I have often referred to GUARANTEED ISSUE as being the two most important words in all of Medicare. I will now explain why.
A Medigap supplement, such as a Plan G, covers the entirety of the 20% of Original Medicare that Medicare itself doesn’t cover once your $203 annual Part B deductible is paid. This 20% that a Medigap Supplement (Plan G) covers is like having a roof over your head in a storm. Without a Medigap Supplement, there is no limit to what your own 20% copay could add up to. It could potentially be hundreds of thousands of dollars.
Medigap supplements are sold by private insurance companies, which are running a business. In an ideal world, they want to collect your premium, such as $120 a month, and pay out very little. This, by the way, is a good thing for you too, because it means you’ve stayed healthy. After all, none of us want to brag, “I had six operations this year and Medicare with my Medigap Supplement paid 100%. I made out like a bandit.”
Being a business, if a Medigap carrier thinks that they are going to pay out a lot more than the $120 or so a month you are paying them, then they would rather pass on taking your $120. These carriers will judge whether you are a good risk: someone they’re likely to make money on; or someone who’s likely to be a money loser. They do this through a process called underwriting.
The plot thickens though because Medicare itself made a deal with the Medigap Supplement carriers. To sell Medigap they had to agree that for a brief period, which takes place when you first take out Part B, there will be no underwriting. It doesn’t matter if you have every medical condition under the sun; even if you had two heads and four mouths that all chain-smoke. They still have to enroll you in any Medigap Supplement you want with no underwriting and with no medical questions even asked. This is called your GUARANTEED ISSUE period.
This period lasts for the first 6 months after your Part B coverage begins. Your Part B start date is usually the first day of the month you turn 65, but as we discussed in other sections, it can be later, for instance, if you delayed Part B because you stayed on Group Health insurance. If this is your situation and you don’t take out Part B until you are 90, then this is when your Guaranteed Issue will begin.
Guaranteed Issue Applies Only to Medigap Supplements
As an expert in Medicare, there is a “False concern” which I hear all the time. People worry that they are going to be stuck in a Medicare Advantage plan and will not be able to change plans to another Medicare Advantage plan during the Open Enrollment Period if they can’t pass the medical underwriting.
This is FALSE. There are never any medical questions to answer or underwriting of any kind with either Medicare Advantage plans or with stand-alone Prescription Drug Plans. You are free to change either one of these during the Open Enrollment Period from October 15 to December 7 each year. But Medigap Supplements, on the other hand, do have underwriting once you are outside of your Guaranteed Issue timeframe.
Guaranteed Means Guaranteed
Once you are on your Medigap plan (such as a Plan G) you cannot be kicked off of your plan for any reason, such as if you are costing the plan too much money. The only situations under which you can lose your plan involuntarily is if you fail to make your premium payment for two months or you fail to make your Medicare Part B payment and lose your Medicare coverage.
What Happens After You Lose Guaranteed Issue
Let’s say that six months go by and because you didn’t sign up for a Medigap Supplement, you no longer have Guaranteed Issue. You may still have six additional months of Guaranteed Issue (up to a full year from your birth month) if you first signed up for a Medicare Advantage plan. This is called a Medicare Advantage “Trial Right”.
But let’s say you have exhausted that period as well, and you decide at some future point you want to have Original Medicare with a Medigap Supplement. Can you?
Or, Situation Two: You signed up for a Plan L for instance, and now you want to switch to a Plan G. Can you?
Or, Situation Three: You are not thrilled with your carrier, maybe there was a big jump in operating costs the carrier passed on to you. And now you want to make a carrier switch. Can you?
The answer to all three situations is the same: Maybe.
Whether you can or can’t now depends on if you can pass medical underwriting. You now no longer have Guaranteed Issue and so carriers as a result have the right to say Yes or No. Which one it is will be based upon typical underwriting criteria such as the medical conditions you have, drugs that you take, and if you require surgeries or other treatments that haven’t yet been completed. In other words, carriers are now going to be poking you up and down (don’t worry, not literally), evaluating you, and making their decision with their pocketbooks as they are now allowed to.
You could be turned down flat and it is quite possible that you will not be able to get a Medigap supplement from any carrier, ever again. If you are on a Medigap supplement now then this is the one you will need to keep. If you are on a Medicare Advantage plan then that’s what you’ll need to stay put with if no Medigap carrier will take you.
Some carriers do have Tier 2 plans for those who don’t meet underwriting standards for regular plans but also aren’t rejected out of hand. These Tier 2 plans can also be triple in cost.
Your Guaranteed Issue rights are vital to weigh carefully and I am happy to help you in doing so. Once you lose Guaranteed Issue, you lose it. And as I always remind my clients, “The fact that you are in perfect health today is no guarantee that if you decide you want a Medigap supplement a year from now that you are still going to be the same healthy guy or gal.” We certainly hope you’ll be healthy as a horse for years to come, but life itself doesn’t give us “Good Health Guaranteed Issue. “
I suggest to clients to think of losing Guaranteed Issue as being much like getting a tattoo. Your choice—once you lose Guaranteed Issue—could be with you for the duration.
Different States Have Different Guaranteed Issue Rules
Most states follow Medicare’s rules concerning Guaranteed Issue. One rule is that if you lose your Guaranteed Issue you can only get it back under a few special circumstances. For instance, if your plan is discontinued, you’ll be able to reclaim Guaranteed Issue to go with a different plan. Another such circumstance is if you move to an area where your current plan is not serviced, entitling you to a new Guaranteed Issue.
Some states have their own added rules. For instance, California gives you a Guaranteed Issue birthday present. Each year you get a special Guaranteed Issue called the Birthday Rule that gives you 30 days to switch plans. There are, however, a couple of catches, First, you have to already be on a Medigap supplement; you cannot use the Birthday Rule to switch to Medigap from Medicare Advantage. Second, you cannot go from a lower benefit plan to a higher benefit plan; for instance, switching from Plan N to Plan G.
You can only use Birthday rights to switch carriers if there is another one offering the same plan, such as the Plan G you are already on, but at a lower cost. But it is still something. As they say, “Never look a Medicare birthday Guaranteed Issue gift horse in the mouth.”