TYPES OF PRIVATE HEALTH INSURANCE

TYPES OF PRIVATE HEALTH INSURANCE


Whether you need health insurance in addition to Medicare
is a decision that only you can make. As you saw from the
review of your Medicare benefits, Medicare does not offer
complete health insurance protection. Private health insurance
can help fill many of the gaps. But before buying insurance to
supplement your Medicare benefits, make sure you need it. Not
everyone does (see page 17). In general it is advisable to buy
the additional protection that private health insurance can
provide. If you decide to buy supplemental insurance, shop
carefully and buy a policy that offers the kind of additional
help you think you need most.

A variety of private insurance policies is available to
help pay for medical expenses, services and supplies that
Medicare covers only partly or not at all. The basic types of
policies include:

1. Medigap, which pays some of the amounts that Medicare does
not pay for covered services and may pay for certain
services not covered by Medicare.

2. Managed care plans [these include health maintenance
organizations (HMOs) and competitive medical plans
(CMPs)], from which you purchase health care services
directly for a fixed monthly premium;

3. Continuation or conversion of an employer-provided or
other policy you have when you reach 65;

4. Nursing home or long-term care policies, which pay cash
amounts for each day of covered nursing home or at-home
care;

5. Hospital indemnity policies, which pay only when you need
treatment for the insured disease.

6. Specified disease policies, which pay only when you need
treatment for the insured disease.


Medigap


Medigap insurance is regulated by federal and state law
and must be clearly identified as Medicare supplement
insurance. Unlike other types of health insurance, it is
designed specifically to supplement Medicare's benefits by
filling in some of the gaps in Medicare coverage.

To make it easier for consumers to comparison shop for
Medigap insurance, nearly all states, U.S. territories, and the
District of Columbia have adopted regulations that limit the
number of different Medigap policies that can be sold in any of
those jurisdictions to no more than 10 standard benefit plans.
The plans, which have letter designations ranging from "A"
through "J", were developed by the National Association of
Insurance Commissioners and incorporated into state and federal
laws. See pages 22-24 for descriptions and comparisons of the
10 plans.

Plan A of the 10 standard Medigap plans is the "basic"
benefit package. Each of the other nine plans includes the
basic package plus a different combination of benefits. The
plans cover specific expenses either not covered or not fully
covered by Medicare, with "A" being the most basic policy and
"J" the most comprehensive. Insurers are not permitted to
change the combination of benefits in any of the plans or to
change the letter designations.

Each state must allow the sale of Plan A, and all Medigap
insurers must make Plan A available. Insurers are not required
to offer any of the other nine plans, but most offer several
plans, and some offer all 10. Insurers can independently decide
which of the nine optional plans they will sell as long as the
plans they select have been approved for sale in the state in
which they are to be offered.

Some states have limited the number of plans available in
the state. Delaware does not permit Plans C, F, G and H to be
sold in the state. Pennsylvania and Vermont do not permit the
sale of Plans F, G and I. (As this guide was being prepared for
printing, however, Pennsylvania was considering a proposal that
would permit the sale of all 10 plans.)

Residents of Minnesota, Massachusetts and Wisconsin will
find that their Medigap plans are different than those sold in
other states. This is because those states had alternative
Medigap standardization programs in effect before the federal
legislation standardizing Medigap was enacted. Therefore, they
were not required to change their benefit plans. If you live in
Minnesota, Massachusetts or Wisconsin, you should contact the
state insurance department to find out what Medigap coverage is
available to you.

The only areas where standardization is not in effect are
Guam, American Samoa, and the Commonwealth of the Northern
Mariana Islands.

Comparing Medigap Plans: To make it easier for consumers
to compare plans and premiums, the same format, language, and
definitions must be used in describing the benefits of each of
the plans. A uniform chart and outline of coverage also must be
used by the insurer to summarize those benefits for you.

As you shop for a Medigap policy, keep in mind that each
company's products are alike, so they are competing on service,
reliability and price. Compare benefits and premiums and be
satisfied that the insurer is reputable before buying. And in
selecting the benefits that meet your needs, remember that
Medicare pays only for services it determines to be medically
necessary and only the amount it determines to be reasonable.

Medigap policies pay most, if not all, Medicare
coinsurance amounts and may provide coverage for Medicare's
deductibles. Some of the 10 standard plans pay for services not
covered by Medicare and some pay for charges in excess of
Medicare's approved amount. Look for the plan that best meets
your needs.

All standard Medigap plans must have a loss ratio of at
least 65 percent for individual policies and 75 percent for
group policies. This means that on average either 65 cents or
75 cents of each premium dollar goes for benefits.

Unlike some types of health coverage that restrict where
and from whom you can receive care, Medigap policies generally
pay the same supplemental benefits regardless of your choice of
health care provider. If Medicare pays for a service, wherever
provided, the standard Medigap policy must pay its regular
share of benefits. The only exception is Medicare SELECT
insurance, discussed on page 13.

Besides the standardized benefit plans, federal law
permits states to allow an insurer to add "new and innovative
benefits" to a standardized plan that otherwise complies with
applicable standards. Any such new or innovative benefits must
be cost-effective, not otherwise available in the marketplace,
and offered in a manner that is consistent with the goal of
simplification. Check with your state insurance department to
find out whether such benefits are available in your state.

Your Right To Medigap Coverage: If you are 65 or older,
state and federal laws guarantee that for a period of 6 months
from the date you first enroll in Medicare Part B, you have a
right to buy the Medigap policy of your choice regardless of
your health conditions.

During this 6-month open enrollment period, you have the
choice of any of the different Medigap policies sold by any
insurer doing Medigap business in your state. The company
cannot deny or condition the issuance or effectiveness, or
discriminate in the pricing of a policy, because of your
medical history, health status, or claims experience. The
company can, however, impose the same preexisting condition
restrictions (see page 19) that it applies to Medigap policies
sold outside the open enrollment period.

Many individuals are enrolled automatically in Pan
B as soon as they rum 65, or they sign up during an initial
7-month enrollment period that begins 3 months before they turn
65. If you are in this group, your Part B coverage generally
starts in the month you turn 65 or shortly thereafter,
depending on when you applied for Part B. Your Medigap open
enrollment period starts as soon as your Part B coverage
starts.

Others may delay their enrollment in Part B. For example,
if after turning 65, you continue to work and choose to be
continuously covered by an employer insurance plan, or if you
are continuously covered under a spouse's employment related
insurance instead of Medicare Part B, you will have a special
7-month enrollment period for Part B. It begins with the month
your or your spouse's work ends or when you are no longer
covered under the employer plan, whichever comes first. Your
6-month Medigap open enrollment period starts when your Part B
coverage begins.

If you are covered under an employer group health plan
when you become eligible for Part B at age 65, carefully
consider your options. Once you enroll in Part B the 6-month
Medigap open enrollment period starts and cannot be extended or
repeated.

If you cannot defer Part B enrollment as described above,
but are 65 or older and are eligible for Part B but never
signed up for it, you may buy Part B during Medicare's annual
general enrollment period. It runs from January 1 through March
31. If you sign-up during an open enrollment period, both your
Part B coverage and Medigap open enrollment period begin the
following July 1.

Your Medicare card shows the effective dates for your Part
A and/or Part B coverage. To figure whether you are in your
Medigap open enrollment period, add 6 months to the effective
date of your Part B coverage. If the date is in the future and
you are at least 65, you are eligible for open enrollment. If
the date is in the past, you are not eligible.

If you are under age 65, disabled, and enrolled in
Medicare Part B, you are not eligible for Medigap open
enrollment unless your state requires open enrollment for
persons under 65 who qualify for Medicare because of a
disability. Moreover, unless your state requires otherwise, you
will not be eligible for the Medigap open enrollment period
when you turn 65 because you will not be enrolling in Part B
for the first time.

Older Medigap Policies: Current federal requirements
generally do not apply to Medigap policies in force in a state
before the requirements which took effect in that state in
1992. Depending on which state you live in, you will not have
to switch to one of the 10 standard plans if you have an older
policy that is guaranteed renewable.

Some states, however, have specific requirements that
affect existing non-standard policies. For example, some states
require or permit insurers to convert older policies to the
standardized plans. Check with your state insurance department
to find out what state-specific requirements are in force. Even
if you are not required to convert an older policy, you may
want to consider switching to one of the standardized Medigap
plans if it is to your advantage and an insurer is willing to
sell you one.

If you do switch, you will not be allowed to go back to
the old policy. Before switching, compare benefits and
premiums, and determine if there are waiting periods for any of
the benefits in the new policy. Some of the older policies may
provide superior coverage, especially for prescription drugs
and extended skilled nursing care.

If you had the old Medigap policy at least 6 months and
you decide to switch, the new policy is not permitted to impose
a waiting period for a preexisting condition if you satisfied a
waiting period for a similar benefit under your old policy. If,
however, a benefit is included in the new policy that was not
in the old policy, a waiting period of up to 6 months unless
prohibited by your state may be applied to that particular
benefit.

Because it is unlawful for anyone to sell you insurance
that duplicates coverage you already have, and because you do
not need more than one Medigap policy, you must sign a
statement that you intend to replace your current policy and
will not keep both policies. Do not cancel the old policy until
the new one is in force and you have decided to keep it (see
"Free Look," page 20).

Medigap Insurance Defined: Under state and federal laws,
Medigap policies are policies designed to supplement your
Medicare benefits. They must provide specific benefits that
pay, within limits, some or all of the costs of services either
not covered or not fully covered by Medicare. The definition
does not include all insurance products that may help you cover
out-of-pocket costs. For example, neither a health plan offered
by a company for current or former employees, nor by a labor
organization for current or former members, is Medigap
insurance. Nor are limited benefit plans such as hospital
indemnity insurance. They do not qualify because they are not
required. to provide the same benefits that the 10 standard
Medigap plans must provide.

Similarly, coverage provided to individuals enrolled in
managed care plans, such as health maintenance organizations
(HMOs) under contracts or agreements with the federal
government, does not meet the definition of Medigap insurance
even though some of the coverage may be similar. On the other
hand, an HMO's supplemental insurance product sold to an
individual Medicare beneficiary who is not enrolled under
either an employer plan or a federal contract or agreement,
does qualify as Medigap insurance.

Medicare SELECT. A Medicare supplement health insurance
product called "Medicare SELECT" is permitted to be sold in
Alabama, Arizona, California, Florida, Illinois, Indiana,
Kentucky, Massachusetts, Minnesota, Missouri, Noah Dakota,
Ohio, Texas, Washington and Wisconsin. Medicare SELECT, which
may be offered in the designated states by insurance companies
and HMOs, is the same as standard Medigap insurance in nearly
all respects. If you buy a Medicare SELECT policy, you are
buying one of the 10 standard Medigap plans (see page 22).

The only difference between Medicare SELECT and standard
Medigap insurance is that Medicare SELECT policies will only
pay or provide full supplemental benefits if covered services
are obtained through specified health care professionals and
facilities. Medicare SELECT policies are expected to have lower
premiums because of this limitation. The specified health care
professionals and facilities, called "preferred providers," are
selected by the insurance company or HMO. Each issuer of a
Medicare SELECT policy makes arrangements with its own network
of preferred providers.

If you have a Medicare SELECT policy, each time you
receive covered services from a preferred provider, Medicare
will pay its share of the approved charges and the insurer will
pay or provide the full supplemental benefits provided for in
the policy. Medicare SELECT insurers must also pay supplemental
benefits for emergency health care furnished by providers
outside the preferred provider network. In general, Medicare
SELECT policies deny payment or pay less than the full benefit
if you go outside the network for non-emergency services.
Medicare, however, will still pay its share of approved charges
if the services you receive outside the network are services
covered by Medicare.

Medicare SELECT will be evaluated through 1994 to
determine if it should be continued and made available
throughout the nation. Companies selling Medicare SELECT
policies are required to provide for the continuation of
coverage if the policies are discontinued. If the program is
not extended, Medicare SELECT policyholders will have the
option to purchase any standard Medigap policy that the
insurance company or HMO offers, if in fact it issues Medigap
insurance other than Medicare SELECT. To the extent possible,
the replacement policy would have to provide similar benefits.

Carrier Filing of Medigap Claims. Under certain
circumstances, when you receive medical services covered by
both Medicare and your Medigap insurance, you may not have to
file a separate claim with your Medigap insurer in order to
have payment made directly to your physician or medical
supplier. By law, the Medicare carrier that processes Medicare
claims for your area must send your claim to the Medigap
insurer for payment when the following three conditions are met
for a Medicare Part B claim:

1. Your physician or supplier must have signed a
participation agreement with Medicare to accept assignment
of Medicare claims for all patients who are Medicare
beneficiaries:

2. Your policy must be a Medigap policy: and

3. You must instruct your physician to indicate on the
Medicare claim form that you wish payment of Medigap
benefits to be made to the participating physician or
supplier. Your physician will put your Medigap policy
number on the Medicare claim form.

When these conditions are met, the Medicare carrier will
process the Medicare claim, send the claim to the Medigap
insurer and generally send you an Explanation of Medicare
Benefits (EOMB). Your Medigap insurer will pay benefits
directly to your physician or medical supplier and send you a
notice that they have done so. If the insurer refuses to pay
the physician directly when these three conditions are met, you
should report this to your state insurance department. For more
information on Medigap claim filing by the carrier, contact the
Medicare carrier. Look in The Medicare Handbook for the name
and telephone number of the carrier for your area.


Managed Care Plans That Contract With Medicare


Managed care plans, also called coordinated care and
prepaid plans, include health maintenance organizations (HMOs)
and competitive medical plans (CMPs). They might be thought of
as a combination insurance company and doctor/hospital. Like an
insurance company, they cover health care costs in return for a
monthly premium, and like a doctor or hospital, they arrange
for health care.

As a Medicare beneficiary, you can choose how you will
receive hospital, doctor, and other health care services
covered by Medicare. You can receive them either through the
traditional fee-for-service delivery system or through a
managed care plan that has a contract with Medicare. If you
choose fee-for-service care, you should consider purchasing
Medigap insurance.

If you enroll in a Medicare-contracting HMO or CMP, you
will not need a Medigap policy. In fact, insurers are
prohibited from issuing you one because it would duplicate your
HMO or CMP benefits. If you have a Medigap policy and decide to
enroll in a plan, you will be asked to provide an assurance
that you will give up the Medigap policy.

Should you enroll in a managed care plan and later
disenroll and return to fee-for-service care, you likely will
be able to buy a Medigap policy, but you may not get the
policy; of your choice, especially if you have a health
problem. On the other hand, both disabled and aged Medicare
beneficiaries generally may enroll in a Medicare-contracting
HMO or CMP without regard to any health problems they may have.
For this and other reasons, managed care can be an attractive
option for many beneficiaries.

A managed care plan generally arranges with a network of
health care providers (doctors, hospitals, skilled nursing
facilities, etc.) to offer comprehensive, coordinated medical
services to plan members on a prepaid basis. If you enroll in
an HMO or CMP with a Medicare contract; services usually must
be obtained from the professionals and facilities that are part
of the plan, except in a medical emergency.

The plan must provide or arrange for all Part A and B
services (if you are covered under both parts of Medicare).
Some plans also provide benefits beyond what Medicare covers,
such as preventive care, prescription drugs, dental care,
hearing aids and eyeglasses.

Medicare makes a monthly payment to the plan to cover
Medicare's share of the cost of the services you receive.
Additionally, most plans charge enrollees a monthly premium and
nominal copayments as services are used. Usually there are no
other charges--no matter how many times you visit the doctor,
are hospitalized, or use other covered services. Medicare's
deductibles and coinsurance do not apply to beneficiaries
enrolled in plans with Medicare contracts.

If you enroll in an HMO or a CMP that has a "risk"
contract with Medicare, Medicare will not pay for non-emergency
services you receive from providers outside of the HMO or CMP.
That is, you must receive all your health care benefits (except
in an emergency) from the HMO or CMP in order to be covered.

If you enroll in a plan that has a "cost" contract with
Medicare, you can receive covered services either through the
plan or outside the plan. If you go outside the plan for
non-emergency services, Medicare will still pay but the plan
will not. You would be responsible for the same charges that
you would be liable for if you were only covered by Medicare,
but you would no longer have a Medigap policy to cover those
charges.

You are eligible to enroll in a managed care plan with a
Medicare contract if you live in the plan's service area, are
enrolled in Medicare Part B, do not have permanent kidney
failure, and have not elected the Medicare hospice benefit. The
plan must enroll Medicare beneficiaries in the order of
application, without health screening, during at least one open
enrollment period each year.

Before joining a plan, be sure to read the plan's
membership materials carefully to learn your rights and the
nature and extent of your coverage. If you live in an area that
is served by more than one managed care plan, compare benefits,
costs and other features to determine which plan meets your
needs. Also, determine which type of contract the plan has with
Medicare.


Group Insurance


There are two principal sources of group insurance:
employers and voluntary associations.

Employer Group Insurance for Retirees. Many people have
private insurance when they reach age 65 that often is
purchased through their or their spouse's current employer or
union membership. If you have such coverage, find out if it can
be continued when you or your spouse retires. Check the price
and the benefits, including benefits for your spouse.

Group health insurance that is continued after retirement
usually has the advantage of having no waiting periods or
exclusions for preexisting conditions, and the coverage is
usually based on group premium rates, which may be lower than
the premium rates for individually purchased policies. One note
of caution, however. If you have a spouse under 65 who was
covered under the prior policy, make sure you know what effect
your continued coverage will have on his or her insurance
protection.

Furthermore, since employer group insurance policies do
not have to comply with the federal minimum benefit standards
for Medigap policies, it is important to determine what
coverage your specific retirement policy provides. While the
policy may not provide the same benefits as a Medigap policy,
it may offer other benefits such as prescription drug coverage
and routine dental care.

Special Rules for Working People Age 65 or Over. If you
are 65 or over and you or your spouse works, Medicare may be
secondary payer to any employer group health plan (EGHP)
coverage you have. This means that the employer plan pays first
on your hospital and medical bills. If the employer plan does
not pay all of your expenses, Medicare may pay secondary
benefits for Medicare-covered services to supplement the amount
paid by the employer plan.

Employers who have 20 or more employees are required to
offer the same health benefits, under the same conditions, to
employees age 65 or over and to employees' spouses who are 65
or over, that they offer to younger employees and spouses. EGHP
coverage of employers of 20 or more employees is primary to
Medicare.

You may accept or reject coverage under the EGHP. If you
accept the employer plan, it will be your primary payer. If you
reject the plan, Medicare will be the primary payer for
Medicare-covered health services that you receive. If you
reject the employer plan, you can buy supplemental insurance
but an employer cannot provide you with a plan that pays
supplemental benefits for Medicare-covered services or
subsidize such coverage. An employer may, however, offer a plan
that pays for health care services not covered by Medicare,
such as hearing aids, routine dental care, and physical
checkups.

Special Rules for Certain Disabled Medicare Beneficiaries.
Medicare is also secondary for certain people under age 65 who
are entitled to Medicare based on disability (other than those
with permanent kidney failure) and who have large group health
plan (LGHP) coverage. An LGHP is a plan of, or contributed to
by, an employer or employee organization that covers the
employees of at least one employer with 100 or more employees.

This requirement applies to those who have LGHP coverage
as an employee, employer, self-employed person, business
associate of an employer, or a family member of any of these
people. An LGHP must not treat any of these people differently
because they are disabled and have Medicare.

The term "employee" here includes both those who are
actively working despite their disability (such as disabled
Medicare beneficiaries engaged in a trial work period) and
those who are not actively working, but whom the employer
treats as employees. Medicare determines whether an individual
is considered to be an employee.

Disabled persons also have the option of accepting or
rejecting LGHP coverage. If they reject the plan, Medicare
becomes their primary payer and the employer may not provide or
subsidize supplemental coverage, except for items and services
not covered by Medicare.

Special Rules for Medicare Beneficiaries with Permanent
Kidney Failure. Medicare is secondary payer to EGHPs for 18
months for beneficiaries who have Medicare solely because of
permanent kidney failure. This requirement applies only to
those with permanent kidney failure, whether they have their
own coverage under an EGHP or are covered under an EGHP as
dependents. EGHPs are primary payers during this period without
regard to the size of the EGHP or the number of employees. The
18-month period begins with the earlier of:

* The first month in which the person becomes entitled to
Medicare Part A or

* The first month in which an individual would have been
entitled to Part A if he had filed an application for
Medicare benefits.

However, EGHPs may be primary for an additional 3 months,
or a total of up to 21 months: the first three months of
dialysis (a period during which an individual generally is not
eligible for Medicare benefits) plus the first 18 months of
Medicare eligibility or entitlement. After the period of up to
21 months expires, Medicare is primary payer for entitled
individuals and the EGHP is secondary.

The Health Care Financing Administration pamphlet entitled
Medicare Coverage of Kidney Dialysis and Kidney Transplant
Services contains more information about Medicare and kidney
disease. You can get a free copy from the Social Security
Administration or the Consumer Information Center, Department
59, Pueblo, CO 81009.

Association Group Insurance. Many organizations, other
than employers, offer group health insurance coverage to their
members. Just because you are buying through a group does not
mean that you are getting a low rate. Group insurance can be as
expensive as or more costly than comparable coverage under
individual policies. Be sure you understand the benefits
included and then compare prices. Association group Medigap
insurance must comply with the same rules that apply to other
Medigap policies.

The following types of coverage are generally limited in
scope and are not substitutes for Medigap insurance or managed
care plans.


Long-Term Care Insurance


Nursing home and long-term care insurance are available to
cover custodial care in a nursing home. Some of these policies
also cover care in the home, and others are available to pay
for care in a skilled nursing facility (SNF) after your
Medicare benefits run out (see page 3 for an explanation of the
Medicare benefit for skilled nursing facility care).

If you are in the market for nursing home or longterm care
insurance, be sure you know which types of nursing homes and
services are covered by the different policies available. And
if you buy a policy, make sure it does not duplicate skilled
nursing facility (SNF) coverage provided by any Medigap policy,
managed care plan, or other coverage you have.

It is important to remember that custodial care (the type
of care most persons in nursing homes require) is not covered
by Medicare or most Medigap policies. The only care of this
nature that Medicare covers is skilled nursing care or skilled
rehabilitation care that is provided in a Medicare-certified
skilled nursing facility.

For more information about long-term care insurance,
request a copy of A Shopper's Guide to Long-Term Care Insurance
from either your state insurance department or the National
Association of Insurance Commissioners, 120 W. 12th Street,
Suite 1100, Kansas City, MO 64 105-1925. You may also obtain a
copy of the Guide to Choosing a Nursing Home by writing to
Medicare Publications, Health Care Financing Administration,
6325 Security Boulevard, Baltimore, MD 21207.


Hospital Indemnity Insurance


Hospital indemnity coverage is insurance that pays a fixed
cash amount for each day you are hospitalized up to a
designated number of days. Some coverage may have added
benefits such as surgical benefits or skilled nursing home
confinement benefits. Some policies have a maximum number of
days or a maximum payment amount. Generally, a hospital
indemnity policy will pay the specified daily amount regardless
of any other health insurance coverage you have, but other
group health insurance may coordinate benefits with hospital
confinement indemnity insurance sold on a group basis.


Specified Disease Insurance


Specified disease insurance, which is not available in
some states, provides benefits for only a single disease, such
as cancer, or a group of specified diseases. The value of such
coverage depends on the chance you will get the specific
disease or diseases covered. Benefits are usually limited to
payment of a fixed amount for each type of treatment. Benefits
are not designed to fill gaps in Medicare coverage.