IS INSURANCE COMPANY LONG TERM STABILITY MORE IMPORTANT THAN THE FINANCIAL STABILITY OF SENIORS?
By Richard Davis
The February 19 edition of the Vermont Business Magazine carried a piece written by Dawn Schneiderman, Vice President and Chief Operating Officer for Blue Cross and Blue Shield of Vermont, claiming that if Vermonters are allowed to enroll in Medicare supplemental plans after their initial six month eligibility period costs will rise for everyone else. She does a poor job of defending her position.
To make this issue real look at the current cost of a Vermont Medigap Blue Plan G policy for someone initially enrolling during the initial six month window. It will cost that person $152.33 a month. If that person wants to enroll in that same plan after the six month window it will cost them $268.91 for the same coverage under Vermont Blue 65 Plan G.
If a person has Medicare Parts A and B they need a supplemental policy to cover the 20% of costs not covered by those plans. They can buy a Medigap policy or enroll in a Medicare Advantage plan.
Medicare Advantage is a Trojan horse because it lures people in with low or no premiums and coverage comparable to a Medicare supplemental plan at no additional cost. If that person uses their insurance they could have to pay $6000 or more out of pocket that they would not have to pay under traditional Medicare.
Schneiderman, and I assume the Blue Cross organization, has become worried because of the potential passage of S.239 in the Vermont legislature that would “… create annual open enrollment periods for Medicare supplemental insurance policies and prohibit health insurers from charging additional premiums, fees, or penalties based on an individual’s failure to enroll in a Medicare supplemental insurance policy within six months following the individual’s 65th birthday. The bill would permit enrollees to change at any time from one Medicare supplemental insurance policy to another policy with comparable or lesser benefits.”
Schneiderman’s argument against this bill is that costs will increase if the enrollment period is flexible because people will only enroll when they need the insurance. She defends the added cost as needed to level the playing field for the insurance company. She says, “While this may seem harsh to those who miss the deadline or decide to switch plans later on, this requirement is a major factor in controlling the premium costs for Medicare Supplement plans for the entire population. If people wait until they are sick or anticipate significant healthcare needs to purchase coverage, they aren’t contributing to the pool that depends on long-term stability in order to provide consistency for everyone. If allowed, this choice will come at a steep cost – a monthly premium increase of approximately 50-100% for everyone.
This change eliminates the incentive to buy early and penalizes those who purchase their plans immediately for the benefit of the people who wait.”
That argument might make sense for health insurance products other than those that apply to Medicare beneficiaries, but it is flawed in many respects for the elderly. I have been counseling people about insurance issues for years and many don’t understand why they need a Medicare supplemental policy so, when they finally figure it out, their initial six month enrollment period is over. When they look at the cost of a policy they then realize they can’t afford it.
Many of these people wait for the open enrollment period for Medicare Advantage and try to save money while thinking they can afford the Advantage plan. If they end up using the insurance they could get hit with a hefty bill they can’t pay. Some of these people try to go back to traditional Medicare but then find out they have to pay 76% more for a plan than they would have paid if they understood all of their options when they were initially eligible for Medicare.
Schneiderman also states that the cost of the 76% higher plan is because of current flexible enrollment rules. But it is because Blue Cross Blue Shield assumes that all of the people enrolling late got sick and then looked for a policy to buy. The issue is not that simple and blaming Medicare recipients for their inability to understand the complexities of the insurance market is an inhumane way to run any business.
This issue plays out in a number of states and you should check out prices to see if you are paying a dollar for a fifty cent piece of the pie. Vermont’s S. 239 requires further study of the issue before passage and I hope more light is shed on the convoluted Medicare supplemental policy market so that Blue Cross Blue Shield of Vermont is not allowed to use their flawed assumptions to “increase costs for all in favor of a few”.