Understanding Medicare Supplement Plans
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Medicare Supplement Plans
Welcome to Medicare! If you have already turned 65 or have a 65th birthday coming up, you’ve probably noticed a sudden increase in your mail telling you about your Medicare options and describing things like Medicare supplement plans and Medicare Part D plans. For many, the whole topic can seem a little overwhelming, but understanding how Medicare works and what your benefits are is important to make sure that you end up with the best Medicare supplement plan for you.
So what are the basics of Medicare? Medicare is a federal healthcare program for people age 65 and older. There are several parts to Medicare, including Part A, Part B, Medicare supplement plans, MA plans and Part D plans. Part A covers hospital stays, inpatient procedures and care in a skilled-nursing facility. Hospice care and some in-home health care are also covered by Part A. Part B is medical insurance that covers care from healthcare providers, outpatient procedures, and some other things. Many preventative services such as mammogram and colonoscopy are covered by Part B.
Medicare Part A and Part B cover most but not all of the medical expenses you might incur. For that reason, there are Medicare supplemental plans that are sold by private insurance companies. These policies are sometimes called Medigap plans because they fill in the “gaps” in Medicare coverage. There are also Part D plans that cover prescription drugs. More recently, plans called MA have been made available that offer an alternative to Original Medicare. With an MA plan, a private insurance company provides the benefits you would receive from Part A and Part B, along with additional benefits such as prescription drug coverage.
Choosing a Medicare Supplement Plan
Part A and Part B will not cover 100% of your health expenses, and you will pay something for any care you receive in the form of deductibles, co-pays, and co-insurances. For example, if have Part A and Part B only and you are admitted to the hospital, Medicare will cover most of your costs, but you will pay a deductible of $1,316 in 2017. More importantly, that deductible applies to a 60 day benefit period, so you could pay it more than once in a year if you had multiple hospital stays.
Medicare supplemental plans cover costs such as the Part A deductible, as well as co-pays and co-insurances related to Part B services. There are ten Medicare supplemental plans currently available — A, B, C, D, F, G, K, L, M, N, and a high-deductible version of Medigap Plan F — each offering a different combination of benefits. The Medigap plans are sold by private insurance companies and are standardized, meaning the benefits of each type of Medicare plan do not vary from company to company, regardless of the cost.
The flexibility and transportability of Medicare supplement plans are one of the things that make them attractive to many seniors. For retirees hoping to spend their hard-earned retirement traveling the country – or even venturing abroad – Medicare supplemental plans provide the ideal solution to insurance coverage concerns. These Medigap plans are accepted by any doctor or hospital anywhere in the country that accepts Medicare, and there is no referral required. For snowbirds who summer in the north but head south or west in the winter, there are no worries about being “out of network,” because Medigap plans have no networks to worry about.
There are two other ways in which Medicare supplement insurance offers seniors peace of mind. The plans renew automatically, and the companies are prevented from canceling your policy as long as you pay your premiums. So, as long as you are happy with your Medigap plan, you can forget about your insurance and move onto things you’d rather be doing. And, if you’re not happy, there is a 30-day money-back guarantee in most states, which allows you to get a quote on and choose a different Medicare supplemental plan.
Medicare supplement insurance is extremely popular and customer satisfaction is very high. According to the America’s Health Insurance Plans (AHIP) 2014 Medicare Enrollee Survey, 94% of Medicare beneficiaries across all plans and providers are satisfied with the coverage provided by their Medicare supplemental plan and 91% would recommend Medigap plans to a friend or relative turning 65. Doctors and hospitals like the ease of working with supplemental plans and appreciate the fact that they have been very stable, with very few, if any, changes to coverage from year to year.
The Most Popular Medicare Supplement Plans
There are 11 Medicare supplemental plans available, each offering a different combination of benefits. Three of these plans, described below, offer compelling combinations of benefits that have made them the favorites of many seniors.
Medicare Supplement Plan F
Medicare supplement plan F is by far the most popular of the Medicare supplemental plans, perhaps because it is the most comprehensive. According to a 2015 report by AHIP, 57% of the Medigap policies purchased are F plans. With a Medicare plan F, you have virtually complete coverage, with no co-pays, no deductibles and no coinsurance costs associated with any medical service whatsoever. From a visit to the doctor for a flu shot to a stay in the hospital, you will likely have no bills coming in if you have a Medicare supplement plan F. In each state in the country, Medicare supplement plan F is offered by multiple providers. The rates vary from one company to another, but the benefits of the plan are standardized. So, once you pay your monthly premium, you can relax, knowing that, no matter what happens, you are covered. If you are looking for a plan with soup to nuts coverage that will require little attention, a Medicare plan F plan is worth a look.
Medicare Supplement Plan G
Medicare supplement plan G is a newer plan than Medicare plan F, but compares very favorably, offering similar benefits. In fact, the only difference in coverage between the two is that Medicare plan G does not cover the Part B deductible ($183 in 2017.) Other than that, however, the benefits are identical, meaning that there are no co-pays or co-insurances associated with doctor visits and no deductible for hospitalization. According to CSG Actuarial, Medicare supplement plan G has grown in popularity over the past few years and is expected to continue gaining ground. The primary reason for this growth is that the rates for some Medicare plan G plans are low enough that the savings over a Medicare plan F plan will cover the cost of the Part B deductible.
Medicare Supplement Plan N
Introduced in 2008, Medicare supplement plan N offers another interesting alternative to Medicare plan F. In exchange for lower rates, Medicare plan N has increased cost-sharing for some of the benefits. A key feature of plan N is that you pay up to a $20 copay for office visits and up to $50 for emergency room visits. Aside from that, the plan pays 100% of your Part B costs. For many people who are just aging into Medicare, this type of plan is similar to employer plans that often have co-pays associated with services.
Another difference from Plan F is that Medicare supplement plan N does not cover excess charges. That means that, if a healthcare provider you see does not accept Medicare assignment, they could charge you up to 15% more than what Medicare will reimburse them for. Excess charges are not permitted in some states, but if they are allowed where you live, you can avoid extra costs by selecting doctors who accept Medicare assignment.
Medicare Part D Still Needed
While the best Medicare supplement plans provide very comprehensive medical coverage, one thing that they don’t cover is prescription drugs. For that, a Part D plan is needed. Like the Medicare supplement plans, Part D plans are sold by private insurance companies. They all have a monthly premium, and they all cover a wide range of medications. The enrollment period for the drug plans is the same seven-month period around your 65th birthday as for Parts A and B.
Enrolling in a Part D plan is easy and can even be done online. It is important to enroll during your initial enrollment period for a couple of reasons. First, if you miss your initial enrollment, you will have to wait for the annual open enrollment period to enroll, and your policy won’t take effect until January of the following year. In the meantime, you will have to payout of pocket for any prescriptions you may have. The second reason is that you will be charged a penalty for failing to enroll during the initial enrollment period if you try and sign up for a plan later. You will still be able to enroll during open enrollment, but the penalty charge will be added forever to the monthly rate of the plan you choose. Medicare provides an online tool where you can review your options, compare plans and obtain quotes for Part D plans.
Medicare Enrollment Periods
One thing that is understandably confusing to many Medicare beneficiaries is the timing of the enrollment process. When you turn 65, you have an Initial Enrollment Period (IEP) for Medicare that begins three months before the month of your 65th birthday and continues until three months after the month of your 65th birthday. If you are collecting Social Security, you will be automatically enrolled in Part A and Part B and your benefits will begin on the first day of the month you turn 65. If you are not yet receiving Social Security, you will need to contact the Social Security Administration to enroll in Medicare during your IEP. It is important to enroll in the three months before your birthday so that your benefits are not delayed. For most people, Part A is free but there is a monthly premium for Part B. Those with high incomes pay an additional premium for Part B while low-income individuals may have their Part B premium waived if they are eligible for assistance. Medicare is also available to those under 65 who are disabled.
Seniors who are still working are often confused about when to enroll in Medicare. Suppose you plan to work until you are 66 and have insurance through your employer. In that case, you should contact Social Security and tell them that you want your Part A to start when you turn 65 (because it’s free), but that you want to defer your Part B. That way, you won’t be paying the Part B premium for insurance you don’t need. When you do decide retire, you can contact Social Security again and let them know when you want your Part B coverage to begin.
Once you do enroll in Medicare Part B, you six months to purchase a Medicare supplement plan. During this time you have what is referred to as “guaranteed issue rights.” When you have guaranteed issue rights, insurers must sell you a Medigap plan regardless of any pre-existing conditions you may have, and they cannot charge you more because of your health problems. It is important to know when you have guaranteed issue rights for Medicare supplement insurance and when you do not. Besides having guaranteed issue rights when you first turn 65, you also have guaranteed issue rights when you have other insurance that is ending, such as losing employer coverage because of retirement. You also have guaranteed issue rights to purchase Medicare supplement insurance if you have an MA plan and either move out of the coverage area or are within your trial period and want to change back to original Medicare. Of course, if you are enrolled in a Medigap plan that goes out of business or does something wrong, you will also have the opportunity to purchase a new policy with no restrictions.
One thing to keep in mind about guaranteed issue rights is that, even if you are outside of one of these periods, that doesn’t mean that you can’t purchase a Medigap plan. While there are penalties associated with enrolling in Part B or Part D outside of your initial enrollment period, that isn’t the case with Medicare supplemental plans. Let’s say that five years ago when you turned 65, you were healthy, rarely went to the doctor and just didn’t see the point in paying each month for supplemental insurance you probably wouldn’t use. Now, as you turn 70, you’re still healthy but starting to think about the future a little more. You can contact insurance companies or work with an agent to review your options for coverage and it’s quite possible that you will be able to purchase a comprehensive policy. The insurance company may inquire about your health at this point, but they can’t charge you more.
Where to Purchase Medicare Supplement Plans
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In every state, there are a number insurance companies that sell Medicare supplement policies, but not all companies are created equal. When you are making a decision about something as important as your healthcare, you want to think carefully about the company you choose to do business with. Working with a well-known, national company such as the ones below provides some important benefits.
These insurers are household names, having been around long enough to establish stellar reputations around the country. They offer all of the Medigap plans, and their size allows them to offer very competitive rates. Another benefit of working with a large, well-established insurance company is the resources that they bring to the table, including state of the art technology, online resources, fast quotes and high-quality customer service. If you want the best Medicare supplement plan you can get, it makes sense to work with a top company. Working with a licensed insurance agent, you can review the offerings and compare the rates from these companies to get a clear picture of your choices.
- Paying for a Medicare Supplement Plan
Getting Medicare supplement insurance with good coverage is important, but the cost is also a consideration. When you start shopping for a Medigap policy, one thing that you will notice is that, while the policies are standardized, the prices are not. The costs of Medigap Plan F, for example, vary widely, so it is important to remember that the policies themselves are identical. You do not get anything more for paying more.
Let’s take a look at what Martha, a 65-year-old retiree living in Dallas, Texas would pay each month for Medigap plan F and Medigap Plan G from three top insurance providers:
Plan F Plan G
Company A $126 $102
Company B $142 $112
Company C $158 $114
As the chart shows, there are big differences in cost from one company to the next. In Texas, Martha’s husband, Harry, who is the same age, could be charged higher rates by these same companies, for the same policies. Because Martha and Harry are non-smokers, they are getting lower rates than smokers would pay.
Plan F Plan G
Company A $143 $116
Company B $164 $129
Company C $177 $128
*quotes are not endorsed or sponsored by any insurance company; we provide information based on our professional opinion
When you are reviewing plans with a company representative or an agent, be sure to ask about ways in which you can save on your policy. Some companies offer discounts for couples and first-time customers while others provide free or discounted gym memberships. Inquiring about the plan’s history of rate increases will also provide insight into potential cost increases in the future.
Finding the best Medicare supplement plan isn’t a matter of luck, it requires some effort on your part. But instead of spending your valuable time getting quotes from a lengthy list of insurance companies and spending hours online trying to compare prices, why not work with an experienced, licensed insurance agent? An agent has all of the online resources necessary to compare quotes, obtain reviews and find the best Medicare supplement plan for you.