Medigap regulation: Lessons for health care reform

Abstract Congress enacted legislation in 1990 that dramatically changed the rules for selling supplemental health insurance, or “Medigap ” policies, to the elderly. Most notably, policy coverage was standardized. Insurance carriers are allowed to sell only the ten specified packages of benefits, which reduces consumer choice but facilitates comparison shopping. This legislation is important in its own right and also offers lessons for U.S. health care reform. To examine the changes brought about by this legislation and analyze their implications for health care reform, we conducted site visits to nine states and interviewed insurer representatives, executive branch officials, congressional staff, and various interest groups for two years. Far-reaching federal legislation, enacted as part of the Omnibus Bud-get Reconciliation Act of 1990 (OBRA-90), dramatically changed the rules for selling supplemental health insurance (“Medigap”) policies to the elderly. Most notably, the law called for the development of as many as ten standardized benefit packages, which, since July 1992, have be-come the only packages that may be sold. Previously, hundreds, if not thousands, of different policies were available. Despite the enormity of these changes, they have not received the appropriate recognition from the policy community. This is unfortunate because they are important in their own right, and they offer lessons as the United States considers fundamentally reforming its health care system. Supported by the Robert Wood Johnson Foundation’s Health Care Financing and Organization program. The views expressed herein are those of the authors and do not necessarily represent those of the Foundation. The authors thank the many state and federal, consumer, and insurance industry representatives who made this study possible