Our resident Medicare expert explains what's
behind the differences
When
you sign up for Medicare you have a choice between Original
Medicare (Parts A & B) and a Medicare
Advantage plan. If you go with Original Medicare, you’ll likely want
a private Medicare
Supplement policy as well, and with 10 standardized policies
available, shopping for one can be daunting.
In this
week’s column, Phil Moeller, the author of Get What’s Yours for Medicare:
Maximize Your Coverage, Minimize Your Costs and co-author
of the updated edition of How to Get
What’s Yours: The Revised Secrets to Maxing Out Your Social Security,
advises a reader confused by the choices.
Got a
question of your own about Medicare or Social Security? Send it to askphil@considerable.com.
Why would I pay a higher premium for a Medicare Supplement plan?
Renee: I am leaning toward original Medicare with a Medigap letter G
policy. I am confused about the different ways that insurance
companies price these policies. I have 59 choices for what are called “Attained
Age”rated policies, two choices for “Issue Age,” and only one choice for “No
age.”
Regarding
the Attained Age policies, if all these G plans are identical, why would anyone
pay a monthly premium of $229.41 at the high end rather than $90.42 at the
cheapest end? Yet that is the price range of these plans in my state. Even a
Medicare counselor at a nearby public agency had no idea.
How do
I choose if there are no rating systems for original Medicare? Do you have any
suggestions or resources? I do have your book Get What’s Yours for
Medicare.
Phil Moeller: By way of background for those who need it,
Medicare Supplement plans (also known as Medigap plans) help pay for claims for
covered medical services that are not fully paid for by Parts A and B of
Medicare (“Original” Medicare). Different letter plans provide varying degrees
of help.
The letter G plan that
Renee is considering provides complete protection. With the exception of the
annual deductible for Part B, which covers doctors, outpatient services, and
durable medical equipment, letter G holders will have no out-of-pocket expenses
for covered medical care beyond their premiums.
Medigap
plans, however, do not cover unpaid expenses in Part D drug plans. Medicare
Advantage plans have their own out-of-pocket ceilings for medical expenses. As
a result, people with Advantage plans do not need Medigap and, in fact, are not
allowed to purchase one.
Now,
onto Renee’s questions! The identical coverage requirement for each different
letter plan is a federal rule, but the actual policies are sold and regulated
at the state level, and insurers are free to set their own rates.
Looking for Medicare Plans?
The annual Medigap guide from the Centers for Medicare &
Medicaid Services (CMS) prominently states, “Cost is usually the only
difference between Medigap policies with the same letter sold by different
insurance companies.” Buying the least expensive plan thus is usually the best
idea. However, this decision can be affected by which type of pricing approach
a policy is offering.
Here
are the CMS guide’s explanations for these three approaches:
Community-rated (also called “no-age-rated”): Generally,
the same premium is charged to everyone who has the Medigap policy, regardless
of age or gender. Your premium isn’t based on your age. Premiums may go up
because of inflation and other factors but not because of your age.
Policies
are sold and regulated at the state level, and insurers are free to set their
own rates.
Issue-age-rated (also called “entry age-rated”): The
premium is based on the age you are when you buy (are “issued”) the Medigap
policy. Premiums are lower for people who buy at a younger age and won’t change
as you get older. Premiums may go up because of inflation and other factors but
not because of your age.
Attained-age-rated:The premium is based on
your current age (the age you’ve “attained”), so your premium goes up as you
get older. Premiums are low for younger buyers but go up as you get older. They
may be the least expensive at first, but they can eventually become the most
expensive. Premiums may also go up because of inflation and other factors.
As
Renee learned, it can be hard to find community-rated Medigap plans, although
that’s where I’d start.
It’s
also possible that an insurance company’s customer service performance could be
so poor that its policies should be avoided even if they’re the cheapest. Most
state insurance departments are not aggressive about monitoring consumer
service records, but checking with your state department is another step I’d
suggest before buying a Medigap plan.
https://considerable.com/medigap-medicare-supplement-plan-prices/
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