Can Medicare Supplemental Insurance Be Cancelled?

Medicare Supplemental Insurance, or Medigap, is private health insurance that helps cover costs not paid by Original Medicare, such as copayments, coinsurance, and deductibles. Many policyholders wonder if these plans can be canceled by the insurer or themselves. Understanding Medigap policy cancellation rules is important for continuous health coverage and managing healthcare expenses. This article clarifies the circumstances under which Medigap policies can be canceled.

Guaranteed Renewability of Medigap Policies

A key protection for Medigap policyholders is “guaranteed renewability.” As long as premiums are paid on time, the insurance company cannot cancel the policy. This protection applies regardless of changes in the policyholder’s health status or age after the policy is issued.

This standard ensures continuous coverage for Medigap policyholders, even with new health conditions or increased medical care needs. It prevents insurers from dropping coverage, differentiating Medigap from other health insurance where renewal might depend on health status.

Policyholders can maintain supplemental coverage year after year, keeping Original Medicare costs manageable. This stability is why many choose Medigap plans.

Conditions Allowing Insurer Cancellation

While Medigap policies are generally guaranteed renewable, an insurer can cancel a policy under specific circumstances. These exceptions relate primarily to the policyholder’s actions, not their health.

The most common reason for an insurer to cancel a Medigap policy is non-payment of premiums. Insurers typically provide a grace period, during which a late payment can be made to avoid termination. If premiums remain unpaid beyond this period, the insurer can terminate coverage.

Material misrepresentation on the application or fraud in obtaining benefits are reasons for cancellation. These involve providing false information or deceptive actions to receive unentitled benefits. If discovered, the insurer can cancel the policy.

Policy termination also occurs if the insurance company goes out of business or becomes insolvent. In these cases, policyholders usually gain guaranteed issue rights to purchase a new Medigap plan without medical underwriting.

Policyholder Initiated Cancellation

A policyholder can cancel their Medigap policy at any time. This flexibility allows individuals to adjust their coverage based on changing needs or financial situations. The process typically involves notifying the insurance company directly, often in writing, to formally request cancellation.

Policyholders might choose to cancel for several reasons. These include switching to a different Medicare coverage type, such as a Medicare Advantage plan, or finding a more affordable Medigap policy from a different insurer. Some policyholders may also decide they no longer need supplemental coverage, perhaps due to financial changes or other available health benefits. When canceling, it is advisable to ensure new coverage is in place to avoid gaps.

Other Factors Affecting Policy Continuation

Beyond direct cancellation, other factors influence a policyholder’s decision to continue their Medigap plan. A key factor is regular premium increases. Medigap premiums can increase due to factors like the policyholder’s age, general inflation, and rising healthcare costs.

Insurers must notify policyholders before a premium increase takes effect, usually annually. While the policy remains guaranteed renewable, these increases can make the plan less affordable. Policyholders should factor in potential premium escalations when selecting a plan.

While core benefits of standardized Medigap plans cannot be changed by the insurer, administrative aspects or plan availability might be adjusted. This is not a cancellation but can affect the policy’s practical value. Insurers may introduce new plans or discontinue selling older ones, though existing policies remain in force.

If an insurance company faces solvency issues or goes out of business, state guaranty funds protect policyholders. These funds ensure continued coverage or a transition to new coverage without significant loss.