No Medical Question Medigap Deadline Approaches
Legacy Medigap Plans, offered by BCBS, apparently have 205,000 beneficiaries throughout the State of Michigan, according to this Detroit Free Press article. Well, those plans have some great features. First, you can enroll if you are Medicare eligible prior to the age of 65. That means that if you have the funds, you can get exceptionally good coverage for a fixed price. Second, the premium does not vary with age (also known as community-rated). Third, that premium is frozen. And there is the issue.
Premium Freeze Ends July 31, 2016
This is a known fact. The carrier was required to keep the price, as is, due to an agreement with the State of Michigan. However, that agreement ends July 31st, THIS YEAR. At that point, the carrier is allowed to adjust the premium.
Some people might think it won’t happen. Really?
You Don’t Need to Know Anything About Insurance
Let’s say you are the seller of a widget, but that for whatever reason, you are unable to change the selling price, and that you have to keep selling as long as there are buyers. Other competitors offer the exact same widget, but at substantially higher prices, and those substantially higher prices are profitable, but the profit margin is restricted by law. You however, must keep your price fixed, until a certain date.
Let’s now say that you no longer have to keep the price fixed, and that you have lost a lot of money selling those widgets. What would you do? Do you get it now? That is what faces the carrier, until July 31st. Period.
There are rules in place that prevent a carrier from raising rates unless it is acturially proven, i.e. if the numbers prove that premium increases are justified. This will be NO problem to prove. If that was not the case, then all of the competitors would’ve had to massively send refunds to customers that bought similar, but more expensively-priced widgets. You don’t need to anything about insurance to understand this. You can change the word “insurance” to “corn,” and you would get the exact same result.
This isn’t over. We await an update from the carrier and then the insurance regulator in the State of Michigan. It is stunning that the public hasn’t received an update. This Happens.
Update: As of today, May 12th, there is no update.