September 20, 2011 -- Members of the National Association of Insurance Commissioners are developing a letter to members of Congress in which they will oppose attempts to extract more money from Medicare enrollees who buy Medigap insurance—an option the president has now backed for new enrollees.

The letter has not yet been publicly released, but members of an NAIC committee working on health care law issues voted during a conference call to approve a version of it.

Aides said that the Health Insurance and Managed Care (B) Committee approved a letter to congressional leadership and members of the Select Committee on Deficit Reduction "expressing opposition to proposals that would prohibit Medigap first-dollar coverage." The letter will next be considered by another NAIC panel, the Government Relations Leadership Council.

Critics of changes in Medigap say President Obama's proposal could harm seniors who can't afford to pay more out of pocket. According to a recent brief in the journal Health Affairs, Medigap plans are currently offered in 10 standard benefit packages that were developed by NAIC, which is made up of state insurance regulators. The Health Affairs article also said the two most popular plans cover all deductibles and coinsurance under Medicare Part A and Part B, including hospice and skilled nursing facility care.

In his recent deficit reduction proposal, Obama said he supports a Part B premium surcharge for new Medicare beneficiaries who purchase first-dollar coverage. Medigap policies sold by private companies cover most or all of the cost sharing required by Medicare, his proposal noted. But this "gives individuals less incentive to consider the costs of health care services and thus raises Medicare costs and Part B premiums," say administration documents on the plan.

It adds that "of particular concern" are Medigap plans that cover nearly all Medicare co-payments, even those for routine care that beneficiaries could afford to pay out-of-pocket. So the administration is proposing a Part B premium surcharge equal to about 15 percent of the average Medigap premium for new enrollees who buy Medigap policies with very low-cost sharing requirements, beginning in 2017.

Other Medigap plans would be exempt, and the surcharge would not apply to current beneficiaries or near-retirees. The administration says this move would save $2.5 billion over 10 years.

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