IMPACT OF THE MEDICARE ACT OF 2003 ON
MEDICARE SUPPLEMENTAL (MEDIGAP) INSURANCE PLANS


On or after January 1, 2006, the day that the new Medicare drug plan provisions (Part D) go into effect, Medicare Supplemental Insurance (Medigap) plans that cover prescription drugs (Plans H, I, and J) can not be sold, issued or renewed to any Medicare beneficiary who is enrolled in or eligible for Medicare Part D - with one exception. The exception is that a Medigap policy with prescription benefits issued before January 1, 2006, may be renewed for a person not enrolled in Medicare Part D.

Under the new law, beneficiaries who currently have Medigap prescription drug plans will be guaranteed issuance of Medigap plans A, B, C, or F. These individuals will have no waiting period for coverage of pre-existing conditions and no medical underwriting if they enroll in a Part D plan during the initial Part D enrollment period and seek to enroll in the new Medigap policy within 63 days of the effective date of their coverage under Part D. Beneficiaries who drop a Medigap prescription drug plan to enroll for the first time in a Medicare Advantage plan and who subsequently disenroll from Medicare Advantage within 12 months are also guaranteed re-issuance of their Medigap prescription drug plan if it is still available from the original issuer. If not, they are guaranteed issuance of other Medigap plans A, B, C, or F with no wait for coverage of pre-existing conditions and no medical underwriting. Beneficiaries must enroll in the Medigap plan within 63 days of the effective date of disenrollment from the Medicare Advantage plan.

If a beneficiary decides to keep his Medigap prescription drug plan, upon enrollment in Medicare Part D the Medigap planís coverage will be modified to eliminate prescription drug coverage for expenses of prescription drugs incurred after the effective date of coverage under Part D. Premiums will also be adjusted to reflect the elimination of this coverage.

Two new Medigap policies will also be offered. The first benefit package will cover 50% of cost-sharing applicable under Medicare Parts A and B, except for the Part B deductible. It will cover 100% cost-sharing for preventive benefits, all inpatient hospital co-insurance, and 365 extra lifetime days of coverage of inpatient hospital services. There will also be a limitation on annual out-of-pocket expenses under Parts A and B of $4000 in 2006, which will be adjusted for inflation in subsequent years. The second benefit package will be the same as the first except that it will cover 75% of cost-sharing applicable under Parts A and B and the limit on annual out-of-pocket expenses will be $2000 in 2006.

Note: Neither the existing nor new Medigap policies will cover any of the cost sharing associated with the prescription drug benefit provided under Part D.


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