If you have visited The Insurance Barn before, you understand that my focus is on health insurance for Baby Boomers. That is a pretty large undertaking.
Not only am I required to understand how “Obamacare” will affect those who are still employed. I also need to understand what will happen to those who have Medicare.
This year I have written a great deal about how Obamacare will affect Americans who are not yet on Medicare. Unfortunately, it has caused some confusion among my clients who are already enrolled in Medicare.
In this post, I want to try to relieve some of the confusion by sharing the answers to some recent questions I have gotten.
What if a senior cannot afford Medicare supplement insurance as required by Obamacare?
I understand why someone would be concerned about this, however, it is not something that should worry anyone.
The 10 Essential Benefits are only mandated for people who do not have Medicare. As long as you have part A of Medicare, you are exempt from the Individual Mandate.
Although it makes good common sense, the law does not require you to buy optional Medicare B, Medicare D or Medigap.
Will Obamacare affect my supplement health insurance?
NO! The PPACA is a lengthy law. Its provisions are being phased in over time.
If you are concerned about changes to Medicare, the ones in Obamacare have already happened.
The PPACA made sweeping changes to the Medicare Advantage system in 2010. It also added an annual “Preventive Service” visit benefit to the optional Medicare B program.
The only other adjustment to Medicare, that concerns Americans is to the optional program for prescription drug coverage. A gradual change is taking place in Medicare D supplements for the “Donut Hole.”
Each year seniors are responsible for less out-of-pocket expenses for their prescription drugs. Obamacare has no affect any other Medicare supplements.
With that having been said, there are bi-partisan talks in D.C. that would make significant changes to the Medicare and Medigap systems in the future. However, there are 2 facts that I want to emphasize.
- Changes to Medigap will not be part of “Obamacare.” It will be a different legislation.
- As of today, the politicians are just talking. Any changes you hear about Medigap are nothing more than speculation.
If your concern is about supplements to traditional Major Medical insurance, I want to assure you that there is nothing in Obamacare that will apply toward supplemental plans. They will remain exactly like they are today.
However, I also want to say that although they are not mandated or governed by guarantee issue laws, under Obamacare, insurance supplements are anticipated to become more desirable.
All of the “Obamacare” Essential Benefit Plans have cost-sharing provisions. None of them will help you pay your bills while you are recovering from medical treatment. The implied promise that they will prevent bankruptcy because you got sick did not happen as Americans thought.
Although you are required by “Obamacare” to buy government approved health insurance, you would be wise to get supplemental insurance to help you pay for things that the government approved “Metal Plans” do not.
Some of the supplements that you may wish to investigate include…
- Disability Income – To help you pay your non-medical bills while you are recovering from medical treatment.
- Critical Illness – To help you pay your “Metal Plan’s” cost sharing expenses and other misc. expenses in the event of cancer, heart attack or stroke.
- Hospital Income – To help you pay your deductible and/or co-insurance in the event you are admitted to the hospital.
- Dental – To help you maintain good oral health
- Long Term Care – To help you pay nursing home, home care or assisted living expenses in the future.
Does Medicare supplement plan N have underwriting?
I understand why someone might be confused about this. When plan N was first made available, in June of 2010, one insurance company waived its right to medical underwriting. It did not restrict guaranteed approval to only the times created by Medicare. It approved policies for everyone who applied for plan N.
In less than 2 years they were forced to increase the premium they charged for plan N. The phenomenon known as, Adverse Selection, hit them hard. The principle of “Adverse Selection” indicates that the sickest of the population will be attracted to policies that are “guaranteed issue.”
The insurance company that waived the right to medical underwriting for plan N has had to pay out more money for claims than it has collected in premium. That insurance company no longer offers plan N and has increased premiums drastically.
Their hope is to force those who can medically qualify for another plan to switch. Those who cannot medically qualify are stuck with their plan N Medigap and must pay a premium that is equal to their risk.
All insurance companies, that I am aware of, have learned from the mistake this insurance company made. As a rule, insurance companies have the same underwriting policies for plan N that they have for all other Medigap plans they offer. Unless you buy a Medigap during your Initial Enrollment Period or during one of the Special Enrollment Periods, you must be able to medically qualify for Medigap.
What that means to you is that you should never cancel your current Medigap policy just because you have completed an application. If you are switching to a new insurance company, request an effective date far enough in the future for the new plan to allow you to complete underwriting and get your new policy before you contact your current insurance company to cancel your current Medigap.
It can also serve as a powerful object lesson for Obamacare’s guaranteed issue provisions but as the consequences for Adverse Selection will not begin to show themselves until the end of this presidential term, there is no reason for the politicians who gave us guaranteed issue to be concerned. They will be ending their terms of office about the time that Adverse Selection price increases start.