Medicare supplement policies

The gap that needs filling

Original Medicare pays most, but not all, of a beneficiary's hospital and medical bills. What it leaves behind — deductibles, coinsurance percentages, per-day copayments during long inpatient stays, and charges that run past the point where Medicare's payment stops — falls on the beneficiary. A Medicare supplement policy, often called Medigap, is private insurance designed to pay some or all of those leftover amounts.

In Texas these are individual accident and health products, issued by private insurers and regulated under the health insurance chapters of the Insurance Code (Tex. Ins. Code Title 8), with the general individual accident and health rules of Chapter 1201 forming part of the backdrop (Tex. Ins. Code ch. 1201).

What a supplement is not

Producers lose licenses over this distinction, so learn it cold:

• A supplement is not Medicare itself and is not a government program. It is a private policy that coordinates with Medicare.
• A supplement is not a Medicare Advantage plan. Advantage plans replace the way Original Medicare delivers benefits; a supplement sits alongside Original Medicare and pays after it.
• A supplement is not long-term care insurance, and it is not designed to cover custodial nursing home care.
• A supplement is not appropriate for someone whose costs are already covered — for example, a person enrolled in Medicaid or already holding a supplement. Selling duplicate coverage is the classic prohibited practice.

Standardized plans

Medicare supplement coverage is sold as standardized plans identified by letters. Every insurer offering a given lettered plan must provide the same core benefit package for that letter, so two companies' identical letters cover the same things. What differs between carriers is price, service, and underwriting practice. This standardization exists precisely so a buyer can compare on price rather than guess at fine print, and it is why comparison of like letters is the honest way to present a replacement.

Eligibility, enrollment, and renewability

Supplements are marketed to people enrolled in Medicare. There is a protected open enrollment window tied to the applicant's enrollment in Medicare Part B, during which an eligible applicant cannot be turned down or surcharged because of health history. Outside that window, and outside other guaranteed-issue situations, an insurer may underwrite.

Once issued, a Medicare supplement policy is guaranteed renewable: the insurer may not cancel it because the insured's health worsened or claims were filed. Premiums can change only on a class basis, never for one insured alone.

Consumer protections and producer duties

Expect the following themes on the exam:

• An outline of coverage and the current Medicare buyer's guide must be delivered to the applicant.
• A free-look (right-to-return) period lets the buyer send the policy back for a full premium refund.
• Replacement requires a signed replacement notice and a determination that the new coverage is genuinely needed.
• Suitability: recommend based on the client's Medicare status, existing coverage, and ability to pay renewal premiums.

Rule of thumb: Original Medicare pays first, the supplement pays the gap it is designed to cover, and the insured pays only what neither one covers.

Hold onto the shape of the product — private, standardized, secondary to Medicare, guaranteed renewable, and never duplicative — and most questions on this objective answer themselves.