Medigap is looming issue for senior citizens

Probably few Michigan senior citizens are focused on what their Medigap health insurance premiums will be in 2016, but they should be.

For state residents receiving their Medigap coverage from Blue Cross Blue Shield of Michigan, their  rates will be frozen under state law through July of 2016. After that, all bets are off.

BCBSM’s status was changed a year ago when the legislature approved its request to become a non-profit mutual insurer. That was in preparation for the new market realities under the Affordable Care Act, in which BCBSM would no longer need to function as Michigan’s insurer of last resort.

The new status for BCBSM basically enables the company to compete on a level playing field. It is now — except for the Medigap exception through July of 2016 — just like any other health insurer.

But according to an attorney who specializes in issues affecting senior citizens, the Medigap issue looms like a voracious shark.

“We currently have approximately 200,000 Michiganders on BCBSM Medigap Legacy plans with most paying $121.22 (for Medigap Plan C) per month, per person regardless of age, residence, body mass, etc.” for BCBSM Medigap coverage, said Christoper W. Smith, who is with the Jackson office of the law firm Chalgian & Tripp. “Blue Cross’s rates quickly jump up to $250-plus a month per person in comparable, non-subsidized plans and much more for those age 80 and over,” Smith said.

“Say Blue Cross increases the rate to $250.  That would be a monthly increase of $129 per person ($250-$121). Over 12 months, that’s an increased cost of $3,096 a year for a married couple to keep similar coverage,” Smith said.

Before BCBSM’s status changed, Michigan residents had protections against such increases unlike those in  almost any other state.

“We were really lucky to have that plan in Michigan,” Smith said, referring to BCBSM’s Medigap Legacy plan. “Michigan had exceptional Medicare coverage.”

For its part, BCBSM believes the competitive market will ultimately determine the desirability of offering all health products, including Medigap, according to Helen Stojic, director of corporate affairs for BCBSM and the Blue Cares Network.

“For example, Medicare Advantage is a competitively priced option that exists in the marketplace today,” Stojic said. “Given that we expect the market will be much more competitive for this particular product in 2016 than it is today, there's little reason as it stands today to think that we wouldn't offer Medigap.

“Additionally, Public Act 4 allows the nonprofit health endowment fund to establish a needs based subsidy program for Medigap and provides $120 million from Aug. 1, 2016 to Dec. 31, 2021 for that purpose.”

“Any way you slice it, BCBSM got one heck of a deal last year,” Smith said.  

“That frustration aside and being realistic about political realities, I am most concerned about three groups:  1) those under 65 where insurers do not have to offer a Medigap policy; 2) retirees who have their retirement plans cut and are outside their ‘guaranteed issue period;’ and 3) people getting stuck with unsustainable price hikes by his or her insurer and being unable to switch insurers due to underwriting.  These are the groups that some other states have enacted legislation to protect,” Smith said.

Smith said a majority of states have statutes that guarantee that an individual under 65 can get a Medigap plan.  Social Security Disability recipients are eligible for Medicare after two years.

“The Affordable Care Act provides no protection to these individuals,” Smith said.   Many of them rely on Medicaid for supplemental coverage, costing taxpayers, Smith said.

Smith also said the legislature could act to ensure that retirees who have pension plans that are substantially cut or eliminated have a guaranteed issue period to get a Medigap plan.  

“Every week, I receive calls from individuals concerned about cuts to their retirement health plans. For many, they may not be able to get an affordable Medigap plan because of medical underwriting and related factors when their plans are cut.  We would ideally enact legislation that protects these individuals who delayed getting a Medigap plan because he or she understandably relied on his or her former employer providing coverage,” Smith said.  Smith also said the the BCBSM Legacy plans would have been an affordable solution for many Detroit retirees facing possible cuts in benefits from Detroit’s bankruptcy.  Detroit’s bankruptcy is currently in the federal courts.

“The legislature could also enact an 'annual enrollment period' where each year — often the month of a person’s birthday — a person can switch insurance providers and/or  switch to a Medigap plan that provides less coverage, but is more affordable.  This would ensure that most individuals are not priced out of the Medigap market by their insurer as they get older,” Smith said.

He noted that until 2016 the Blue Cross Legacy plan is the same price no matter how old you are, something that is called a community rated plan.

“In 2016, we may no longer have a true community rated plan in Michigan,” Smith said.

Smith said he hopes these issues will be raised in the 2014 state elections. Senior citizens ought to be bringing such concerns to their lawmakers and state candidates.