Medigap Insurance

In response to a congressional request, GAO reviewed the effectiveness of Public Law 96-265 provisions to protect the elderly against substandard and overpriced health insurance policies supplementing Medicare.

GAO found that: (1) since the law's enactment, all but four states have adopted the National Association of Insurance Commissioners' (NAIC) standards for the supplemental, or Medigap, policies; (2) states' programs for Medigap policies are not identical and can provide varying degrees of coverage, even though the law encourages states to standardize their regulatory programs; (3) although Medicare beneficiaries can buy Medigap insurance that meets minimum benefit standards, the beneficiaries may still face significant out-of-pocket costs because such policies do not always pay some deductibles, usually do not cover any costs that exceed Medicare-approved charges, and usually do not cover services that Medicare does not cover; (4) although most commercially sold Medigap policies that had over $50 million in premiums generally met the loss-ratio requirements, over 60 percent of the policies with premiums under $50 million did not meet the requirements; (5) penalties for Medigap sales abuse are generally imposed by the states, since they are primarily responsible for regulating the insurance industry; and (6) although there is no requirement for states to determine whether policies meet loss-ratio targets, NAIC has prepared standardized information for states to assist them in monitoring. GAO believes that action such as shoppers' guides, informational presentations, and counselor networks can do much to help educate and protect the elderly purchasers of Medigap insurance.