Guide on Medicare Supplement Insurance
By: California Department of Insurance Consumer Services Division
Do I Need Medicare Supplement
Supplement policies help to pay the health care costs only if you have the Original
Medicare Plan and have both Medicare Part A and Part B. Whether you need a Medicare
Supplement policy is a decision only you can make.
do not need to buy a Medicare Supplement policy if you are enrolled in the following
Medicare Advantage (the new name for Medicare + Choice) plans:
- Medicare Managed Care Plan, or a
- Private Fee-for-Service Plan.
What Is Medicare?
Medicare is a Federally funded insurance program for eligible
participants 65 or over, for eligible participants of any age who have been
qualified as disabled, and for persons with End-Stage Renal Disease (ESRD).
There are two parts of Medicare: Part A (Hospital Insurance) and
Part B (Medical Insurance). Under Medicare Part A, the Federal government
will pay a portion of your expenses for inpatient hospitalization, skilled
nursing facility care, hospice care services, home health care services, and for
medically necessary blood transfusions. Medicare Part B covers your doctors’
services, outpatient hospital care, and other medical services. To better
understand your Medicare benefits and how to use them, read the Medicare &
You handbook, which is available from your local Social Security office or
by calling Medicare at 800-633-4227. You may also refer to the Medicare Web
For each medical service Medicare covers, there is a portion that Medicare does
not pay. Medicare Part A and Part B both have a deductible (the amount you
must pay or must incur before Medicare will begin to pay). You must also
pay the portion of the hospital or medical expenses for which you are
responsible, commonly referred to as “coinsurance” or a “co-payment.” The
monthly premiums, deductibles and coinsurance for Medicare change each year. You
can find out the current amount of these Medicare charges by contacting your
local Social Security office.
need medical services that Medicare does not cover. Such services as medical
expenses incurred during foreign travel or outpatient prescription drugs are not
covered by Medicare.
handbook is reprinted each year to reflect any changes in deductibles,
coinsurances, or benefits. Consult a current Medicare handbook for any changes
to the Medicare plan.
Medicare Supplement Insurance Is
legislation creating Federal standards for Medicare Supplement insurance
policies that the states are required to adopt, with the exception of
Massachusetts, Minnesota, and Wisconsin. Federally mandated standardization
means that all Medicare Supplement insurance policies sold must contain a
package of benefits conforming to one of the ten standard plans that are
designated as Plan A through Plan J
As a result of
standardization, comparison-shopping among
different insurance carriers for Medicare Supplement insurance is relatively
simple. For example, Plan C will contain the same benefits no matter
which insurer sells it. Consumers can select policies based on premium cost and
the special features or services offered by the Medicare Supplement insurance
Who Pays First if You Have Other
you have a question about who should pay, or who should pay first, check your insurance
policy or coverage. It may include a coordination of benefits clause. You may call your
insurance company or the Medicare Coordination of Benefits Contractor at 800-999-1118.
Open Enrollment for
Purchasing a Medicare Policy
If you are 65 years old or older, you may buy any Medicare Supplement insurance policy,
regardless of the condition of your health, during the "open enrollment" period.
The open enrollment period lasts for six months after you first become eligible for
Medicare Part B. Effective September 27, 2000, Medicare eligible disabled individuals
under the age of 65 who do not have End-Stage Renal Disease now have the right to a six
month open enrollment period beginning with their entitlement to Medicare Part B to
purchase selected standardized Plans A, B, C, F or a prescription drug Plan H,
I, or J at the discretion of the insurer. When a Medicare beneficiary under
the age of 65 turns 65, they will have a second six month open enrollment period
to purchase a standardized supplement policy for plans A through J.
you have purchased a Medicare Supplement policy, you will have an annual open enrollment
commencing with your birthday and ending 30 days later. The policy must be of equal or
lesser value in coverage to your existing plan.
Enrollment" means that no insurer may deny you the right to purchase any of the
ten standard plans because of any preexisting medical condition, claims experience, or
receipt of medical care. If you have a preexisting medical condition (a condition for
which you received medical advice or treatment during the six months before your insurance
begins), open enrollment is an important advantage to you.
NOTE: Although you are guaranteed the
right to purchase any Medicare Supplement insurance product during open enrollment, insurers
are permitted to impose a waiting period of up to six months before paying you benefits
related to any preexisting condition, unless you have had prior creditable
an applicant has had a continuous period of creditable coverage of at
least six months, the issuer cannot exclude benefits based on a
preexisting condition. “Continuous period of creditable coverage” means
the period during which an individual was covered by creditable coverage
within the past 63 days from the end of their prior coverage.
“Creditable coverage” means, with respect to an individual,
that they were covered under any individual or group contract which
provided medical, hospital and surgical coverage that was not designed to
supplement other plans.
If you have
a preexisting medical condition, ask your agent to check the outline of
coverage on the policy you are considering buying for the length of the
waiting period as some policies have shorter waiting periods or no waiting
What Is Medicare Select?
Select is a PPO variation of Medicare standardized plans A through J initiated by Congress
in 1990 that set standards for Preferred Provider Organizations (PPOs). PPOs attempt to
cut costs by offering you a discount if you use a doctor or other medical provider who is
a member of the PPO network. The "network" is made up of various health care
provider groups which contract to provide specific services to consumers. You are not
required to use the providers in the network when it is an emergency or not reasonable to
obtain services through a network provider, but you receive an advantage if you do (the
advantage generally is that the insurance company will pay a larger percentage of the
cost). Medicare Select PPOs offer standardized Medicare Supplement coverage through a PPO
system. If you try a Medicare Select PPO system and you do not like it, you may switch to
an individual Medicare Supplement policy if your insurance company offers one.
Individual vs. Group
Medicare Supplement policy is a contract between you and the insurance company.
Its provisions have the maximum number of consumer protections required under California
law, but it is sometimes more expensive than group insurance. The law requires that every
individual policy must be either "guaranteed renewable" or
means that you have the right to continue the same coverage with no change
in the terms of your policy, so long as you continue to pay the premiums on time. However,
the insurance company has the right to change the premium. Of course, there is no
guarantee that the insurer will not go bankrupt. Individuals covered by a company
withdrawing / exiting the Medicare Supplement market shall have the opportunity to renew
under another company and retain the same benefits.
means that you have the right to continue the same coverage, with no
change in policy terms and no change in premium rates, so long
as you continue to pay premiums on time.
Check your contract language to determine if you have either a
noncancelable or guaranteed renewable policy. Although insurers are authorized
to write both types, most or all insurers have chosen to offer guaranteed
Medicare Supplement insurance is a contract between the insurance company and a
group master-policyholder such as an employer acting on behalf of its employees. The group
master-policyholder can also be a sponsoring organization such as a trade or professional
association like AARP, Retired Officers Association, or a labor union specialized plan. If
you are covered under a group plan, you receive a certificate rather than a policy of
insurance, and the group master-policyholder negotiates the terms of the insurance and has
the option to terminate the policy or insurance carriers. Often, but not always, group
insurance is less expensive than individual insurance.
your Medicare Supplement insurance group replaces the policy or the insurer with a new
one, the new group insurer will offer everyone in your group the new coverage without
exclusions for any preexisting condition that would have been covered under the prior
group policy. The premiums may be higher.
Consumer Protections Required in All
Medicare Supplement Insurance
Free Look: Every applicant for Medicare Supplement insurance, both individual and
group, has the right to return any policy or certificate for any reason within 30 days of
receiving that policy. The insurance company is required to refund all premiums and any
other fees that have been paid. Your 30-day free look begins when you receive the policy
or certificate. If you buy a "field-issued" policy (a policy that the agent
delivers to you on the same day you complete the application), your 30-day free
look begins when you receive a notice in the mail from the insurer. Always document the
date you received the policy and the date you return the policy to the insurance company
or the agent. Many applicants use that 30 days to discuss the purchase with family,
friends, or with a HICAP counselor.
Periods for Preexisting Medical Conditions: No Medicare Supplement insurance
may require a waiting period longer than six months for coverage of a preexisting
condition. If you replace one policy or certificate with another, and have satisfied the
waiting period under the first one, the replacing insurance company may not impose a new
waiting period for the same preexisting condition. You must be given credit for your prior
of Coverage During Medical Eligibility: If you become eligible to receive
Medi-Cal benefits, you can ask to have your Medicare Supplement insurance suspended for up
to two years. If you become ineligible for Medi-Cal during the two years, you can ask to
have your insurance benefits reinstated and begin paying premiums again.
of Coverage: Every Medicare Supplement insurer and agent is required to give
you an outline of coverage at the time you are offered insurance to buy. The outline of
coverage contains a chart of all ten standardized plans and a chart for each plan offered
by the insurance company. It will probably summarize the terms and features unique to that
insurance company. You do not have to fill out an application in order to get the outline
of coverage. Compare different outlines of coverage in private with family members,
friends, or a HICAP counselor.
Refund: Insurers are required to refund any unearned monthly premium you paid
in advance and terminate coverage when requested by the insured.
What Should I Look for When Comparison
Rates: Since standardization, the most important difference between Medicare
Supplement insurance products is the premium cost. Be careful! Lower premiums are not
necessarily the best choice.
Age Rating policies use a pricing method which automatically increase the premium
as you age. These policies are usually less expensive during the first year, but the
premium will increase automatically as you enter new age brackets. These automatic
increases may be combined with premium increases based on inflation and higher medical
costs, resulting in exceptionally steep increases as you get older. You may be
"priced out" and find it costly to go elsewhere at an advanced age. California
law requires a notice on each policy or certificate disclosing any automatic premium
increases based on age.
Age Pricing is a pricing method based on your age when the policy is first
issued. The premium may increase with inflation, but not because you enter an older age
bracket. Policies using this method appear slightly more expensive initially, but premiums
do not automatically increase and are more reasonable in an older age bracket.
policies, also called No-Age Rated policies, charge everyone the same rate, regardless of
Policy / Health Maintenance Plan:
your local HICAP office can provide in depth comparison between indemnity based
(traditional fee-for-service insurance) and managed care Medicare Supplement plans, a few
initial distinctions between insurance and managed care policies may assist you in
researching the Medicare Supplement policy that best suits your needs and budget.
The hallmark of
traditional fee-for-service insurance is choice. Most indemnity based policies give you
the freedom to choose your doctor, specialist, or hospital with few if any limitations.
Also, the options you have with an insurance company are seldom limited by geographic
The intent of
managed care products is to create less costly delivery of health care services while
maintaining quality health care by specifying provider choice. With managed care products
you must obtain health care services from designated providers in most cases. Also, you
are often limited by geographic restrictions of the managed care network.
Should I Replace My Non-Standardized
Policy with a Newer Standardized Policy?
necessarily. If you bought a Medicare Supplement policy before July 1992, it may
contain better benefits or suit you better than one of the new standardized policies. It
may be less expensive than the same coverage in a standardized policy. Consult your HICAP
counselor if you are considering replacing your coverage.
disadvantage of replacing an older policy is that many insurers will charge higher
premiums or deny coverage to applicants who have preexisting conditions. If you are
considering replacement, first ask your current insurance company if you may update your
coverage without submitting a new application. If your company agrees, only the medical
conditions listed as preexisting in your original policy will be considered as
preexisting conditions. Also, request that your premium be calculated based on your age
when you purchased the original policy. If your company agrees, the premium may be higher
than the one for your original policy, but it will be lower than the cost to a first-time
buyer. Remember that you have the right to switch to another company with similar benefits
each year for 30 days following your birthday.
cancel existing coverage until a replacement policy is in force, and you are certain you
want to keep it.
What Are Limited Benefit Health
Limited Benefit Health Plans also called Supplemental Plans are not
Medicare Supplement Plans. Limited Benefit Health Plans may include the following:
- Dread Disease
Policies that cover medical expenses or pay for a specific disease, usually cancer
or stroke. Since medical treatment for all diseases are covered by Medicare, this coverage
Indemnity Policies that pay a certain number of dollars for each day you are
hospitalized. As hospital stays become shorter, these benefits are used less and less.
More importantly, since Medicare Part A covers inpatient hospitalization, these policies
may duplicate Medicare.
Policies that often pay a benefit for the loss of a limb or other body parts as a
result of an accident. Since Medicare covers any medical treatment, regardless of the
cause, this coverage may be unnecessary.
you already own one of these policies when you buy a Medicare Supplement policy, discuss
with your HICAP counselor the need and usefulness of these policies.
Know Your Rights
California, agents owe you a duty of honesty, good faith, and fair dealing. Agents are
specifically prohibited from doing the following:
high pressure tactics (selling insurance through threat or undue pressure)
(inducing you to give up or replace an existing policy for a new one)
(selling you more insurance than you need or want)
are required to give you an outline of coverage during the first presentation of an
insurance product. The outline must inform you that HICAP is available for insurance
counseling free-of-charge and tell you how to reach your local HICAP office.
you decide to fill out an application, the agent is prohibited from taking more than one
month's premium with the application unless interim coverage is provided (i.e. the policy
is "field-issued"). Field-issued means that the agent has the authority to issue
the policy to you at the same time you fill out the application. That is the only time the
agent may collect two month’s premium with the application.
a comprehensive Medicare Supplement policy that has the most benefits for the amount you
can afford. Make sure to consider the following before purchasing insurance:
the California Department of Insurance to verify if the agent and the insurer are properly
what you need and want before you sit down with the agent.
not be rushed into buying insurance.
the place, the beginning, and the ending time of your meeting.
- Get a
second opinion before you buy or replace insurance.
not buy anything you did not intend to purchase or do not want.
not replace an existing policy unless you can not afford it or the benefits no longer meet
- Do not pay cash.
- Do not be
- If you feel unsure
or uncomfortable DON’T DO IT!
Is It Illegal to Sell You a Medicare
Supplement Policy if You Have Medicaid?
you have Medicaid (Medi-Cal in California), it is illegal for an insurance company to sell
you a Medicare Supplement policy except in the following situations:
- If Medicaid pays your Medicare Supplement premium, then you can buy any Medicare
- If Medicaid pays your Medicare premium, your deductibles and coinsurance, then
you can buy Medicare Supplement Plans H, I, or J.
- If Medicaid pays all or part of your Medicare Part B premium, then you can buy
any Medicare Supplement policy.
Buying Insurance Through the Mail
response insurance companies sell Medicare Supplement insurance through the mail, without
using agents. Their advertising must mention the availability of the outline of coverage
and the company must send it to you with the application, or within 14 days of your
request. Before completing the application, take the outline to HICAP for comparison. In
all other ways, direct response insurers must follow the same rules. Because direct
response companies do not pay agents commissions, the premium costs for mail order
insurance are often, but not always, lower.
Who to Contact in the Event of a
Problem with an Agent or an Insurance Company
California Department of Insurance (CDI) licenses private insurance companies and
insurance agents. The CDI assists consumers in resolving complaints and disputes
concerning premium rates, claims handling, and many other problems with agents or
companies. The Consumer Hotline 800-927-4357 is serviced by experienced professionals who
will answer your questions, provide appropriate referrals (such as referrals to your local
HICAP office), send you brochures and other information published by the CDI, or assist
you in filing a complaint.
your claim is not paid in a timely manner, call the insurance company first. If you are
still dissatisfied, contact the California Department of Insurance's Consumer Hotline to
file a formal complaint:
Department of Insurance
Consumer Services Division
300 South Spring Street, South Tower
Los Angeles, CA 90013
(800) 927-HELP (4357)
It is important to
note that the CDI only regulates Medicare Supplement policies underwritten by licensed
insurance companies. The CDI does not have regulatory authority
over Medicare Health Maintenance Organizations (HMOs) or Medicare Supplement plans that
are underwritten by managed care plans. Medicare HMOs (for example, Secure Horizon or
Kaiser Senior plans) fall within the jurisdiction of the Centers for Medicare and Medicaid
Services (CMS), while Medicare Supplement plans (for example, Blue Cross or Blue Shield)
underwritten by managed care plans are regulated by the Department of Managed Health Care
- If you
have a problem or want to register a complaint about a Medicare HMO, you have to complete
the following steps:
- Appeal directly to
the health plan by calling their customer service department.
- If the health plan
does not find in your favor, the appeal is automatically forwarded to an independent
organization, the Center for Health Dispute Resolution (CHDR) that works for Medicare, not
the health plan.
- CHDR reviews the
health plan's denial and determines if it should be upheld or overturned.
- If CHDR upholds the
denial, then you would need to contact Centers for Medicare and Medicaid Services (CMS) at
800-633-4227 for further assistance.
- If you
have a problem with a Medicare Supplement plan underwritten by a managed care plan, then
contact the Department of Managed Health Care (DMHC) at 888-466-2219 for further