In 1966, Congress passed and President Lyndon B Johnson signed into law the Medicare Act. Medicare provided health insurance to people 65 and older and to people who received Social Security Disability for at least two years. Medicare paid about 70% of its policyholders’ doctor and hospital bills. Because only 70% of the expenses were reimbursed, the need arose for an insurance policy to fill the gap: a Medicare supplement also known as “Medigap.”
In 1971, Bankers Life introduced the first Medicare supplement policies. Initially, Bankers Life hired thousands of insurance agents to sell this new insurance innovation. Policies were somewhat complicated to understand and Bankers Life quickly gained a 47% share in this new insurance sales market.
Other insurers, such as United American, Mutual of Omaha and Colonial Life, got smaller shares of the market. This lower tier of insurers hired independent insurance agents who were paid a percentage of the premium for a period typically lasting six years. Bankers Life sold and continues to sell its policies through independent agents and a state-of-the-art customer service facility located in Newark, NJ.
The National Association of Insurance Commissioners (NAIC) standardized the policies that could be sold to consumers in 1981. Plans A through J were created. Plan A is the most basic coverage and the insurance company must offer this coverage to everyone. the clients. Plan J is the most comprehensive coverage that pays all deductibles and coinsurance, even paying up to $ 3,000 per year for pharmaceutical items.
The vast majority of Medicare supplement customers have taken Plan F, which pays all of their Medicare expenses along with Original Medicare, but does not cover drugs. In fact, Plan F accounted for a staggering 56% of all new sales from the big four supplemental insurers, Bankers Life, United American, Colonial Life, and Mutual of Omaha, in 2005.
In 2004, the United States federal government introduced a drug benefit for Medicare beneficiaries. This billion dollar government program was priced at over two hundred billion dollars per year. Many observers have commented that this new program was the result of George W. Bush’s close victory over Al Gore in the 2000 presidential election.
Florida was the state that made George W. the next president and Florida is home to millions of Medicare beneficiaries. Giving these voters free prescription drugs seemed like a good idea to President George W. Bush to ensure their re-election. President Bush won reelection and the federal budget deficit began to climb.
