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Will Obamacare Affect Supplemental Insurance Policies?
by Abraham

No. Although changes were originally suggested, they have been dismissed by the National Association of Insurance Commissioners (NAIC) and Department of Health and Human Services (HHS).

The Affordable Care Act of 2010 (or ACA), colloquially referred to as “Obamacare,” was established in 2010 as part of President Barack Obama’s campaign to remodel health care and, subsequently, Medicare.

Concerning Medigap, a provision of the ACA required the NAIC to review the most popular Medigap plans (C and F) and determine whether or not employing “nominal cost-sharing” would deter enrollees from misusing physician services. The implication was that, because these Medigap plans fill in the gaps of Medicare (thereby covering 100% of Medicare fees) people are over utilizing doctor visits since it comes at no cost to them, and that employing more cost-sharing would help cut federal health care spending.

Nominal cost-sharing would mean that enrollees in those plans would pay a percentage of all costs; this is similar to Medigap plans K and L, which require 50% and 75% cost-sharing premiums, respectively. If making these changes proved to save costs, then they would be enacted January 1, 2015.

After receiving this request, NAIC responded on December 19, 2012, stating that they had reviewed the standards of Plans C and F and “were unable to find evidence that nominal cost sharing encourage[d] the use of appropriate physicians’ services.” The NAIC went on to say that Medigap was being inappropriately viewed as the cause for overspending in Medicare, when it is precisely Medicare that must approve the allotted costs before Medicare supplement pays anything.

In fact, the NAIC’s studies purport that, in implementing cost sharing for the two most popular Medigap plans, Original Medicare expenses may actually rise. Many people enroll in Medigap because they have low-incomes or chronic health conditions, which would make additional expenses financially burdening. As a result, this could delay treatment of those that sorely need it and increase Medicare expenses in the form of emergency room visits.

Additionally, the NAIC does not see the immediate need for making any more plans with nominal cost-sharing expenses as they’ve already implemented two new plans as of 2010 (M and N). Both of these new plans require cost sharing to some extent. However, as they are the most recently instated, not much data is available as to whether or not they’re saving Medicare costs. Therefore, they lack the evidence to substantiate whether or not nominal cost sharing is effective.

As a result, Kathleen Sebelius (Secretary of HHS) responded on May 28, 2013, stating that she subscribes to NAIC’s decision.

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