New Federal Rule Promises Fairer Medigap Access: What Agents Need to Know
Medicare Supplement (Medigap) plans have long been a popular choice for Medicare beneficiaries looking to manage healthcare costs. Yet they’ve lacked critical federal consumer protections, leading to discriminatory practices from insurers based on age, disability, and sex. As 42% of traditional Medicare enrollees also purchase a Medigap policy to cover out-of-pocket costs, the demand for fair and equitable access is clear.
Recent revisions to Section 1557 of the Affordable Care Act (ACA) may help level the playing field for many beneficiaries and provide licensed agents with an opportunity to better serve Medicare-eligible consumers.
Understanding the need for Medigap protections
Discriminatory practices within the Medigap market have historically limited access for certain groups. For instance, higher premiums can be charged for older adults, people with disabilities, or based on gender. Denials of coverage often occur for those with pre-existing conditions, and beneficiaries under age 65 with disabilities face an even greater lack of access due to minimal federal protections.
While some protections exist for those over age 65, the current scope is narrow, ensuring coverage only for six months after enrolling in Medicare Part B and for a limited period after certain events (such as a Medigap plan going bankrupt).
The limitations on Medigap access have pushed some beneficiaries toward Medicare Advantage (MA) plans, which cap out-of-pocket costs but often have less flexibility. With the cap set at $8,850 in 2024 — a level 95% of beneficiaries are unlikely to reach — the financial predictability of Medigap remains a critical draw for many.
The new rules and their potential impact
The revised rule under Section 1557 broadens protections against discrimination to include health insurance companies receiving federal funds and all plans from insurers primarily engaged in healthcare. In essence, the new regulations ensure that insurers offering federally funded products like MA, ACA marketplace plans, and Medicaid managed care must also apply nondiscriminatory practices to their Medigap policies. This includes:
- Prohibiting discriminatory pricing based on age, disability, gender, race, sexual orientation, or other protected statuses.
- Extending coverage without pre-existing condition limitations.
This change, set to take effect on Jan. 1, 2025, means some Medigap insurers will need to adjust their pricing and coverage practices significantly. However, it doesn’t apply universally. Medigap plans sold by companies primarily offering life, home, or auto insurance aren’t affected by the Section 1557 revision and can continue their current practices.
Implications for the Medigap market
The revisions to Section 1557 could create a market with two distinct types of Medigap policies: plans subject to the new nondiscrimination rules, and those that are exempt.
Such a divided market could lead to consumer confusion, administrative complexities, and potential shifts in premiums and coverage. While nondiscriminatory plans may face higher premiums to accommodate a broader risk pool, lower-cost plans not affected by the new rule could attract healthier enrollees. This segmentation could undermine fair access and drive up costs for those requiring nondiscriminatory coverage.
How we can leverage the changes
As a licensed agent, you have a unique opportunity to help beneficiaries navigate the new Medigap landscape. Here are a few ways you can leverage these changes:
- Educate consumers on their rights: Ensure those you serve understand the implications of Section 1557 and how it might impact their Medigap options, particularly if they are in vulnerable groups previously subject to discriminatory practices.
- Highlight the value of Medigap: For consumers seeking stability, explain how Medigap can offer predictable costs and broader access to care compared to MA plans, especially as the new nondiscrimination rules take effect.
- Compare and contrast plans thoroughly: With the potential for a divided market, be prepared to guide people through the nuances of Medigap policies that adhere to Section 1557 and those that don’t, tailoring recommendations to each individual’s needs.
Key takeaways:
- Revisions to Section 1557 of the ACA will prohibit discriminatory practices among insurers primarily engaged in healthcare, affecting some Medigap policies starting Jan. 1, 2025.
- These changes could create widespread impacts on the Medicare Supplement market as some insurers would not be affected, potentially leading to a two tiers of Medigap plans.
- Licensed agents should stay informed about the shifting landscape of Medigap coverage and costs to better guide their clients toward the most advantageous plan for their needs.
