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Changes in Medicare Supplemental Policies (Medigap)

by David Jones, J.D., Hotline Attorney

A Medicare Supplement insurance policy (commonly called a Medigap policy) helps to pay medical costs not covered by Medicare for covered services: e.g., deductibles and co-insurance. Currently, the most popular Medigap policy in Michigan is the Blue Cross-Blue Shield (BCBS) Legacy Plan C. It has a little under 50 % of the total enrollees. It uniformly costs $122.86 per month, which is below the market rate. The cost has been frozen for 5 years, but the freeze expires 7/31/2016. BCBS submitted a rate increase proposal to the Insurance Commissioner on July 5, 2016 which, if approved, would take effect on January 1, 2017. Enrollees have recently been getting notices from BCBS that their rates may be increased effective January 1, 2017. The Insurance Commissioner accepted comments on the rate increase up to July 31, 2016. It is generally believed the Insurance Commissioner will approve the new rates. 

Under the new rates, for the first time, BCBS will consider the client’s age, gender, and geographic location. The greatest increases will be for those with Medicare under 65 (generally the disabled), men, those living in Southeast Michigan, and older seniors. For example, for those living in Southeast Michigan, a 65 year old female will see an increase of $48 per month, and an 80 year old male will see an increase of $177 per month.

Lower income people who apply may be eligible for a subsidy. The income limit for a one person group is $17,820 per year. The income limit for a two person group is $24,030. The subsidy ranges from $40 per month to $125 per month.

No new enrollees will be allowed into Legacy Plan C. Therefore, over time, as the current enrollees age and their medical expenses increase, the rates can be expected to increase considerably.

There actually are a total of 21 insurance companies in Michigan that offer Medigap policies. Therefore, enrollees in the BCBS Legacy Plan C may want to shop the other insurance companies rates and consider shifting insurers. However, if an enrollee has any of certain pre-existing medical conditions, those conditions may not be immediately or fully covered by the new insurance company. The relevant pre-existing conditions are generally the more severe and costly ones, such as Parkinson’s or End Stage Renal Failure. Such a person really has no option to leave BCBS, and must pay the current increase in rates, as well as the anticipated future increases.

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