The following contains an excerpt from Kaplan’s Long-Term Care Concepts course for Insurance Continuing Education.
A Medicare supplement policy, also called a Medigap policy, is health insurance sold by a private insurance company to fill certain gaps in the Original Medicare coverage. The Original Medicare Program, Medicare Parts A and B, does not cover all health care expenses. There are major gaps in the program that can create financial hardships for senior citizens. Part A covers inpatient hospital expenses for a specified period of time, but it doesn’t cover outpatient expenses.
More complete health care coverage is obtained by a beneficiary also enrolling in Medicare Part B. However, both Part A and Part B are subject to deductibles, coinsurance, co-payments, and certain other limitations.
Medigap policies are designed to help fill many of those coverage gaps, and some Medigap policies even consider benefits the Original Medicare does not include.
However, Medigap policies do not cover Medicare beneficiaries’ share of the premium costs under other types of health coverage, including Medicare Advantage Plans (e.g., HMOs, PPOs, or Private Fee-for-Service Plans); stand-alone Medicare Prescription Drug Plans; employer or union plans; Veterans Administration benefits; TRICARERE; Indian Health Service, Tribal, and Urban Indian Health plans; and long-term care insurance policies.
Except for Medicare Part D prescription drug plans, if a person has any one of the other types of health coverages referred to in the preceding paragraph, insurance companies cannot sell a Medigap policy to that individual.
It’s also important for beneficiaries to realize that Medigap policies do not cover long-term custodial care such as that provided in nursing homes. Too many people believe that the combination of Medicare and Medigap supplement policies cover such care.
The need for additional health care coverage is clear when the bene¬fits provided by Medicare are reviewed. For individuals who have adequate income to provide for their daily needs and comforts but only a few extra dol¬lars for nonessential items, a sudden, large medical bill can create a financial crisis.
The Original Medicare Plan (i.e., Medicare Parts A and B) presents senior citizens with significant financial risks.
Medicare supplement insurance policies are designed to pay the costs not covered by the Original Medicare Plan, and this is why Medicare supple¬ment insurance is called Medigap coverage. Federal and state laws regulate the benefits provided by Medicare supplements.
Senior citizens also need good advice regarding Medicare and Medi¬care supplement insurance policies. Many insurers and retiree associations overwhelm senior citizens with Medicare supplement advertisements. This often creates confusion, and the confusion causes seniors to make mistakes in choosing supplemental coverage.
Professionalism and ethical conduct on the part of producers market¬ing Medicare supplements are critical needs, as many marketing abuses in this area of insurance have occurred in the past.
What seniors actually need are one-on-one discussions, explanations, and advice regarding Medicare supplemental coverage. The best way for a senior citizen to receive these services is in a planning session with a profes¬sional insurance producer who is knowledgeable about the Medicare program and Medicare supplement coverage.
As a producer, you must thoroughly understand the personal circum¬stances of a prospect for a Medicare supplement policy. The individual will generally be an older person who most likely needs detailed information pre¬sented in an easy- to- understand manner and will probably not be inclined to make an immediate decision regarding the purchase of any insurance.
So, you, the producer, must have specific and up-to-date information regarding Medicare—how it functions, the types of benefits that are offered, the claims process, and so forth. You must also have specific information regarding the need for Medicare supplement insurance to close the gaps in Medicare coverage, and you must be able to explain how your product satis¬fies the client’s specific needs.
Insurance producers dealing with senior citizens have a fiduciary responsi¬bility to act in an ethical manner and to never sell inappropriate or duplicate coverages. Too often, senior citizens are the target of unscrupulous individuals who prey on their fears and lack of resistance to high-pressure sales tactics.
In most states, it is illegal to sell duplicate Medicare supplement cover¬age (not replacement coverage), and it is illegal to sell Medigap insurance to people who are covered by Medicare Advantage (Part C) plans. It is always illegal for a producer to resort to high-pressure sales tactics. Severe penalties are usually imposed for violating these laws, including:
Although it is unethical and inappropriate to duplicate existing coverage for the sake of generating a premium and/or commission, the practice does exist. Producers may, therefore, encounter senior citizens who already have more than one Medicare supplement policy. When this situation arises, producers are obligated to inform clients that only one Medicare supplement is needed to provide adequate coverage. Plan beneficiaries cannot collect double or triple benefits on a claim just because they may have two or three separate policies.
Providing proper advice about existing coverage is as important as recommending new coverage to close insurance gaps. Doing so may not always result in a sale or commission, but such behavior is demanded by regulation and codes of professional ethics.
Producers also need to exercise patience when dealing with senior citizens. In many cases, senior citizens do not like to be forced into quick decisions, and this effort should not take place. When contemplating a purchase decision, seniors often want to talk it over with significant others, such as a spouse, children, other relatives, or friends. Frequently, wanting to do this is not a sales objection but a genuine need for consensus and support, which generally must be satisfied before the person will purchase any insurance. Thus, producers should always exercise compassion, understanding, and patience when dealing with senior citizens.
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