For Professionals: Medicare and Other Health Insurance

Summary of Medigap Changes: A.B. 1543 (Jones)

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Published: Nov. 16, 2009

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A.B.1543 was signed by the Governor on July 2nd and became law on that date. The bill contained a few minor enhancements or clarifications to existing Medigap open enrollment and guaranteed issue rights. Those changes took effect and became law on July 2, 2009. The bill did not change many existing sections that could have benefited from revision, did not eliminate outdated sections, and did not add other substantive changes that would have been desirable such as deleting references to Medigap plans that will no longer be available after June of 2010. Committee staff decided to keep the scope of the bill very narrow to expedite its passage through the legislature and meet federal deadlines for enactment.

AB 1543 brought California into conformity with federal law that changed the benefits of all lettered Medigap plans, added two new benefit packages, eliminated four existing benefit packages, and reduced the number of variations that will be available in Medigap plans beginning in 2010. The number of available Medigap plans has been scaled back to the original number of 10 plans, plus one high deductible rider that can be added to Plan F. Some existing Medigap plans (H, I, J, and E) have been deleted along with the rider for Plan J, and benefits in a few other lettered plans have been rearranged. In addition, two existing benefits will not be included in the new standardized Medigap plans: preventive care and home recovery.

The new standardized Medigaps cannot be issued with an effective date before June 1, 2010, although they are likely to be marketed soon after they have been approved by the Departments of Insurance or Managed Health Care, most likely in early 2010. Existing Medigap plans cannot be issued after May 31, 2010.

The new Medigap plans will consist of A, B, C, D, F, HdF, G, K, and L, plus M and N; both new plans with limited cost sharing. Although CHA was unsuccessful in obtaining a requirement that everyone with an existing Medigap could replace it with a new Medigap of the same or similar benefits, we were able to ensure that people could transition from an old standardized Medigap to a new one of the same or similar letter designation (or one with less benefits) during the 30 days following their birthday, but only after the new standardized plans become available in mid-2010.

Birthday Rule: CIC 10192.11(h)(1)8

(Note: Identical requirements are contained in the Health and Safety Code for those companies that sell Medigap policies and are licensees of the Department of Managed Health Care.)

Beginning in June 2010 anyone with an old lettered Medigap plan can get one of the new plans with the same letter, or one with less benefits, for 30 days following their birthday from any company selling a plan in the Medigap market. If there is no Medigap plan with the same letter, substitutions for those lettered plans can be made as follows:

  • New Plan D substitutes for old Plan E and old Plan H
  • New Plan G substitutes for old plan I
  • New Plan F substitutes for old plan J
  • New High deductible F substitutes for old high deductible F and J

These substitutions cannot be made until the new plans are available later next year, and none can have an effective date earlier than June 1, 2010.

Until the new standardized plans are available beneficiaries will only have access to the current standardized plans. People who have birthdays between January 2010 and May 1, 2010 and want to switch coverage will have to choose from the current standardized plans, although some insurers may allow them to switch to the same lettered new plan in June 2010. Those with birthdays during May 2010 may be able to choose the same or similar lettered new standardized plan with an effective date in June.

Some companies may voluntarily allow people to switch to the newer policies when they become available, but companies selling Medigap policies are not required to do so. As always, anyone healthy enough to qualify for new coverage and willing to pay a higher premium price can certainly do so.

Other Changes That Took Effect on July 2, 2009

  1. When an employer sponsored retiree plan stops providing supplemental benefits or no longer covers the 20 percent coinsurance a covered individual is entitled to open enrollment for six months and can buy any Medigap that is available. CIC 10192.12(b)(1)
  2. COBRA and CalCOBRA are specifically included when the loss of employer sponsored coverage triggers the right to a Medigap policy. CIC 10192.11 (e)(2)
  3. If a person loses eligibility for Medi-Cal, or incurs a share of cost, an individual 65 and older is entitled to any Medigap plan (a person younger than 65 is entitled to A, B, C, F, or H, I, or J, or K or L at the option of the insurance company) for 63 days after receiving notice of the change in their Medi-Cal status. When a Share of Cost (SoC) has been imposed an applicant will have to certify that he or she has not met their SoC in the month they are applying for a Medigap policy. CIC 10192.11(L)(i)

Medical Records CIC 10192.18.(g)

A company cannot request or require a person to answer medical questions on an application for Medigap coverage if that person is entitled to open enrollment or guaranteed issue protection under any of the circumstances described in 10192.11 or 12, or in parallel requirements in the Health and Safety Code for licensees of the Department of Managed Health Care. Companies must inform an applicant that they are not required to complete the medical portion of an application when the company is required to issue coverage without medical screening.

The only exception to this rule is when an individual is first signing up for Part B. In that instance an issuer may apply a waiting period of no more than 6 months for pre-existing medical conditions. The waiting period must however be reduced by any existing creditable coverage during the previous 6 months.

CIC = California Insurance Code

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