Companies are not required to offer all 10 plans, and many do not. Beneficiaries are informed of the 6-month open enrollment period when they enroll in Medicare. Enrollment in an HMO with a Medicare risk contract can be viewed as a substitute for a Medigap policy. However, Medicare beneficiaries who wish to change Medigap policies have at least one alternative that does not involve medical underwriting and, depending on where they live, may have several alternatives. Twelve of the 16 companies that submitted some or all of their applications to medical underwriting allowed their policyholders to switch from a prestandardized Medigap policy to a standardized Medigap policy without medical underwriting, if the benefits were comparable with or less comprehensive than those of the prestandardized policy. Medicare SELECT Policyholders Have Choices

Federal law requires insurers to offer Medicare beneficiaries who want to leave the Medicare SELECT program the option of purchasing a traditional Medigap policy. Medicare Beneficiaries Seldom Change Health Plans

Most elderly Medicare beneficiaries do not replace their private health insurance coverage but many do add to existing coverage. About 25 percent of the 19.5 million added plans to supplement those they had in 1991 (see table 2). Few Medigap Underwriting Complaints Have Been Made

Since 1993, NAIC has maintained a central database of formal complaints made to state insurance departments. One way to ensure that medical underwriting does not become a problem in the future would be to require Medigap insurers to offer policies with comparable benefit packages on a guaranteed-issue basis to individuals who have been continuously covered under Medigap. Few beneficiaries subsequently decide to change their policies, and those that do have at least one alternative for changing without being subject to medical underwriting. Methodology

To identify the extent to which medical underwriting is used in the Medigap market, we interviewed knowledgeable officials from the 25 largest sellers of Medigap insurance on their underwriting practices.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed Medigap policies, focusing on: (1) the extent to which Medicare beneficiaries are subject to medical underwriting when they change Medigap policies; and (2) options for modifying federal Medigap requirements to ensure that medical underwriting is not a problem in such cases.

What GAO Found

GAO found that: (1) 11 of the 25 largest Medigap insurers use medical underwriting to determine whom they will insure, 5 sell some policies without medical underwriting, and 9 sell all of their policies without medical underwriting; (2) the American Association of Retired Persons' (AARP) insurer accepts all Medicare beneficiaries who are AARP members without medical underwriting for certain Medigap policies; (3) some Medicare beneficiaries can obtain supplemental insurance from local Blue Cross/Blue Shield plans depending on where they reside; (4) federal law requires Medicare SELECT program insurers to offer participants who want to drop their SELECT policy the option of purchasing a traditional Medigap policy without medical underwriting; (5) some beneficiaries have the option of enrolling in health maintenance organizations (HMO) with Medicare risk contracts; (6) about 99 percent of Medicare beneficiaries do not change their private health insurance, but about 25 percent supplement their existing coverage; (7) few beneficiaries have made formal complaints to their state insurance departments about Medigap underwriting practices; and (8) insurers may discontinue the few policies that do not require medical underwriting in the future, since federal law does not require these insurers to offer such policies.