If an insurance neophyte were to have a discussion with a group of industry professionals about gap plans in general, the novice maybe might leave the conversation with a lot of enlightenment, but not a lot of clarity. The term gap (or bridge) plan, over time, has become a catch all classification for any products that helped filled a "gap" in any insurance coverage.
Many property and casualty insurance professionals are very familiar with auto gap coverage, and certainly most benefit brokers would separate that from what they might consider a "real" gap plan, but after that, the definition has evolved into something quite a bit more flexible.
Primarily, the most accepted definition of a gap plan is coverage that helps an employee fill the gap inherent in medical coverage. This frequently includes helping pay for deductibles or helping to cover cost beyond what might be covered for a particular procedure. Gap plans normally are not overly complicated and can provide both individual and family coverage, and they tend to be affordable and often are designed to literally bridge the coverage gap.
A lot of brokers actually, are placing gap insurance in their groups with high-deductible plans to help employees meet that deductible, a strategy that can be used as opposed to the standard health savings account model and has been attractive to employers that can't afford to help fund the HSA.
Some brokers choose to use products that are not specifically called gap plans as a gap plan. For example, traditional hospital indemnity plans often are used to fill those gaps. There also is a debate among some if a mini-med is a gap plan or a completely different and separate type of policy. This is one reason why our aforementioned neophyte would walk away from their discussion rather confused. Some brokers believe a gap plan is only a gap plan and a mini-med is a completely different animal, the same with the hospital indemnity plan.
Now recently, there has been some news about changes to the health insurance industry and a logical question would follow what will that mean for the traditional gap plan. For now, taking the position that a mini-med is different than a true gap plan, the simple answer is probably not much. It looks like there will still be deductibles, co-pays and various other costs still associated with insurance coverage. In other words, there will still be a need to cover the gaps however a broker and their clients choose to fill them.
A gap by any other name...
As if all this talk of gaps and bridges wasn't confusing enough, there are also a flood of changes sweeping over another kind of gap plan: Medicare Supplements, or Medi-Gap plans. It's been the same old game for the past two decades. Not anymore, thanks to Plans M and N. Since the early 1990s, when Medicare Supplements became Standardized Plans A-J under the TEFRA legislation, the same exact plans have been available.
In 2003 Congress passed the Medicare Modernization Act. Under the MMA, several new Medicare benefits were introduced, the most notable being Part D, the prescription drug benefit plans. Americans were also introduced to new Medi-Gap Plans K and L. Another phase of the MMA begins June 1 when certain "standardized" plans are dropped (E, H, I and J) and two "modernized" plans roll out (Plans M and N).
Get the new terms memorized. "Standardized plans" refer to Plans A-J. "Modernized" plans refer to the new Medicare Supplement plan grid. Plan F has been the most popular plan, but the new Plan N could become the new "Medi-Gap Darling". For the first time, Medicare Beneficiaries will have an office copay option with Plan N. The office copay could be up to $20, and the Emergency Room copay could be up to $50. The initial Plan N premiums appear to be as much as 30 percent less than the most popular Medi-Gap plan, Plan F.
While a respectable premium savings is attractive, note that Plan N does not cover the Part B deductible. This is easy to look past considering you will save far more than $155 in premium.
However, the "excess charge" of 15 percent a provider may add to the current Medicare reimbursement level is not covered (Plan F covers "excess charges".) Assuming a person sees the doctor once a month, and the average office charges over a one year period are $2400, the "excess charges" will equal $360. If the doctor collected a $20 office copay, add another $240.
If the Medicare beneficiary incurs a $100,000 Part B claim and the outpatient facility adds 15 percent to the bill, losing the "excess charges" benefit begins to impact one's financial statement with a new $15,000 out of pocket expense. Weigh the risk of premium savings vs. the new "excess charge" exposures carefully when comparing Medicare Supplement policies.
Plans H, I and J are eliminated May 31. These three plans carried the only prescription drug benefits, but due to Part D on Jan. 1, 2006, the Plan's Rx benefits died. Plan E also is being dropped due to benefits being mandated, making Plan E & F virtually the same. If a person owns a Plan E, H, I or J, they may keep their plan after June 1. With cuts coming to Part C of Medicare, Advantage plans will be forced to cut benefits and raise premiums. Look for "Med Sups" to gain popularity. Finally, the provider community prefers patients have a Medi-Gap plan, making access to health care easier for the patients.
- Smith
