Understanding Medicare
Pre-standardized Medigap plans refer to those plans that were sold prior to July 1992.
Before 1980, the regulation of Medigap plans, also known as Medicare Supplement Insurance, was the responsibility of individual states. A report from the Office of Inspector General for the U.S. Department of Health and Human Services (HHS) indicates that the absence of federal oversight in the Medigap sector led to marketing fraud and consumer exploitation.
From 1980 to 1990, a collaborative effort among the federal government, state governments, and the National Association of Insurance Commissioners (NAIC) resulted in the implementation of the Omnibus Budget Reconciliation Act (OBRA) of 1990. This legislation reformed Medigap by standardizing Medicare Supplement Insurance plans, banning the sale of pre-standardized Medigap plans, and establishing consumer protections.
The HHS report outlines the reasons for the passage of the Act as follows:
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Establish minimum standards for Medigap policies
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Prevent insurance companies from offering more than 10 different plan options (effective July 30, 1992)
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Reduce misleading sales and marketing practices in the Medigap sector
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Educate consumers interested in purchasing Medigap insurance
The 1990 Medigap reform legislation standardized the plans and their benefits. Each Medigap plan is designated by a letter and includes a specific set of benefits. Currently, there are 10 Medigap plans available for purchase: Plan A, B, C, D, F, G, K, L, M, and N.
Sales of pre-standardized plans ceased after July 1992. Nevertheless, the plans sold prior to this date still account for a small segment of the Medigap market. A report by America’s Health Insurance Plans (AHIP) in 2014 revealed that pre-standardized Medigap plans constituted 4% of all Medigap policies in the United States and its territories. In that same year, there were 422,961 pre-standardized Medigap policies still active.
If you possess a plan that is no longer available for purchase, such as an older or pre-standardized plan, it remains valid for use.