MACRA, the Medicare Access and CHIP Reauthorization Act of 2015, will be changing the Medicare supplement marketplace starting in 2020. Brought on by fears that certain supplement plans were leading to over-utilization of the Medicare program, what we offer today and what will be available next year will be similar, but different in many ways. Let’s break down the upcoming changes and what to expect as we move into this year’s selling season.
“Newly Eligible” Beneficiaries
One term you’ll hear often from the supplement carriers is “newly eligible beneficiaries”. According to Mutual of Omaha’s Underwriting Guide, “newly eligible” is defined as individuals who have attained age 65 on or after January 1, 2020 or first become eligible for Medicare due to age, disability or end-stage renal disease, on or after January 1, 2020.
Per section 401 of MACRA, newly eligible Medicare beneficiaries will not be allowed to enroll in a Medicare supplement plan that covers the Medicare Part B deductible, which are plans C and F. Individuals who were eligible prior to 2020 will continue to have access to plans C and F and carriers will continue to release new options. Furthermore, those who are currently on C or F will be able to keep their coverage.
In Wisconsin and Minnesota, this change will only limit newly eligible individuals from purchasing the Part B Deductible rider. As most Part B Deductible riders are dollar for dollar coverage, this shouldn’t have too much of an impact on plans in the neighbor states.
Guarantee Issue Changes
Another interesting change happening in 2020 is around which plans are allowed to be used for clients that have a guarantee issue situation. Depending on your client’s Medicare start date, the plans available to them on a guarantee issue basis are as follows:
Eligible for Medicare prior to January 1, 2020 – A, B, C, F (including Select F and High Deductible F)
Eligible for Medicare on or after January 1, 2020 – A, B, D, G (including Select G and High Deductible G)
High Deductible Plan G
You read that last bit right, carriers are now able to offer a high deductible Plan G (HDG). Much like the current High Deductible Plan F (HDF), HDG will have a deductible before it pays any benefits for a client in a given calendar year. Currently, the deductible sits at $2,300 and while Plan G doesn’t cover the Part B deductible, what the client pays out of pocket for that will count towards meeting the plan deductible.
Remember, Medicare still pays their portion for all covered services, the client would be responsible for anything that’s left over up to the deductible limit. Reach out to the JSA Marketing Team if you’d like to learn more about high deductible Medicare supplements.
What’s going to happen to my current Plan F clients?
According to AHIP’s State of Medigap 2018 (June 2018) report, 55% of Medicare Supplement policyholders were enrolled in Plan F; this equates to roughly 7.2 million Medicare beneficiaries. The next largest plan by enrollment was Plan G at 10%, or approximately 1.3 million beneficiaries. While newly eligible beneficiaries won’t have the ability to purchase a Plan F, there will still be a great market for Plan F business and plenty of opportunity for agents.
The fear behind the current plan F blocks of business is an aging client base which will lead to higher claims and higher rate increases. While we can’t rule out some above-average rate increases in the future, we’re even seeing some now, what we can anticipate is the release of new blocks of business from some of the major carriers (think Mutual of Omaha, Aetna, and Cigna to name a few). These new blocks of business will be shielded from the newly eligible and will be priced competitively to attract healthy clients to enroll. General rule of thumb, the healthier the book of business, the more insulated it will be against high rate increases in the future. It’s true that we’ll eventually get to a point where there will be no more Plan F business on the books, but that’s another 30+ years away as I type this out. Plan J hasn’t been sold since 2010, but there are still over a half a million Plan J policyholders around today.
Furthermore, what’s going to happen to my Plan G clients?
Plan G has enjoyed a quiet ride, having only grown its market share 2% over a four year period from 2012 to 2016. Current Plan G is priced competitively, and is insulated from accepting any guarantee issue business. As this plan opens up to GI business for newly eligible, we will start to see a role reversal between F and G in regards to rate increases. As new Plan F receives underwritten, healthier business, Plan G becomes the most comprehensive coverage for newly eligible and will start to see a rising influx of open enrollment and GI business. Some carriers predict that we can expect to see regular medical trend increases of 7-8% on Plan G and lower 3-5% increases on Plan F because of the changes.
What should we do?
For lack of a better term, relax. We still have a suite of Medicare supplements to offer to our clients based on their needs, that will never change. As long as we handle each client by educating them on their options and clearly explaining coverage, prices and rate increases, you should have no problem guiding them to a competitive option in your market. Carriers will continue to come and go with new books of business and annual rate increases just as they do now, and new opportunities will rise and fall like always.
One plan to keep an eye on is the last one on the list, Plan N. This plan continues to receive great pricing in return for the client self-insuring for things like the Part B deductible, Part B excess charges, and small co-pays for doctor office and ER visits. It’s one of the few plans that is not eligible to receive guarantee issue clients, keeping the books of business healthier for the long haul. Plus, some carriers have even raised their Plan N commissions to make them comparable to what we’re being paid for Plan G and Plan F business today.
As more changes unfold, or new legislation shakes up the Medicare supplement market, trust that JSA will be here to help guide you and your clients in the right direction. We’re looking forward to a great AEP and many more to come, and we appreciate our partnership with you.
