Medicare supplement policies, sold by private insurance companies, generally cover most of the gaps, (deductibles and cost sharing) that comes with basic Medicare Part A and Part B . And, they are standardized across most states so you know the benefits are the same regardless of where you live or which insurance carrier is offering, say, Plan G or Plan N. However, the cost can vary widely among insurers and locations. For instance, monthly premiums for the popular Plan G range from $90 to $476 for a 65-year-old. For Plan N, the range is $78 to $284. (Those two plans are the most popular, accounting for about 87% of Medicare supplement plans newly purchased. Regardless of which plan you pick, the premiums generally will rise each year — some more than others — and switching to a different plan may be difficult, depending on where you live and whether you’d need to undergo medical underwriting. What happens if you choose a plan strictly by the price, ignoring all other factors and later your health deteriorates, premiums were increased significantly, and now you are stuck with that carrier at least until your health improves and you can pass the underwriting requirements.
Here’s what you need to know:
More than 63 million people — the majority of whom are age 65 or older — are enrolled in Medicare. About 43% of beneficiaries choose to get Medicare delivered through an Advantage Plan (Part C), which offer out-of-pocket maximums and often include other benefits like dental and vision coverage. They also typically include Part D prescription drug coverage. The remaining beneficiaries decide to stick with basic Medicare and, often, pair it with a standalone Part D drug plan. In this situation, unless you have additional coverage elsewhere (i.e., employer-sponsored insurance or Medicaid), the option for mitigating your out-of-pocket costs is a Medicare supplement policy. These supplements will cover as much as 100% of medical costs or at least depending on which plan you choose will limit what you’ll pay out of pocket each year.
Reasons for sticking with basic Medicare instead of enrolling in an Advantage Plan differ from person to person. That can include wanting more freedom in choosing providers or needing coverage while away from home.
When you can enroll
When you first enroll in Part B, you generally get six months to purchase a Medigap plan without an insurance company examining your health history and deciding whether to insure you. After that, depending on the specifics of your situation and the state you live in, you may have to go through medical underwriting.
While a number of insurers offer Medigap policies, they can only offer policies from a list of about 10 standardized plans. Each is simply assigned a letter: A, B, C, D, F, G, K, L, M and N, although Plans C and F are not available to people who were newly eligible for Medicare on or after Jan. 1, 2020. Some states also offer high-deductible versions of Plan F and G.
If you know going in that you have a health condition that will likely prevent you from being able to switch plans down the road, ask your advisor for recommendations … for the long-term.
How they are priced
One difference in premiums can arise from how they are “rated.” If you know this, it may help you anticipate what may or may not happen to your premium down the road. Some policies are “community-rated,” which means everyone who buys a particular plan pays the same rate regardless of their age. Others are based on “attained age,” which means the rate you get at purchase is based on your age and will increase as you get older. Still others use “issue age”: The rate won’t change as you age, but it’s based on your age at the time you purchase the policy (so younger individuals may pay less).
Premiums also may go up from year to year due to other factors, such as inflation and insurer increases. It’s worth choosing an insurance company that has a good track record. Some carriers may come into the marketplace with low [premiums] to attract business, but the next year may raise rates by a significant amount once they have a bit of claims history. If you work with an agent, you should ask how many insurance companies they work with (or are “appointed with”), according to the American Association for Medicare Supplement Insurance. They may not recommend a particular insurer’s policies if they don’t get a commission to do so. Also ask if there’s a household discount. Many insurers offer this, the association said, and it can mean savings of 3% to 14%.
Medicare Support Services focus is education, helping you navigate the Medicare maze. Plus we represent all the Medicare companies using a wide range of broker partners as well as Medicare Insurance companies. Contact us with any questions you may have.