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Sen. Kerry, Rep. Stark Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars

Press Release

Location: Washington DC

Today, Sen. John Kerry (D-MA) and Rep. Pete Stark (D-CA) introduced the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical care, not executive compensation or administrative costs. This percentage is called the medical loss ratio (MLR).

"We want premium dollars going towards better care for patients and the system will be stronger when they do," said Sen. Kerry. "This commonsense bill provides another layer of protection for our seniors."

"Americans have long paid to line the pockets of insurance executives with their premium dollars," said Rep. Stark. "Health reform pushes back by ensuring that consumers get improved value for their premium dollars through strong medical loss ratio standards for private health insurers and Medicare Advantage plans. Our legislation builds on those reforms by extending the same standards to Medigap plans."

Under current law, Medigap insurers are required to meet an MLR of only 65 percent in the individual marketplace and 75 percent in the group market. These percentages date back to the original enactment of Medigap insurance standards in 1990. The Medigap Medical Loss Ratio Improvement Act would require Medigap insurance plans to spend at least 85 percent of every premium dollar on medical care in the group market and 80 percent in the individual market. To give insurers time to prepare for this change, it would become effective in 2014.

More than 9 million Medicare beneficiaries purchase private supplemental Medigap policies to help cover cost sharing and deductibles in traditional Medicare.

"Medigap plans help people fill in the gaps of Medicare cost sharing, but often have very high administrative overhead," said Rep. Henry Waxman, Ranking Member on the Committee on Energy and Commerce. "This legislation will help people enrolled in Medigap get a good value from those health insurers."

"This important bill will provide seniors in Medigap with consumer protections like those already in place for Medicare Advantage enrollees," said Rep. Frank Pallone, Ranking Member on the Energy and Commerce Health Subcommittee. "More than 9 million Medicare beneficiaries have Medigap policies and their premium dollars should be spent on medical care."

This legislation has been endorsed by the National Council on Aging, Families USA, AFSCME, the Alliance for Retired Americans, the Center for Medicare Advocacy, Health Care for America Now, AARP, the National Senior Citizens Law Center, Community Catalyst, and the Medicare Rights Center.

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