Legacy Medigap in Transition: What You Need to Know

Andrew Hetzel

| 5 min read

Blue Cross has begun sending letters to nearly 200,000 people in Michigan who are enrolled in a product called “Legacy Medigap.” It’s a type of voluntary, supplemental insurance for Medicare-eligible people. It can help pay some of the health care costs that Original Medicare doesn't cover, like copayments, coinsurance and deductibles. Our Medigap members are among our best and most loyal customers. I know many people personally who refer to it fondly as “my Blue Cross.” They’re passionate about it, because between Original Medicare, the Medicare Part D drug plan they’ve selected and their Legacy Medigap supplemental plan from Blue Cross, they have coverage that gives them confidence. This confidence is something we’ve aspired to create for Michigan’s people over 77 years and we are committed to continue this far into the future. The letters we’re sending preview big changes we need to make to Legacy Medigap. We acknowledge that these changes will be concerning – even scary – to some of our members and their family caregivers. To prevent this worry and minimize concern, we are making an extra effort to make sure our members have all the information they need to understand how and why things are changing with Legacy Medigap, and that we are here to work hand-in-hand with them through this transition. How Are Things Changing?
  • A rate freeze on Legacy Medigap is ending. Legacy Medigap is perhaps the only health insurance plan in the United States whose rates have been frozen over the last five years. This was due to an agreement between Blue Cross Blue Shield of Michigan and the State of Michigan. This agreement expires on July 31. Typically, insurance premiums reflect the cost of providing health care services to the people enrolled in insurance plans. In Legacy Medigap, premiums (frozen for five years) have not kept up with costs, which increase every year.
  • A subsidy program that reduces Medigap premiums is transitioning. In addition to the freeze on rates, Blue Cross Legacy Medigap members have benefitted from subsidies provided directly by Blue Cross that reduce the premiums they pay from the rates Blue Cross would otherwise charge in the market. This means that the price our members see on their bills is artificially low. This subsidy program is transitioning from Blue Cross to the Michigan Health Endowment Fund – meaning that the premiums people see on their bills will be aligned to competitive market rates. Subsidies provided by the Health Endowment Fund will be in place to help some people with lower incomes (adjusted gross incomes) or disabilities.
Why Are Things Changing?
  • The rules have changed. Blue Cross began subsidizing Medigap plans back in 1980, under an old state law that made the company exempt from paying state and local taxes. This law has been replaced. Today, Blue Cross now is required to pay taxes (we paid more than $100 million in state and local taxes in 2015) and the Medigap subsidy program was replaced as a result.
  • Blue Cross now pays the Health Endowment Fund to subsidize Medigap. The same law that requires Blue Cross to pay taxes also established the Michigan Health Endowment Fund, a nonprofit whose mission is to help vulnerable populations in our state, including children and older adults. Blue Cross is the sole source of money for the Health Endowment Fund, and will pay $1.56 billion over 18 years to the Endowment Fund. We have already paid $210 million of that pledge. With some of this money, the Health Endowment Fund will put a subsidy program in place that is now available to people with lower incomes (adjusted gross incomes) and disabilities who purchase a Medigap plan.
Some Good News
  • Legacy Medigap members can keep their plans. We are going to be introducing new Medigap plans to the market, but anyone currently enrolled in a Blue Cross Legacy Medigap plan can remain in that plan as long as they pay the new premiums.
  • Blue Cross will continue offering a guarantee-issued Medigap plan. This means that people with pre-existing health conditions won’t be denied coverage.
  • Premiums for Legacy Medigap won’t increase until January 1, 2017. We want to give our members time to examine all of their options for coverage, talk with their families and caregivers, and work with Blue Cross experts who can help get questions answered.
  • Medicare-eligible people have a large number of coverage options. Legacy Medigap is not the only insurance plan for Medicare beneficiaries. But when you’ve had a great deal for a long time (like Legacy Medigap has been) you don’t look anywhere else. When we started the subsidy program back in 1980, there were no options for Medicare-eligible people. Today, there are many options – including plans that cover things like dental and vision that aren’t covered even with a Legacy Medigap plan. Blue Cross experts are available to help people explore all these options under today’s modern Medicare system.
  • Subsidies will remain available to reduce the cost. Medicare beneficiaries enrolling in Medigap will be eligible for subsidies to reduce their premiums if they meet eligibility criteria. The Michigan Health Endowment Fund is managing the subsidy program and is expected to establish eligibility criteria this month. Check back here for updates on their decisions. Blue Cross also will be mailing information to all of our Legacy Medigap members to provide them with additional information about the subsidy once the program is determined.
  • We are here to help. Blue Cross is committed to meeting the needs of each of our Legacy Medigap members as they make decisions regarding their health coverage. Each one of our members will receive two letters – with the second (arriving before July 15) having a special phone number for them to call for assistance. We will work hard to make this change as understandable as possible, and provide the information necessary to help our members make confident choices about their health coverage.
MI Blues Perspectives is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association