5 Illegal Medigap Practices to be Aware of
Seniors approaching Medicare age, at 65, are ready targets for fraudsters and scammers, primarily the seniors who may not fully understand the various coverage options – and the many names that sound so similar.
Your best protection is to be familiar with your choices and their correct names. These brief descriptions of your basic coverage choices should help.
Describing the Medicare System
Original Medicare: Everyone starts their Medicare journey with Medicare’s primary coverage, called Original Medicare, which includes Part A (Hospital insurance) and Part B (Medical insurance). The federal government provides this coverage.
Medicare Advantage (or Part C) is offered by private insurance companies as an optional replacement for Original Medicare. Besides covering Part A and Part B, these insurers bundle different combinations of prescription drug, vision, dental and hearing plans.
Medicare Supplement (or Medigap) insurance is also provided by private insurers. Medigap plans, also optional, help pay for the remaining 20% of your medical costs after Original Medicare pays 80% of the approved Medicare charges.
Medigap plans get far less advertising exposure than Medicare Advantage – almost as an afterthought. Yet they can be a significant complement to your Original Medicare, bringing your financial exposure more in line with Medicare Advantage. Until you actually use Original Medicare, you may not realize how costly your out-of-pocket expenses can potentially be, paying the 20% open-ended copayment.
Medigap plans may be optional, but there is an ideal time to enroll. By doing so within the first six months after you turn 65, you can access any authorized plan offered in your state by a private insurer, regardless of pre-existing conditions. After the 6-month window, insurers might require underwriting, which could lead to higher premiums, long waiting periods or outright denial of coverage.
If you want Medigap coverage to supplement your Original Medicare, here are five illegal practices to avoid as you explore your Medigap possibilities.
1. Selling you a Medicare Advantage plan when you specifically asked for Medigap
All the television ads and oversized postcards in your mailbox promote Medicare Advantage plans during certain times of the year. A manipulative salesperson can fast-talk you into believing that a Medicare Advantage plan is a better alternative than Medigap. Instead, they are trying to move you from your Original Medicare coverage – where private insurers make no money – to Medicare Advantage, where they do.
Takeaway action step: Invest the time to understand the structure and terminology. If you aren’t asked what plan you want, you are being sold something other than a Medigap plan.
2. Telling you that a Medigap plan is part of the Medicare program
If an insurance agent or marketer tells you a Medigap plan is part of Medicare, consider it a red flag and find another person to deal with. They are being dishonest because Medigap is only available through private insurance companies and not from the federal government.
A less-than-ethical agent might use federal government agency names to build the credibility of what they are selling you. The names most commonly used are Social Security, the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS). All these agencies are involved in Medicare activities, but not in the way the agent tells you.
3. Trying to sell you a Medigap plan when you already have Medicare Advantage or Medicaid coverage
If you already have Medicare Advantage coverage, it is illegal to sell you a Medigap plan. Besides, a Medigap plan only functions with Original Medicare, not Medicare Advantage.
If you are on Medicare and have limited income, you may receive assistance from your state’s Medicaid program. If so, you are considered a “dual-eligible Medicare and Medicaid beneficiary,” where Medicaid covers your out-of-pocket health care costs, so you have no need for a Medigap plan. (Only rare exceptions exist to that situation.)
Takeaway action step: If you have Medicaid, contact a Medicare representative to find out if you need a Medigap policy to supplement your Medicaid. Unless you have a trusted relationship with an insurance agent, they could be pushing the sale of a policy you don’t need.
4. Trying to sell you a Medigap plan that is not available in your state
Medigap’s plans are consistent across the country, so Plan A in California offers the same coverage as Plan A in Maine. However, each insurance company can decide the plans they want to offer in each state. As a result, not all plans or insurers are available in all states.
Insurers are also free to charge whatever they want in each state, limited only by competition from other insurers. So premiums vary from state to state and by insurer.
Takeaway action step: Find the number for your State Insurance Department and confirm that the Medigap plan you are being offered is available in your state.
5. Pressuring you into buying or switching Medigap coverage
Since Medigap is optional, you have the right as a Medicare beneficiary to decide whether you want a plan. The insurance agent is only supposed to guide you, not pressure you. But some agents are not beyond using scare tactics to pressure you into buying a plan.
Insurance agents are compensated with a set percentage of the annual premium. As a result, they have been known to push potential clients towards higher-premium plans or to switch you from one plan to another because new plans pay higher commissions than automatic rollovers.
Takeaway action step: If you feel you were affected financially by how someone misled or pressured you related to Medicare coverage, contact the Office of the Inspector General, which investigates and reviews federal issues of Medicare fraud.
The best way to safeguard your money, health and personal data is to be informed about Medigap plans and the illegal Medigap practices in the market.
An ethical, professional insurance agent will never charge you a fee or pressure you into buying a specific plan. Instead, they will provide all the information you need to make your own final decision.