Trends in Medigap Coverage and Enrollment, 2011

Trends in Medigap Coverage and Enrollment, 2011 May 2012 SUMMARY This report presents trends in enrollment in Medicare Supplement (Medigap) insurance coverage, using data on the number of policies in force as of December 2011 from the National Association of Insurance Commissioners (NAIC) and an America s Health Insurance Plans (AHIP) survey of newly purchased cost-sharing policies issued by Medigap carriers in 2011. The NAIC dataset contains information on most Medigap policies in force in the U.S., representing approximately 9.8 million covered lives, with policies from 254 carriers. 1 Respondents to the AHIP survey of newly purchased cost-sharing policies included large nationwide carriers and carriers selling in a single state; the survey represents about 45 percent of Medigap enrollment for 2011. In December 2011, enrollment in Medigap coverage increased by about 100,000 policies to 9.8 million, up from 9.7 million Medigap policies in force in December 2010. 2 Most Medicare beneficiaries obtain supplemental coverage, through Medigap, Medicaid, and employerbased retiree plans or comprehensive coverage through Medicare Advantage. In 2011, most Medicare beneficiaries with a standardized Medigap policy had Plan F (51 percent). Plan C, the second most popular plan, had 14 percent of the Medigap standardized plan market. Plans F and C cover 100 percent of the deductibles and coinsurance not covered by Medicare.3 However, the Affordable Care Act of 2010 (ACA) requires that the NAIC review the benefit designs for Plans F and C policies for potential inclusion of nominal cost-sharing. To the extent practicable new Plans F and C must be available in the market by January 1, 2015. 1 Some Medigap carriers may not report enrollment to the NAIC. However, we believe that the number of Medigap enrollees among these non-reporting carriers is relatively small and that the NAIC dataset includes most Medigap enrollment. 2 AHIP Center for Policy and Research. Trends in Medigap Coverage and Enrollment, 2010-2011. (July 2011) See: http://www.ahip.org/ Medigap-2011.aspx. 3 A high-deductible version of Plan F is also on the market; however, based on our survey of newly purchased policies, we estimate that it has relatively few policyholders. America s Health Insurance Plans, Center for Policy and Research 1

High-deductible Plan F, and newer standardized Medigap plans K, L, M, and N which contain enrollee cost-sharing requirements (copayments, coinsurance and/or deductibles) made up 23 percent of new Medigap purchases in 2011. Plan N, which includes costsharing of up to $20 for physician office visits and up to $50 for certain emergency room visits (waived in certain circumstances), represented 18 percent of newly purchased Medigap policies in 2011 and was by far the most popular of the newer standardized plans. BACKGROUND Medigap is a key source of supplemental coverage for Medicare beneficiaries. Seniors purchase Medigap coverage to protect themselves from high out-of-pocket costs not covered by Medicare, to budget for medical expenses, and to avoid the confusion and inconvenience of handling complex bills from health care providers. In 2012, the Medicare program has a $1,156 deductible per benefit period for inpatient hospital care (Part A) and 20 percent coinsurance for outpatient and physician care (Part B) after an annual deductible of $140. 4 In addition, the Medicare program does not have a limit on beneficiaries potential out-of-pocket costs. Most Medigap plans cover beneficiaries Part A deductible and Part B deductible as well as the Part B coinsurance. Only two plans currently offer full coverage for the Part B deductible. Some Medigap plans also cover certain benefits not covered by Medicare. In addition, under most Medigap policies, 4 United States Department of Health and Human Services. What are the Medicare premiums and coinsurance rates for 2012? See: http://answers.hhs.gov/questions/3006. policyholders can assign their benefits directly to providers and thereby avoid the need to decipher bills and file claims. Plans. Medigap policies sold after July 1992 were required to conform to one of 10 uniform benefit packages, Plans A through J, based on provisions in the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990). In recent years, Congress has allowed new versions of the original standardized plans, authorized several new plans, and discontinued some of the original or modified plans. 5 The newer standardized plans require some cost-sharing (deductibles, coinsurance, and/or copayments) to be paid by beneficiaries. For example, Plan F is now authorized to be sold as a high-deductible plan. Plans K and L, which entered the market in 2006, do not cover the Medicare Part B deductible and only cover a portion of beneficiaries Part B coinsurance. However, there is a limit on beneficiaries annual out-of-pocket costs for Medicare eligible expenses of $4,660 for Plan K and $2,330 for Plan L (in 2012). 6 New Plans M and N entered the market in June of 2010. Plan M only covers half of the Part A deductible and does not cover the Part B deductible. Plan N covers the Part A deductible and does not cover the Part B deductible. Plan N also includes cost-sharing amounts of up to $20 for certain physician visits and up to $50 for certain emergency room visits. 5 Original Plans E, H, I, and J, and high-deductible Plan J are no longer available for new purchase. 6 Centers for Medicare and Medicaid Services. Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.(2012). See: http://www.medicare.gov/publications/pubs/pdf/02110.pdf. America s Health Insurance Plans, Center for Policy and Research 2

The ACA requires the NAIC to revise the standards for Plans C and F to include nominal cost-sharing for Part B physicians services. The new plans must be made available in the market, to the extent practicable, in January 2015. This requirement means that the current benefit designs for Plans C and F, which are the most popular Medigap plans and generally provide first-dollar coverage, will no longer be available to new purchasers after the changes are implemented. 7 Waiver State Standard Plans. Three states (Massachusetts, Minnesota, and Wisconsin) offer standard Medigap plans, but are exempt from the OBRA 1990 standardized plan provisions (and subsequent revisions). Individuals who purchase Medigap plans in one of these three states may keep their plans if they move to other states. Plans. Medigap changes are usually phased in for new purchasers, and allow existing policyholders to retain their policies. Although OBRA 1990 prohibited the sale of new prestandardized plans, some beneficiaries still have the pre-standardized policies. CARRIERS OFFERING COVERAGE, DECEMBER 2011 In 2011, 19 percent of carriers covered individuals with standardized Medigap plans in 41 to 51 states (including the District of Columbia); 11 percent of carriers covered individuals in 26 to 40 states; 9 percent covered individuals in 11 to 25 states; and 15 percent of carriers covered individuals with standardized Medigap plans in 2 to 10 states. Over half (54 percent) of all Medigap carriers had 7 Under the ACA, Medicare now covers certain preventive services on a first-dollar (no beneficiary cost-sharing at the point of service) basis. Table 1. Distribution of Medigap Carriers with Medigap Policies in Force, by Market Size, 2011 Number of States 2011 41 to 51 states 19% 26 to 40 states 11% 11 to 25 states 9% 2 to 10 states 15% 1 state 46% 100% Notes: Data in this table depicting the number of states are based on companies with standardized Medigap policies in force; data do not include companies with only prestandardized policies in force. The data for standardized policies include Medicare SELECT plans, and those issued in three states (MA, MN, WI) that received waivers from the standardized product provisions of OBRA 1990. The number of carriers with standardized Medigap policies in force reporting to the NAIC for 2011 was 254. For this report the District of Columbia is counted as a "state. policyholders in multiple states, and 46 percent had Medigap standardized policies in force in a single state only (see Table 1). Table 2. Number of Carriers with Medicare Select Policies in Force and Number of Individuals with Medicare Select Plans, 2011 Number of Carriers with Medicare 95 SELECT Policies in Force Number of Individuals with Medicare 739,167 SELECT Policies NAIC Medicare Supplement Insurance Experience Exhibit, for Medicare SELECT plans are identical to standardized Medigap plans but require policyholders to use provider networks to receive the full insurance America s Health Insurance Plans, Center for Policy and Research 3

benefits. For this reason, Medicare SELECT plans generally cost less than other Medigap plans. Table 2 shows the number of carriers with Medicare SELECT policies in force, and the number of Medicare beneficiaries having a Medicare SELECT policy in 2011. Carriers with Medicare SELECT policies in force are located across the country in 45 states. Table 3. Percent of Carriers with Medigap Policies in Force, by Plan Type, 2011 Plan Type 2011 A 87% B 64% C 78% D 45% E 33% F 83% G 48% H 26% I 24% J 29% K 17% L 15% M 8% N 36% Waiver State Plans 29% Notes: The data for standardized policies include Medicare SELECT plans, and those issued in three states (MA, MN, WI) that received waivers from the standardized product provisions of OBRA 1990. The number of carriers with standardized Medigap policies in force for 2011 was 254. All plans offering new coverage must offer Plan A. Table 3 displays the percentage of reporting carriers with standardized Medigap policies in force by each product type. In 2011, the percentages of carriers offering the newer Plans K and L, which were authorized beginning in 2006, are 17 percent and 15 percent, respectively. In June 2010, new Plans M and N were authorized for sale. Eight (8) percent of carriers offered Plan M in 2011 and 36 percent of reporting carriers offered Plan N. POLICIES IN FORCE, DECEMBER 2011 According to the NAIC data, roughly 93 percent of Medigap policies in force in December 2011 were standardized plans. standardized plans, which were no longer sold after July 1992, account for only 7 percent of all Medigap policies (see Table 4). Table 4. Number of Policies, and Medigap Plans, 2011 Policies Percent Plans 9,061,762 93% Plans 705,627 7% All Medigap Plans 9,767,389 100% Note: This data includes U.S. territories and the District of Columbia. Among people with Medigap standardized plans, Plan F continues to be the most popular, covering 51 percent of policyholders in 2011; Plan C had the second highest share, with 14 percent of the market, and Plan J had 8 percent of the Medigap standardized plan market in 2011 (see Table 5). Traditionally, the most popular Medigap plans have covered all or most of Medicare s deductibles and coinsurance. Table 6 shows the number of standardized Medigap policies in force in December 2010 and December 2011, by type of policy. America s Health Insurance Plans, Center for Policy and Research 4

Table 5. Distribution of Individuals with Medigap Plans, by Type of Plan, December 2011 Plan Type 2011 A 2% B 5% C 14% D 3% E 1% F 51% G 4% H 1% I 1% J 8% K * L 1% M * N 3% Wavier State Plans 5% 100% * Less than 0.5 percent. Notes: The data for standardized policies include Medicare SELECT plans and those issued in three states (MA, MN, WI) that received waivers from the standardized product provisions of OBRA 1990. Percentages may not sum to 100 percent due to rounding. TRENDS IN NEWLY PURCHASED POLICIES According to an AHIP survey of Medigap carriers conducted in 2011 at the request of NAIC, and updated the following year (February 2012), newer standardized plans requiring some enrollee costsharing are becoming a larger share of new policies Table 6. Change in Medigap Enrollment, Policies, December 2010 to December 2011, by Plan Type Plan Type 2010 2011 Percent Change A 192,387 186,941-2.8% B 451,192 430,173-4.7% C 1,400,045 1,307,991-6.6% D 332,604 289,196-13.1% E 151,321 131,770-12.9% F 4,201,883 4,604,164 9.6% G 331,960 356,444 7.4% H 66,968 58,232-13.0% I 148,781 135,228-9.1% J 867,761 752,169-13.3% K 29,497 40,832 38.4% L 39,929 69,896 75.1% M 265 596 124.9% N 148,207 265,854 79.4% O 547,310 432,276-21.0% 8,910,110 9,061,762 1.7% Sources: AHIP Center for Policy and Research analysis of the AHIP Center for Policy and Research. Trends in Medigap Coverage and Enrollment, 2010-2011. (July 2011) See: http://www.ahip.org/medigap-2011.aspx. Notes: The data for standardized policies include Medicare SELECT plans and those issued in three states (MA, MN, WI) that received waivers from the standardized product provisions of OBRA 1990. purchased. 8 In particular, new Plan N with predictable cost-sharing amounts (instead of high deductibles or unpredictable coinsurance amounts), has rapidly become the most popular new plan, 8 This 2011 survey was discussed in: AHIP Center for Policy and Research. Trends in Medigap Coverage and Enrollment, 2010-2011. (July 2011) See: http://www.ahip.org/medigap-2011.aspx. America s Health Insurance Plans, Center for Policy and Research 5

Table 7. Percent of Newly Purchased Medigap Policies with Cost-Sharing Features Sold/Issued in, Categories, 2007 to 2011 2007 2008 2009 2010 2011 Plan F (High-Deductible) 1% 1% 3% 3% 2% Plan K 1% 1% 2% 1% 2% Plan L 1% 3% 2% 1% 1% Plan M ** ** ** * * Plan N ** ** ** 6% 18% New Medigap Cost-Sharing Policies Issued/Sold 3% 5% 7% 12% 23% Source: AHIP Center for Policy and Research. * Less than 0.5 percent. ** Plans authorized for sale beginning June 2010. representing 18 percent of new policies issued in 2011 (see Table 7). Enrollment in high-deductible Plan F is not reported separately in the NAIC data. However, based on AHIP s survey of newly purchased cost-sharing policies, we believe that the overall number of highdeductible Plan F policies is likely quite small. Our survey showed, for companies who responded, that high-deductible Plan F comprised between 1 and 3 percent of newly purchased plans in the 2007-2011 period. ACKNOWLEDGMENTS Jessica Collins, Research Analyst for AHIP s Center for Policy and Research, was responsible for the analysis of NAIC data in this report. The survey of newly purchased cost-sharing Medigap policies in 2011 was conducted by Dan LaVallee. For more information please contact Jeff Lemieux, Senior Vice President for AHIP s Center for Policy and Research, at (202) 778-3200 or visit www.ahipresearch.org. MEDIGAP POLICIES BY STATE Table 8 shows enrollment in Medigap by state (including the District of Columbia, but not including the U.S. territories) and plan type in December 2011. Thus, the total number of policyholders in Table 8 is slightly lower than the overall total reported in Table 4, which includes the U.S. territories. America s Health Insurance Plans, Center for Policy and Research 6

Table 8. Medigap Enrollment by Plan Type and State, as Reported to the NAIC, December 2011 Plan Type AK AL AR AZ CA CO CT DC DE A 284 1,259 797 2,583 16,171 1,686 2,650 186 672 186,746 B 90 137,091 683 1,403 4,116 1,472 3,855 116 1,066 429,989 C 667 32,382 2,845 10,270 20,037 4,718 15,767 609 2,593 1,295,796 D 98 992 852 1,502 3,914 1,451 2,993 60 3,245 289,129 E 66 445 186 909 1,987 672 1,559 62 2,229 131,728 F 4,981 27,841 31,455 105,692 168,775 78,256 52,079 3,469 11,177 4,601,784 G 106 3,181 2,369 6,895 7,287 4,369 2,836 132 1,337 356,323 H 19 100 27 255 1,678 492 823 22 174 58,172 I 401 270 246 1,657 6,971 1,702 2,046 221 1,867 135,074 J 1,425 1,669 5,628 13,206 69,811 11,493 28,527 1,775 5,742 750,031 K 61 311 358 770 3,103 538 600 67 501 40,798 L 42 298 454 850 2,539 848 576 78 554 69,878 M - 4 9 5 24 3 - - - 596 N 162 2,718 2,422 4,614 7,509 2,456 2,593 119 1,262 265,796 Waiver - - - - - 1 4 - - 432,276 369 1,832 107,032 6,502 24,580 4,985 29,782 569 2,496 705,388 8,771 210,393 155,363 157,113 338,502 115,142 146,690 7,485 34,915 9,749,504 Plan Type FL GA HI IA ID IL IN KS KY A 14,022 2,843 162 1,119 675 7,070 4,676 1,750 1,966 186,746 B 57,590 5,055 55 352 347 6,840 4,787 787 9,064 429,989 C 98,414 25,902 551 4,413 2,548 29,843 19,573 20,546 28,040 1,295,796 D 76,676 4,538 37 1,063 262 40,642 6,447 2,667 2,672 289,129 E 19,474 13,544 30 4,505 147 3,415 5,017 1,167 6,295 131,728 F 207,292 147,682 2,310 197,520 40,756 427,922 178,026 149,762 87,452 4,601,784 G 13,927 13,512 60 2,812 3,974 18,853 23,045 3,620 8,986 356,323 H 1,459 167 13 123 11 356 924 142 3,577 58,172 I 8,762 2,255 85 398 250 2,342 2,787 984 1,366 135,074 J 97,251 15,704 857 19,822 4,384 19,514 15,397 4,881 5,552 750,031 K 3,228 1,204 31 121 655 1,224 673 685 474 40,798 L 3,535 1,623 22 1,323 221 1,461 2,980 1,020 842 69,878 M 61 13-8 7 20 12 2 5 596 N 14,080 7,894 97 3,268 1,390 16,457 14,209 3,313 6,634 265,796 Waiver 11 11 - - - 2,747-7 - 432,276 39,959 12,102 234 18,069 1,193 33,113 14,279 6,859 9,372 705,388 655,741 254,049 4,544 254,916 56,820 611,819 292,832 198,192 172,297 9,749,504 (Continued) America s Health Insurance Plans, Center for Policy and Research 7

Table 8 (Continued). Plan Type LA MA MD ME MI MN MO MS MT A 639 147 9,675 1,507 14,132 2,216 3,046 1,097 996 186,746 B 3,929 65 6,465 1,441 1,384 4,537 3,892 1,583 552 429,989 C 4,708 3,111 26,814 16,986 187,863 283 19,557 5,590 7,173 1,295,796 D 934 82 5,150 988 3,270 21 13,295 1,853 639 289,129 E 330 115 956 1,560 1,449 43 2,791 432 196 131,728 F 84,713 1,243 79,893 35,034 83,947 1,045 167,338 81,988 36,354 4,601,784 G 7,762 117 4,902 1,955 17,042 23 11,393 6,445 2,529 356,323 H 162 32 1,116 63 560 65 1,013 109 63 58,172 I 919 223 1,098 2,802 1,711 281 3,325 400 548 135,074 J 1,791 620 15,049 6,037 10,209 2,824 18,196 7,085 4,108 750,031 K 1,274. 858 127 1,021 27 688 280 271 40,798 L 742-1,273 822 2,592 34 1,750 295 241 69,878 M 3. 3 17 40. 28 4 1 596 N 4,835-5,572 1,158 12,548 110 8,650 6,656 1,685 265,796 Waiver - 221,038 - - - 20,299 - - - 432,276 6,782 2,523 11,145 1,092 27,063 5,854 17,043 4,798 2,262 705,388 119,523 229,316 169,969 71,589 364,831 37,662 272,005 118,615 57,618 9,749,504 Plan Type NC ND NE NH NJ NM NV NY OH A 3,293 221 728 1,369 11,252 1,008 1,223 20,850 4,725 186,746 B 5,689 137 1,156 978 4,774 1,056 800 46,559 5,998 429,989 C 21,408 1,303 5,226 4,733 99,756 2,838 2,559 48,125 87,194 1,295,796 D 4,895 279 1,036 703 3,923 599 745 3,028 17,038 289,129 E 2,969 50 136 2,031 912 171 326 9,677 5,200 131,728 F 240,344 48,529 99,035 27,945 89,365 25,284 36,679 153,366 137,246 4,601,784 G 14,765 404 5,276 2,293 16,147 1,448 2,627 10,041 22,410 356,323 H 956 38 150 432 4,873 101 696 6,548 1,381 58,172 I 3,664 112 398 603 14,329 1,271 881 13,014 5,350 135,074 J 43,795 1,495 8,446 19,842 57,676 5,878 5,572 10,176 21,354 750,031 K 854 13 104 143 1,429 252 431 1,924 1,055 40,798 L 3,004 38 449 1,337 4,076 228 471 2,801 10,547 69,878 M 21-18 103 8 7 1 67 4 596 N 11,654 200 1,842 2,902 10,595 1,321 2,322 12,529 15,183 265,796 Waiver - - - - - - - 2-432,276 16,849 836 9,182 4,864 31,488 2,007 1,611 16,070 20,233 705,388 374,160 53,655 133,182 70,278 350,603 43,469 56,944 354,777 354,918 9,749,504 (Continued) America s Health Insurance Plans, Center for Policy and Research 8

Table 8 (Continued). Plan Type OK OR PA RI SC SD TN TX UT (All States) A 3,118 1,661 7,645 417 1,981 464 2,111 11,323 856 186,746 B 1,914 599 56,084 259 4,406 211 3,795 6,678 631 429,989 C 5,932 5,718 268,214 25,434 8,988 1,033 17,290 34,467 4,324 1,295,796 D 4,037 1,141 18,372 125 20,517 87 6,860 15,815 1,846 289,129 E 942 463 24,043 99 723 271 3,515 2,705 641 131,728 F 102,158 75,581 80,299 6,188 101,815 56,833 90,553 346,078 24,881 4,601,784 G 5,383 3,178 11,414 141 11,684 1,055 7,465 51,873 2,834 356,323 H 234 114 22,828 18 332 17 341 3,133 631 58,172 I 832 1,153 17,425 178 1,333 141 986 8,416 619 135,074 J 7,626 5,858 28,978 1,203 12,868 1,726 7,747 51,497 4,145 750,031 K 1,392 728 1,874 32 583 32 681 4,543 206 40,798 L 1,982 633 4,713 486 1,588 109 1,074 5,501 218 69,878 M 5 13 20-3 2 2 39-596 N 5,006 5,290 14,910 384 5,544 466 6,298 20,809 1,613 265,796 Waiver - - - 1 1 - - - - 432,276 7,361 5,454 55,254 324 6,602 4,054 23,100 23,291 2,321 705,388 147,922 107,584 612,073 35,289 178,968 66,501 171,818 586,168 45,766 9,749,504 Plan Type VA VT WA WI WV WY A 3,463 1,306 4,132 7,543 1,467 564 186,746 B 5,629 1,326 1,453 19,392 1,533 315 429,989 C 14,691 13,666 17,439 1,107 10,079 2,469 1,295,796 D 2,943 6,230 1,326 45 813 383 289,129 E 3,148 2,462 977 45 533 108 131,728 F 167,312 2,401 123,069 668 49,808 22,345 4,601,784 G 6,702 245 6,002 33 2,558 876 356,323 H 1,162 296 161 10 132 43 58,172 I 8,649 38 4,945 78 4,413 329 135,074 J 33,980 6,383 14,818 3,134 4,857 2,420 750,031 K 478 1 4,417. 235 124 40,798 L 1,004 539 1,229-611 225 69,878 M 10-4. - - 596 N 5,538 505 5,802-2,085 587 265,796 Waiver 1-75 188,078 - - 432,276 20,993 3,149 28,172 19,417 9,319 1,548 705,388 275,703 38,664 214,021 239,550 88,443 32,336 9,749,504 National Association of Insurance Commissioners' (NAIC) Medicare Supplement Insurance Experience Exhibit, for Notes: The data for standard policies include Medicare SELECT plans, and those issued in three states (MA, MN, WI) that received waivers from the standard product provisions of OBRA 1990. America s Health Insurance Plans, Center for Policy and Research 9