When North Carolina health-insurance customers near 65, there’s one letter among the stream of Medicare-related mail that they really should open and read.
By Thomas Goldsmith
State insurance officials say that a letter from someone’s current insurance company could soon notify the beneficiary that the person has been automatically enrolled in a private “Medicare Advantage” plan instead of traditional Medicare. Under the process called “seamless conversion,” the letter says, the person has to take the active step of opting out to prevent the “conversion” from taking effect.
Medicare Advantage plans make profits for insurance companies by receiving enhanced payments from the government to offer coverage that typically differs from that provided by traditional Medicare.
Officials at the Seniors’ Health Insurance Information Program, a division of the state insurance department, said they were not aware of beneficiaries in North Carolina being switched to Medicare Advantage plans. However, Jo Paul, senior technical adviser at SHIIP, said the issue of conversion in other states was a hot one at a regional conference put on last month by the Centers for Medicare and Medicaid Services.
With the annual signup period for Medicare starting in less than a month – on October 15 – consumers should be on the lookout for seamless conversion letters, state and federal officials said. The Centers for Medicare and Medicaid Services, or CMS, must give state-by-state permission for a company to make use of seamless conversion.
And companies that already have Medicare Advantage plans in North Carolina could obtain that permission.
Opting out necessary to stop conversion
The letter gives beneficiaries 60 days to refuse the conversion, but even those who read the communication have to take the extra step of opting out, or else the conversion takes hold.
Studies by social scientists have shown that asking people to opt out of something results in higher retention than in asking people to act in.
“The bottom line is: You have to read the mail, especially from the company that you are currently insured with,” said Melinda Munden, who works in partnership development at SHIIP.
Carla Obiol, deputy director of the state Department of Insurance, said there’s a rule of thumb about this kind of communication to consumers: “A third don’t open it. A third open and don’t understand it. And a third understand it.”
Numbers of people affected by the policy at the state and national level weren’t available Wednesday, but should be released later this year, a CMS spokesman said. CMS officials said they have received few complaints about the enrollments that have taken place under the policy, which originated in 1997.
Medicare experts say the policy could be attracting more attention because some carriers issuing policies under the Affordable Care Act are using it. According to Kaiser Health News, Aetna, UnitedHealthcare and Humana have requested permission from CMS to begin seamless conversion next year.
However, national and state advocates for older people say more notice ought to be provided of possibly-crucial differences in coverage between traditional Medicare and Medicare Advantage.
A Medicare Advantage plan can offer a different network, or group of doctors and other providers, as well as use a different list of covered medications – known as a formulary – from traditional Medicare, said Gina Upchurch, founder and executive director of Senior PharmAssist, a Durham nonprofit that helps older people make insurance choices.
“It seems like a huge mistake for many people, first because of their network and second because of their formularies,” Upchurch said of the choice to automatically enroll people in Medicare Advantage. “In general, we think this is bad because people need to be more informed, not less informed.”
Medicare Advantage has some fans
More than three in 10 Medicare recipients have Medicare Advantage policies and they work well for some older people, Obiol said.
“Some people are very high on Medicare Advantage,” she said. “They are people that have good health and live in large urban areas.”
A potential shortfall under Medicare Advantage is that a hip replacement patient can be prescribed nursing-home rehabilitation, only to discover that the Medicare Advantage policy, in some circumstances, doesn’t cover the rehab or requires a large co-pay.
In addition, enrollment in Medicare Advantage means that you cannot have a Medigap supplement that works with traditional, fee-for-service Medicare.
A Medicare Advantage customer who is entered automatically at 65, then wants to return to traditional Medicare could get an unwelcome surprise: After a 12-month trial period, the person can be turned down for a Medigap policy because of a pre-existing condition, Upchurch said.
“It’s confusing and people should be making informed decisions,” she said.
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