Medigap and subrogation

Medicare is the federal health insurance program for those 65 years of age or older who qualify and for certain other people with disabilities. Medicare does not take care of all medical costs, however, so many seniors also purchase supplemental policies to cover expenses not fully covered by Medicare. These policies, provided by private insurers, make up a program commonly known as Medigap, because they cover the medical bills that fall through the “gap,” the expenses that Medicare will not pay.

Defined by the US government, the terms and conditions of Medigap coverage are identical in all 50 states and are also identical for all private insurers, although costs can vary depending on the insurer used and the coverage chosen.

Travelers’ medical expenses overseas are not covered by Medicare, but some Medigap policies do cover medical expenses incurred outside of the US, offering a lifetime maximum of $50,000 in coverage.

An important thing for any overseas US traveler to be aware of is that any travel insurance policy you purchase will likely have a subrogation clause that allows the travel insurance company to collect funds from (subrogate) any other health coverage you have, including your overseas Medigap coverage.

The website for InsureMyTrip (800/487-4722) has a good definition of subrogation: “After a provider pays a claim, they will typically ‘subrogate’ to seek reimbursement from any other collectible sources that may be available to you (for example, other insurance policies or travel suppliers) to recoup some or all of the claim that was paid.”

Some companies call this “coordinating benefits,” and others use the phrase “We are in excess to any other coverage.”

For example, if you incurred $50,000 worth of medical expenses during a trip outside of the US, your travel insurance policy would allow a complete draining of the portion of your Medigap coverage that pays for medical expenses overseas while the insurance company would shell out nothing, itself, even though your policy specified as much as $100,000 in medical coverage!

Secondary versus primary 

Having laid out the information above, it does get complicated.

All secondary-payer travel insurance policies will require YOU to tap into that Medigap fund before the travel insurance company will pay any medical bills, hence the term “secondary payer.” They pay only when coverage by any other medical insurance is exhausted.

Many primary-payer policies will allow the travel insurance company to attempt to collect from your Medigap policy or any other medical insurance provider after the insurance company has paid your expenses up front. Put another way, not all primary payers will tap into your Medigap funds after paying a claim, even though they have the right to do so.

Chris Buggy of Travelex (800/228-9792) emailed me the following: “Travelex provides primary-payer policies and has the ability to collect from health insurers on the back end. Each case is handled on an individual basis, and the decision is based on the specifics of each claim.”

In any case, the travel insurance company from which you purchase a policy isn’t insuring you. The actual insurer is their underwriter. CSA Travel Protection (800/348-9505) has two underwriters, Generali and Stone­bridge.

Here’s what CSA’s Linda Barger said in response to my hypothetical question regarding a traveler’s Medigap coverage and subrogation: “With the Generali policy, the answer depends on the state.

“In New York we are primary, so I would say, in this case, we would not try to collect from his Medigap. In Alaska, Connecticut, Idaho and Illinois we are required to coordinate benefits, so in those specific states we would go ahead and seek recovery. For all the other states, we are in excess to any other coverage (we would collect from any other insurer), so this situation would not come up, as we would require the traveler to file a claim first with his primary/secondary (insurer).”

Ms. Barger continued: “All of Stonebridge’s policies are excess, so this would also be the case for those plans. However, each policy also states that we have the right to subrogate, so in the case of EMT (emergency medical transportation), we would subrogate their primary/secondary (the policy holder’s additional medical coverage) except in New York (Generali only), which does not have the subrogation language.”

Have I lost you, dear ITN reader? The following examples may help make things more clear.

Tapping into Medigap

Letters from two ITN subscribers are what launched me on this research topic.

Patricia Bunyard of Cambria, California, queried, “Your article on primary and secondary insurance (June ’13, pg. 58) raises a question. You wrote, ‘… the primary payer will pay you first, but… then try to collect from the health insurance carriers on the back end if they can.’

“I have Medicare as well as Medigap Plan F. Plan F provides $50K of lifetime coverage for emergency medical travel insurance. Does your statement mean that if I buy a primary plan to cover emergency medical, the insurance carrier will pay the up-front costs but STILL contact my Plan F carrier to get their money back? I was under the impression that if I purchased additional emergency medical insurance, I might not need to dip into that $50K offered by my plan F.”

The answer to Ms. Bunyard’s question is ‘A primary-payer policy gives the insurance company the right to try to collect from her Medigap policy’!

Libby Eckert of Oakton, Virginia, had a secondary-payer policy with Trip Mate (800/888-7292). It paid her claim for trip interruption but required her to file a claim to retrieve the $2,000 worth of medical expenses from her Aetna Medigap policy. 

So Trip Mate, ultimately, subrogated her Medigap policy, and the total time from filing her original claim to getting full reimbursement stretched out to five months. With a primary-payer policy, it probably would have taken 30 days to complete this claim.

What to do?

Your travel insurance policy will end up paying your applicable overseas medical expenses only if you do not have Medigap overseas coverage or any other overseas medical coverage. However, going without Medigap is not a good approach because of all the other medical coverage it provides for you here in the US. Medicare covers a major portion of your normal medical expenses but not all of them.

Be aware that neither Medicare nor Medigap covers emergency medical evacuation, so you should consider purchasing coverage for that. 

Not many travel insurance companies will provide emergency medical evacuation coverage at a reasonable cost, however. Divers Alert Network (800/446-2671) offers it at a very low cost, but it won’t get you all the way home; it will get you only to the “nearest appropriate medical facility.”

So, given that dilemma, consider doing what I do. I maintain a Medigap policy to cover medical expenses at home that Medicare doesn’t cover, and, when traveling, I buy a “Betty James Travel Insurance Policy” (Sept. ’10, pg. 54), which does NOT cover trip cancellation/interruption but does economically provide high limits of primary-payer coverage for medical expenses overseas as well as emergency medical evacuation. And I make sure I get a policy that will waive the preexisting-condition clause.

You can get one of these (Betty James) post-departure policies from Dan Drennen (402/343-3621) or from most travel insurance suppliers. When you fill out the application, enter “zero” as the trip cost.

To sum up, I say let the travel insurance company subrogate my Medigap policy. I just want to be sure I’m covered for any medical emergencies overseas. 

Happy trails!