Did your Medigap plan get your insurance broker a trip to the Caribbean? It’s entirely possible it contributed to such a perk. Insurance brokers who sell Medicare supplement insurance, or Medigap, plans, often benefit from lax oversight by regulators and financial incentive from insurance carriers. Sometimes these Medigap sales incentives interfere with customers getting the coverage they want or need.  

Medigap is private insurance that is sold to supplement Medicare. The “gap” it refers to is difference between the Medicare reimbursement amount and the total amount allowed to be charged by the Centers for Medicare and Medicaid Services (CMS). The policies offer different benefits and deductibles, much like a non-Medicare insurance plan.

Medicare Advantage plans are private plans that are reimbursed with federal dollars, as an alternative to traditional Medicare. Carriers selling Medicare Advantage plans have been facing increasing criticism for overcharging and incentivizing over diagnosing of patients.  

Insurance brokers and agents selling Medigap coverage are showered with incentives from private insurers to push their plans. Cigna, for example, offered a paid vacation to St. Thomas, and Brokers who sold enough Aetna policies were offered a trip to San Francisco. Other carriers offered cash bonuses. It turns out though that brokers and agents selling these plans do not have to disclose to their clients the incentives tied to these plans, or why they are offering one plan over another. Some plans disfavor a senior insured to the agent’s benefit when they later discover their out of pocket expenses are higher than anticipated or they are not receiving the kind of coverage they were pursuing.

Senator Elizabeth Warren of Massachusetts yesterday released a report highlighting the ways Medigap Insurers’ sales rewards affect seniors on Medicare. These bonuses and perks are minimally regulated; though Senator Warren has called for closing these gaps in federal law.