The Future of Medigap Plan F

The future of Medigap Plan F was recently called into question with the recent passage of the “doc fix” bill, H.R. 2 – the Medicare and CHIP Reauthorization Act. The headline-stealer of this legislation was the stabilization of physician payments through the repeal of the sustainable growth rate model for Medicare payments to physicians. However, one of the lesser-known provisions could impact future Medicare beneficiaries who purchase Medigap insurance.

Specifically, the bill sets forth surcharges for Medicare beneficiaries that choose to purchase either Medigap Plan F or Medigap Plan C, the two Medigap plans that cover the Medicare Part B (doctor/outpatient) deductible. This deductible currently stands at $147/year, but it is projected to increase to $185/year in 2020 and $217/year in 2023. The idea is that these surcharges offset the higher “use rate” on Medicare from people that have Medigap Plan F. Although this has not necessarily been proven to be the case, the idea is that Medigap Plan F policyholders have no “skin in the game” since it doesn’t cost them anything to see a doctor.

Now, it is important to note that the bill specifies “future” beneficiaries (starting in 2020) as the ones who would be subject to the surcharges on Plan F and C premiums. So, at least on the surface, current Plan F or C policyholders would not be affected. However, a deeper look may foretell some consequences on existing policyholders.

To explain, the surcharges will likely greatly reduce the number of new policyholders into those two plans. Once it is understood that the choice to enroll in Plan F or Plan C equals surcharges on top of premium charges, many beneficiaries will pick a different plan. Hypothetically, this would cause upward pressure on Medigap Plan F and C rates, as there would be fewer new policyholders on those plans. So, long term, the outlook for price stability on those plans is not as great as it would be on other plans.

To editorialize a little here, the “overuse” of Medicare by people on Plan F has not been proven. And, although it does make sense in a vacuum, people that have Plan G, for example, have very little “skin in the game” either ($147/year). So, there is not that big of a difference. Also, since the Federal Government has very limited oversight over the Medigap plans – they are to supplement the Federal program, Medicare – it is hard to see how they should be involved in deciding how people choose to cover their “gaps” in Medicare.

All said though, the bill has become law and unless something changes between now and 2020, there will likely be a lot fewer people choosing Medigap Plans F and C at that point. We’ll stay on top of this and other developments, moving forward, and keep you apprised on how they may affect current Medicare beneficiaries.

Medigap Pricing Methods – Attained-Age, Issue-Age and Community-Rated

Medigap pricing methods can be categorized in one of three ways (as found on page 17 of the Choosing a Medigap policy booklet) – attained-age rated, issue-age rated, and community-rated. These differences are often discussed by insurance companies and agents, so it is important to understand what the terms mean, and more importantly, what they may mean to your Medigap rates in the future after you choose a plan.

Attained-age Medigap rates are based on your current age (i.e the age you have “attained”) and rates typically would go up as you get older based on your age or when you reach a birthday. Plans that are rated in this way will typically have lower rates initially when you sign up for a plan and will represent some savings (often significant savings) on the front end.

Issue-age Medigap rates are based on your age at the time that the policy is issued. Rates will be lower if you buy when you are younger. Premiums still go up over time, but it is just not based on your age. Instead, premium increases are based on inflation, claims experience and other factors.

Community-rated Medigap rates are based on the “community” (a certain geographic area) and are typically the same for everyone within that “community”, regardless of age. Just like issue-age rated plans, premiums still go up over time, just not based on your age. Instead, they go up for inflation and claims experience of everyone within that “community”.

So, what do Medigap pricing methods mean to you? First of all, a few facts about the different rating methodologies and things to keep in mind.

  • All Medigap rates are going to go up periodically. Most (regardless of Medigap pricing method) go up each year.
  • In some states, the vast majority of plans are attained-age rated, with only 1-2 exceptions to that.
  • In other states (for example, Georgia Medigap plans), the state restricts the companies to offer plans rates only with certain rating methodologies (i.e. no attained age in GA).
  • It is important to also consider the savings on attained-age plans. For example, if you can save $1000+ a year for the first 10 years of an attained-age plan, even if the rate eventually surpasses an issue-age plan, your already-pocketed savings on the front end are so significant, that may not matter.
  • Lastly, and most importantly, keep in mind that you can always change Medigap plans at any time and for any reason. In some states (for example: CA, OR, NY), this is a “guaranteed issue” right with no underwriting. In other states, you may have to answer general medical questions to be eligible to change. But in most cases, you can change plans to a lower-priced plan if your rate has gone up significantly.

Overall, it is advisable to have the assistance of an independent broker who can give you information about both current rates and typical future rates (i.e. history of rate stability) so you can make an informed choice on which company/plan is going to be best for you, both in the short term and into the future.

If you have questions about this information or Medigap pricing methods in general, you can contact us at 877.506.3378 or contact us online.

Medigap Plans – The Three Most Common Mistakes People Make

medigap plansMedigap plans are plans that fill in the gaps in Medicare Parts A & B. The plans are Federally-standardized and the way they work is relatively straight-forward, especially as compared to other types of insurance. However, it is important to make wise decisions when it comes to choosing and having a Medigap plan. There are three potentially critical mistakes that we often see when it comes to Medigap insurance.

  1. The first mistake, and this one is the most common, is neglecting to get a plan during your “open enrollment” period when you first turn 65 or go on Medicare for the first time. This mistake has its foundations in two common misconceptions – that you can get a plan any year during an annual open enrollment period or that you don’t have to “qualify” medically to get a plan. Both of these are inaccurate.First of all, your open enrollment is the 6 month period that coincides with when you sign up for Medicare Part B or turn 65. There is not an annual open enrollment period for Medigap plans, contrary to popular misconception. The annual open enrollment period that you hear referenced in advertising is the “annual election period” and it is for changing your Medicare Part D plan (or Medicare Advantage plan).The second misconception is that you do not have to qualify for a plan. I’ve heard many people say, especially since “Obamacare” passed, that they did not think that you had to qualify for insurance now. Unfortunately, that is not the case for supplemental types of insurance, like Medigap.So if you do not sign up for a plan when you are first eligible – many people think they are in good health now and will just wait until they “need” a plan – that can be a major mistake in regards to your future eligibility.
  2. The second significant mistake that we see made as far as Medicare supplement insurance is the way Medigap plans are chosen. Many people do not take the time to understand the standardization of plans and simply choose a plan because they have heard of it, it sounds good or a neighbor or family member has it.The reality is that over 90% of people are happy with their Medigap plans. The plans are very easy to use – they are standardized, pay claims automatically through the Medicare “crossover” system, and often cover everything that Medicare does not cover (Plan F). So, what’s not to like?However, just because your friend or neighbor is “happy”, that doesn’t necessarily mean they have the best plan. In fact, if they’ve had it for more than a year or two, they are probably paying too much for it. Rates often change annually and they can vary widely (have seen them range from $90/month to $300/month for the EXACT same coverage). Insurance companies “bank” on people keeping the same plan with Medigap plans, because of the overwhelming satisfaction people have with how their plan pays claims. However, it pays to understand the standardization both initially and later when you wish to re-evaluate – this way, you can compare based on price and company reputation (the two factors that matter) and make a wise and informed choice.
  3. The last of the three common mistakes people make with Medigap plans is the “set it and forget it” mistake, which is somewhat referenced in the paragraphs above. Medigap plans have rates that are consistently changing. There are new companies that enter the marketplace, market factors cause rate changes, and generally, rates just change over time and as you get older. The last thing you should do is make your one open enrollment decision and then never re-evaluate your plan and other options.
    What we generally recommend is comparing plans every two years. This way, you can find out how your plan compares rate-wise to other, equivalent-coverage options. If you can save money on another “like” plan and are in relatively good health, you can simply change to the new plan with a future effective. Then, once approved, you can cancel your old plan effective that same date. Keeping an eye on your rate to ensure you are not paying to much is definitely a wise thing to do when it comes to Medigap plans.

If you have any questions about this information or anything else regarding Medigap plans, you can contact us online at Secure Medicare Solutions or call us at 877.506.3378.

 

Frequently Asked Question of the Month – What are the Enrollment Periods Associated with Medicare?

Answering questions is a big part of my job. Many people on Medicare have the same general questions. In this section, I answer a question that I’ve recently been asked, for everyone’s benefit:

What are the enrollment periods for the various types of Medicare plans?

This is a very common question that can be easily answered; however, there is a lot of misinformation out about this (through other agents) and just through misconceptions. The easiest way to look at it is to break it down by type of plan:


Medicare Supplement (Medigap): There are NO set enrollment periods. You can enroll/disenroll at any time, as long as you have Medicare A & B.


Medicare Advantage:
Medicare Advantage has a set enrollment period of Nov. 15-Dec. 31 each year. Then, you can also make some changes between Jan. 1-Mar. 31 (some restrictions apply – each case is different).


Part D: Part D is the same as Medicare Advantage. The annual enrollment period is Nov. 15-Dec. 31 then there is an additional enrollment period Jan 1-Mar. 31. During that additional period, you can neither drop or add coverage, only switch Part D plans.

Medicare Supplement Insurance – Five Things 90% of Seniors Going on Medicare Don’t Know

Medicare Supplement insurance is something that everyone that goes on Medicare has to understand. Even if you have employer insurance or are electing to have only Medicare, you still must understand these supplements and the ramifications of having/not having one in order to make an informed decision on whether to get one, and if you are getting one, exactly which one to get. When looking at these supplemental plans, there are a few things to keep in mind that, from our thousands of conversations with individuals going on Medicare, we’ve realized that many seniors going on Medicare simply do not know. For your reference, we’ve listed a few of those things below:

  1. Medicare Supplement plans do not cover prescription drugs.
    Prescription drugs are covered under Medicare Part D NOT Medicare Supplement plans. Since supplemental plans are standardized (see #4 below), NO plans can offer drug coverage as a benefit to their supplemental plan.
  2. Medicare Advantage plans are NOT Medicare Supplement plans. The two are completely different.
    Many seniors make the small terminology mistake of calling Advantage plans “supplement” plans. This is simply not true. Advantage plans do not supplement Medicare; on the contrary, they replace Medicare and ALL benefits are provided through the private company. With a true supplement plan, you still have Medicare A & B, you just have a supplement to fill in some, or all, of the ‘gaps’ in Medicare.
  3. Medicare Part D (Rx coverage) has a “donut hole”. This applies to all plans and there is no way to avoid it completely.
    The Medicare Part D “donut hole” is one of the most troublesome (to many people) parts of Medicare, and unfortunately, there are no ways to avoid it completely. The best way to reduce your prescription drug costs are to ensure that you are on a Part D plan that most thoroughly covers your medications and re-evaluate this on an annual or bi-annual basis.
  4. Medicare Supplements are Federally-standardized and they are portable across state lines.
    All companies must offer the exact same standardized Medicare Supplement plans. There is no variation among these plans. A Plan ‘F’ with one company is the exact same as a Plan F with another. Also, all Medicare Supplements can be used anywhere in the U.S. – there are no restrictions or networks. As long as a doctor/hospital takes your primary coverage (Medicare), they will take your supplemental coverage.
  5. Medicare Supplement rates change over time. All plans go up in rate and there is no way to avoid that entirely.
    Regardless of what a company or agent may tell you, all Medicare Supplement plans do go up over time. There is simply no way to avoid this. They may go up at different time periods or using different methodology for increases, but overall, all companies are going to go up. And the best counsel is to have a plan that is the lowest cost possible when signing up (since plans are standardized).

Secure Medicare Solutions is a leading, independent brokerage that works exclusively with Medicare insurance. You can get a Medicare Supplement quote by visiting Medigap Quotes or Medicare Supplement Quotes. You can also reach us by phone, if you prefer, at 877.506.3378.

Medicare Supplement Rate Increases – Medicare Deductible/Coverage Changes Take Toll on Medigap Rates

Medicare Supplement rates have taken a hit in recent months for South Carolina, with several large companies announcing rate increases. Typically, your rate only increases on your policy anniversary date, so if a company announces rate increases to start on 5/1, for example, the increase affects your rate starting on your policy anniversary date (not on 5/1).

Although reasons for rate increases are complex – one of the main reasons is that most policies go up based on your age – this year’s increases are likely due to two major factors – Medicare changes and the economic climate. Medicare has increased the deductibles from 2009 to 2010, as well as making other changes that enlarge the ‘gaps’ that Medicare Supplemental plans cover. When the gaps that have to be covered are larger, the increased costs are passed on to the end-consumer. With the ongoing uncertainty as far as health care reform and its impact on future Medicare changes, this is something to keep an eye on in future years.

One final factor that is sure to be having an impact on Medicare Supplement companies is the recent influx of people from Medicare Advantage plans and employer coverage, moving over to Medicare Supplement plans. Because of the reduction in benefits/increase in costs with the Advantage plans for 2010, many of those people elected to go to supplemental plans. Also, because many people have lost their retirement health insurance benefits, they have had to elect supplement plans. In both situations, the majority of these people are in ‘Guaranteed Issue’ situations, which means the insurance companies are required to accept them despite any poor health conditions. Unhealthier people equals more claims, which in turn, equals higher rates.

If you are getting a rate increase and want to avoid it, chances are you can do so. Over 85% of people can save money on their Medicare supplement coverage by getting Medigap quotes and comparing supplement options to save money. Visit us at: http://www.securemedicaresolutions.com/medicare-insurance-quote.php to find out if you are in this 85% or the 15% that can’t.