Did you know that you can shop for a Medicare Supplement/Medigap policy any time of the year and possibly get a better price?
You might be thinking, “But my policy with XYZ company has paid for everything and I’ve never had a problem.” Yes, and that’s exactly how ALL Medigap policies work!
Medigap policies are standardized and must follow federal and state laws designed to protect you. These plans are named by letters, such as F, G or N. All plans with the same letter offer the same basic benefits, no matter which company you buy the policy from. The only difference is price.
For example, when you have a Medigap Plan G, your claim goes to Medicare, Medicare determines if it’s a covered service and what they’ll pay. Medicare pays 80% of the approved amount, and your Medigap plan pays 20%, after you’ve paid your $257 annual deductible. That’s it. The insurance company doesn’t decide what’s covered, Medicare does.
The cost of Medigap policies can vary widely depending on the insurance company, the plan, and where you live. So, should you just choose the cheapest option? Not necessarily.
When shopping for a Medigap policy, work with an experienced and independent agent to consider the company’s
-number of years they’ve offered this plan in your state
-number of lives on this plan
-history of price increases
-loss ratio. The minimum required loss ratio for Medicare Supplement is 65%, but you’ll see most companies in the 75-95% range.
Guaranteed Issue
In some cases, an insurance company must sell you a Medigap, even if you have health issues. You’re guaranteed the right to buy a Medigap policy when:
- you’re in your Medigap Open Enrollment Period (Turning 65)
- you’re Medicare eligible and you’ve lost group health coverage
- if your Medicare Advantage plan leaves the market
- if you qualified for Medicare Advantage “Trial Right” and wish to return to Original Medicare
If you buy a Medigap policy when you have a guaranteed issue right, the insurance company must cover all your pre-existing health conditions without a waiting period.
Switching Medigap Policies
Outside of these periods, you can still apply to change Medigap policies, but you’ll go through underwriting and could be denied based on your health history. So why do people switch? Usually, to save money.
A common misconception is that people think they got a price increase because they used their plan. Price hikes are typically due to rising costs and aging policyholders in the company’s risk pool.
The Leading Medigap Plans and their differences According to KFF.org*
Plan F has the second largest share of Medigap enrollment, covering 36% of Medigap policyholders. Plan F can no longer be sold to new beneficiaries who turned 65 on or after January 1, 2020 due to a change in law (Plan C also is no longer available as of that date because it also covered the Part B deductible)
In 2025, the Part B deductible is $257. Most folks on Plan F are going to be paying far more than $257 annually in premiums to avoid paying that deductible. So, if you think you can pass underwriting, it’s a good idea to see if you can save money with Plan G or Plan N. “But my policy with XYZ company has paid for everything and I’ve never had a problem.” Yes, and that’s exactly how ALL Medigap policies work! (Have you heard this somewhere before?) The only difference is price.
Plan G is the most popular Medigap policy, accounting for 39% of all policyholders, Plan G is the most comprehensive policy available to new policyholders, covering the Part A deductible and all cost sharing for Part A and B covered services, but not the Part B deductible.
Plan N has the third largest share of Medigap enrollment, but at a much smaller percentage, only 10%. Plan N is similar to Plan G, except that there are Part B copayments for some office visits and some emergency room visits, and it does not cover Part B excess charges.
If the amount a doctor or other health care provider is legally permitted to charge is higher than the Medicare approved amount, the difference is called the excess charge. The excess charges are currently capped at $20 for a doctor visit and $50 for a visit to the emergency room. Certain services may result in higher out-of-pocket costs. Plan N would also be subject to excess charges from providers who do not accept Medicare. This means you may face an additional charge of up to 15% more than the Medicare-approved charge. Depending on what part of the country you live in, Oncologists, Endocrinologists, Pain Management Docs, Ophthalmologists, Psychotherapists, and Physical Therapy are all providers that tend to charge the extra 15%, which can be many thousands of dollars annually.
Another Option: Innovative Plan G
A popular alternative for those who want to keep their lifetime of premium increases in check is the Innovative Plan G. This plan is currently offered by only one company. It acts like a High-Deductible Plan G the first 3 calendar years with lower premiums and then converts to a Plan G at the 1st of the 3rd calendar year. But all future price increases are based on that lower rate. As an added safety measure, the Deductible Discount Rider can be removed from the policy at any time prior to the deductible elimination date. (Effective the 1st of the following month.) At that time the benefits will be that of Plan G at the current Plan G premium.
Thinking of Shopping for a New Policy?
It’s smart to check prices if:
-You’re on a Plan F and in good health
-Your current insurer has had large price increases
-You want to avoid being in a closed risk pool
Just keep in mind that underwriting applies unless you qualify for guaranteed issue. The carrier will run a prescription drug and health data check before approving your application. You can view sample health questions at www.hiattagency.com
A Word of Caution
Recently, two companies, Ace and Allstate, announced that they are exiting the Medigap market. If you’re already with either of them, you can keep your policy, but your risk pool is now closed. This could mean higher rate increases down the road.
*Author’s Note: None of my clients are on either of those plans because I had concerns with these companies being too new to the Medigap market. I recommend waiting until a carrier has at least 5 years of experience offering Medigap in your state.
Mary Hiatt is a Retirement & Insurance Advisor and President of Mary the Medicare Lady (A non-government entity.) She is Certified in Long Term Care Programs, Policies, & Partnerships and Annuities. She offers Educational Workshops on Medicare, Long Term Care and more at no charge. She helps retirees convert their 401Ks and IRA’s into guaranteed income streams as well as helping clients get Medicaid with eligible spend-down plans and Funeral Expense Trusts. Not connected with or endorsed by the U.S. government or the federal Medicare program. Medicare Supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program. See www.hiattagency.com or contact licensed independent agent mary [at] hiattagency [dot] com or call or text 402 672 9449 for more information.