When first deciding on what plan to buy you’re probably wondering the same question.
If an insurance company that you buy a Medicare Supplement from goes out of business, you’ll be able to get another Medicare Supplement without any health underwriting. Every Medicare beneficiary is protected in the event an insurer becomes insolvent by the Guarantee Issue Rule. Although you’ll be able to get a new Medicare Supplement, you won’t be able to choose which one.
Every Medicare Supplement is Guaranteed Renewable which means that once you have a Medicare Supplement in place and continue to pay your monthly premiums, your plan cannot drop you for any reason, including a change in your health status.
But we talk to many people who ask, “What happens to my Medicare supplement plan if the insurance company goes out of business?”
Today we will talk about this in more detail.
Medicare Supplements Are Guaranteed Renewable
Yes, and because they are guaranteed renewable, it is unlikely that your plan would drop you.
Assuming you will continue to pay your monthly premiums and were truthful on your application.
Luckily, if you lose your Medicare Supplement plan because your insurance company goes bankrupt, you have a guaranteed issue right to get another supplement. We will talk about this later in this article.
Even though they are guaranteed renewable, there are still some reasons why you may lose your coverage.
Some of the most common reasons are:
- You stop making monthly premium payments.
- You made false statements on your application.
- Your insurance company goes bankrupt.
What if My Medicare Supplement Company Goes Out of Business?
Or if my company drops me?
If your Medicare Supplement carrier goes out of business, you will be given special rights to choose a new Medicare Supplement.
Medicare has certain rules in place to protect you. You will never have a time when you won’t be able to get insurance.
It may be difficult to find a plan that you want though and your options will be limited.
Make Sure to Pick the Right Company
Choosing the right Medicare Supplement company plays an important role in giving you peace of mind in knowing they won’t go out of business.
We talked about choosing a Medicare Supplement company in more detail here.
Essentially, the company you pick matters.
Company financial ratings are measured on the Better Business Bureau and Am Best. For any company you are considering, you should always look at their financial history reports.
If you are working with your agent, ask how long the company has been in business and how long they’ve been offering Medicare Supplements.
Be careful in working with companies that are just now getting into the Medicare space.
Peace of mind is as important. If you are being pressured into doing business with a company you’ve never heard of, remember to pause and do some research.
Sometimes, we’ve seen huge incentives to agents to push companies that are just now starting to grow their book of business.
Not only do you take a risk in dealing with a small, company, but the stability in the rate may become a problem too.
Don’t worry! If a company goes out of business, you are protected.
Guaranteed Issue Rights
If you have a guaranteed issue right, an insurance company must sell you a Supplement Plan regardless of any pre-existing conditions you may have.
They do not ask health questions. It is an automatic approval.
Also, the insurance company cannot charge you more because of your pre-existing conditions.
There are a total of 10 Medicare supplement plans. You can read about them here.
It is important to note that not all of these plans are available to purchase if you have a guaranteed issue right.
What Happens if I Don’t Pay My Medicare Supplement Premium?
Your policy will lapse and you may or may not be able to get it back
Usually, this is determined by the amount of time since you’ve last paid your bill.
Here are a few reasons why someone may have a lapse in coverage:
- Closing the account the withdrawal comes from
- Not sending a check
- Check lost in the mail
- Being hospitalized
- Death of a spouse or loved one
Bank drafts are the easiest way to avoid not paying your bill. Regardless of your personal situation, life does happen, and sometimes we make mistakes.
There is good news.
Usually, most insurers give you a window to pay your premium. 30-60 days is the norm. Every company is different.
Be careful though, they do not have to take you back.
We have seen carriers refuse to reinstate policies. This usually happens if someone has a medical event at the time of the lapse.
Our experience has been that the easiest way to avoid a potential lapse is by paying by bank draft.
What Happens if I Lied on My Medicare Supplement Application?
Usually lying on a Medicare Supplement application is a big no-no.
Very rarely do we see people flat-out lie about their health, but it does happen.
Sometimes we do not “lie,” but unintentionally forget.
Life gets busy and we may not remember certain things about our health.
If you lied or misrepresented yourself, a company can deny a claim.
When this happens, an insurance company will rescind a policy.
Usually, they will deny any claim and send you back the premium you’ve paid.
Then, you may not be able to qualify for any coverage in the future.
It will be up to you to prove that you did not lie.
When applying for coverage it is always best to tell the truth.
Do not worry though, there are plenty of questions on an application to help trigger your memory.
If you have Plan N and your insurance company goes bankrupt, you cannot use your guaranteed-issue right to get another Plan N.
There is only 1 plan available for someone who uses their guarantee issue rights.
The plan that is available is based on when you were first new to Medicare.
Even though you are only allowed one plan, the plan that you are entitled to will be based on your birthday.
The 2 plans are Plan F and Plan G.
If you are new to Medicare on or after January 1, 2020, your only option is plan G.
Medicare has begun to phase out Plan F, so it is not available for someone new to medicare after this date.
Is only available if you were new to Medicare before Dec 31, 2019.
If you find yourself in a guaranteed situation on or before this date, the only option you’ll have is Plan F.
Can I Choose to Not Use My Guarantee Issue Right?
That is a great question!
Yes, you can. You do not have to use it.
If you feel your health is good enough, you can apply for any plan you’d like.
Even if your health is questionable, you might get approved. It doesn’t hurt to try.
You have 63 days from the day your original Supplemental coverage ends to use your guaranteed issue right to purchase another qualifying supplement plan.
As long as you apply for your GI right within this date, you’ll always be guaranteed the plans mentioned above, even if you get turned down for other coverage.
It is very rare that your Medicare supplement plan would drop you.
If this does happen though, there is good news!
If your insurance company goes out of business, you will lose your supplement plan but will have a guaranteed issue right to get another supplement.
A guaranteed issue right allows you to get a supplement regardless of any pre-existing conditions you may have but only will enable you to get specific supplement plans.
The best thing you can do is contact an independent agent familiar with all insurance companies and how reputable they are.
An independent agent is familiar with each company’s financial condition, how long they have been in business, and can be proactive about helping you find a company that will not go bankrupt in the first place.
If you have any questions, use the search tool at the top of this page or on the home page.
Or, if you would like further detail on any of the topics we discussed, please fill out a contact form and submit your question.
If you prefer to speak by phone, call us at 888-209-5049.