2021 Guide to choosing a Medigap policy has been published by CMS

The official 2021 Guide to choosing a Medigap Policy has been published by the Centers for Medicare and Medicaid Services (CMS).  This important guide covers topics such as:

• What is a Medicare Supplement Insurance (Medigap) policy
• What Medigap policies cover
• Your rights to buy a Medigap policy
• How to buy a Medigap policy

A Medigap policy is private health insurance that wraps around the Original Medicare Program (Parts A and B) by filling in gaps that otherwise would result in out-of-pocket costs.  This means Medigap will pay some of the costs that Original Medicare doesn't cover, such as copayments, coinsurance and deductibles.  During the six months that follows a Medicare Beneficiary's enrollment in Medicare Part B, Medigap can be purchased on a guaranteed issue basis regardless of health status.  After the six months pass, insurance companies are allowed by law to decline or rate applicants due to health status.

Medigap plans, or Medicare Supplements, are known by their "plan letter name" such as Plan G or Plan N.  Consumers who purchase Medigap typically also buy a Stand-alone Medicare Part D Prescription Drug Plan (PDP), since Medigap policies do not include any drug coverage.

Medigap is entirely different from Medicare Advantage (also known as Medicare Part C), which is a program that delivers both Medicare health and drug benefits through a private insurance company on a year-to-year basis.  Medicare Advantage plans, such as HMOs and PPOs, utilize insurance company networks and often require additional authorization for care access that is not required under Medigap policies.  There is an Annual Election Period (AEP) for Medicare Advantage that runs from October 15th to December 7th; during this period a plan change can be made for the next January 1st.  Medicare Beneficiaries also can disenroll from their Medicare Advantage plan during the AEP, and purchase a Medigap policy (as long as they meet the health eligibility requirements to buy a policy).

Click Here To Download the 2021 Choosing a Medigap Policy Guide

Until next time,

Andrew Herman
AH Insurance Services, Inc.

Federal Long-Term Care WISH Act Introduced in U.S. House of Representatives

Earlier this week, U.S. Representative Thomas Suozzi introduced the WISH Act (H.R. 4289) to create a public catastrophic Long-Term Care Insurance program funded by a new payroll tax.  The acronym stands for "Well-Being Insurance for Seniors to be at Home Act" (click here to read H.R. 4289).

The program is to be financed by a payroll tax of 0.3 percent for workers and 0.3 percent for employers; and it would pay out a monthly cash benefit of about $3,600 (indexed to inflation).  This amount is estimated to pay for about six hours of in-home care daily.  Family members would not be eligible to receive payment; and the individual entitled to the benefit must comply with State and Federal laws relating to minimum wage and withholding of payroll taxes and other employment-related taxes.

The following chart shows how 2021 payroll taxes would be increased by this new program:

Including the proposed Long-Term Care (LTC) Tax, W-2 employees would pay total payroll taxes of 7.95% with self-employed workers paying 15.9% (employee plus employer portion).

The WISH Act conditions benefit eligibility on reaching full Social Security retirement age, and having a severe cognitive impairment or needing assistance in at least two activities of daily living (ADLs).  Full benefits would be paid to those who contributed to the program for at least 10 years (people would be eligible for partial benefits once they paid into the system for six quarters).

The program proposes to pay benefits after an enrollee required a high level of care for a varying amount of time based on a beneficiary’s average indexed earnings.  Those with the lowest incomes could receive benefits after one year; a median income worker would be eligible after twenty months; and the highest income workers would begin to receive benefits after five years.

Funding for the WISH Act is not limited to the LTC Tax noted above.  In addition, there is appropriated to the Federal Long-Term Care Trust Fund out of moneys in the Treasury:  $12,000,000 for program establishment in each of Fiscal Years 2022-2024; and another $50,000,000 for educating the public.

An immediate question that comes to mind is whether it would be allowed to opt out of the federal program, for instance if a taxpayer already owns private Long-Term Care Insurance.  It should be noted that an opt out provision was included in a Washington State program passed into law earlier this year.

The new Washington State Long-Term Care program mandates public Long-Term Care benefits for Washington residents.  The Long-Term Care Act was created to reduce pressure on the Medicaid system and is paid for by 0.58% tax on employee wages.  Under current law, residents have one opportunity to opt out of this tax by having private Long-Term Care Insurance in place by November 1st, 2021.

The WISH Act's sponsor said he is hopeful the program also will have an effect on the private Long-Term Care Insurance market, increasing opportunities for insurance companies and their agents to offer Long-Term Care Insurance to supplement the federal program.  That just may be WISH-ful thinking.

Until next time,

Andrew Herman, President