Medicare Supplement Insurance

Choosing a Medicare Supplement Policy

The following information was written to help Medicare recipients understand how to shop for a Medicare Supplement Insurance (Also known as Medigap). 

A Medicare Supplement policy is health insurance sold by insurance companies to help cover some of the gap left by regular Medicare parts A & B.  These policies do not work with any other coverage including retiree plans from companies or unions, VA benefits, TRICARE, or Medicare Advantage plans.  Medicare supplement policies help pay the copayments, deductibles, and coinsurance, otherwise left open by regular Medicare.  Some Medigap polices even cover benefits that are not covered by original Medicare.

Before you learn how to shop for a Medicare supplement, however, you should have a good understanding of how Medicare parts A & B work.  If you already have a good understanding of regular “original” Medicare works you can just skip the next part.

Quick Medicare Overview

Original Medicare is essentially a national healthcare program for people age 65 or older or for folks under age 65 with certain disabilities and/or with ESRD, or end-stage renal disease.

Although Original Medicare covers quite a bit there are many gaps (deductibles, coinsurance, copays, etc) that it doesn’t cover.

Brief Overview of Medicare Parts A & B

Medicare Part A is also known as “Hospital Insurance” and helps cover inpatient care in hospitals as well as skilled nursing facility, hospice, and home health care.

Medicare Part B is also known as “Medical Insurance” and helps cover various outpatient services including doctor’s visits as well as some preventive services

Medicare Part C is also known as “Medicare Advantage”, which can come in various network options including PPO, HMO, and PFFS, is essentially privatized Medicare in which your Medicare benefits are provided by the private insurance company and your benefits typically have to be received through the network of doctors that will take that is “in-network” for that particular insurance company.  In the case of “PFFS” plans you can go to any doctor you wish that will agree to the terms of the Medicare Advantage insurance company.  Many Medicare recipients have come to realize that a much smaller number of doctors are typically willing to accept these plans than regular Medicare.  These plans will often cost less than  Medicare supplements and will also often include your part D drug plan within them and possibly some additional benefits.  You will still have to pay your part B premium and it’s important to understand that you are no longer receiving your benefits from Original Medicare but from the private insurance company.  If you get a Medicare Advantage plan you should not buy a Medicare supplement as a Medicare supplement will only supplement original and not the private Medicare Advantage plan.

Medicare Part D is also known as Medicare Prescription Drug Coverage and helps Medicare recipients cover the cost of medications.  This program is also run through private insurance companies and can be somewhat confusing as to how to choose the right plan for your situation.  Luckily, Medicare provides a tool called the “Medicare Prescription Drug Plan Finder” that allows you to enter your drugs in and will tell you which plan should save you the most money within this year.  It’s important to re-evaluate your plan choice each year because, even though your drugs might not change, the drug plan’s formulary and costs can change fairly dramatically each year and another drug plan may make more sense for the next year.  The time to re-evaluate, and switch plans if necessary, is between November 15th and December 31st of each year.  You can find the Medicare Prescription Drug Plan Finder at this webpage: http://www.medicare.gov/MPDPF/Public/Include/DataSection/Questions/GeneralQuestions.asp

What is a Medicare Supplement Policy?

A Medicare supplement insurance policy, also known as Medigap, is an insurance policy that helps cover some or all of the coinsurance, copay, deductible, and excess charges gaps in regular Medicare part A & B.  It does not help cover any gaps in Medicare part C or Medicare part D.  Some Medicare supplement plans also have features that will cover costs of certain services that are not part of original Medicare – like At-home recovery, which provides limited benefits for custodial care at your home if recovering from a surgery or medical procedure, and/or Preventive Services not otherwise covered by Medicare, which provides a small benefit to cover preventive services that might not be covered by Medicare.  Medicare does cover preventive services pretty well, though.  You can read more about what Medicare covers for Preventive services here:  http://www.medicare.gov/Publications/Pubs/pdf/10110.pdf

Shopping for a Medicare Supplement Policy (Medigap)

Shopping for Medicare supplement insurance plans, although standardized to a large extent, can be a confusing and tiring process.  There are some things that are important to know before you start your search:

• You have to have Medicare part A &B
• You have to pay your part B premium (unless Medicaid pays it for you)
• You have to pay a premium to the insurance company for the Medicare supplement
• Your Medicare supplement will only cover you.  If you have a spouse he/she will have to get a separate one.
• Medicare supplement insurance policies can be purchased from any insurance company licensed to do business in your state and you will typically have plenty of companies to choose from
• Medicare supplement plans are guaranteed renewable meaning that your insurance company cannot cancel your policy for any reason other than you not making your premium payment
• Medicare supplement policies will not cover drug benefits except sometimes in a clinical or hospital setting
• Medicare supplement policies are standardized to a large extent and come in various plan designs with letter designations( ex. Plan F, Plan G, Plan J, etc)

Regardless of your situation there are several things that will not change about your Medicare supplement insurance options.  One of those is the Medicare supplement plans that are currently available to you.  The following is the current grid of available plans (this is a snapshot of page 11 of the Medicare Guide “2009 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare”):

Also, there are certain times when you will be guaranteed issue for a Medicare supplement.  When you are in one of these guaranteed issue periods you are ensured that your medical conditions will not need to be disclosed in order to qualify for a Medicare supplement plan. 

The most obvious time in which you are guaranteed issue for a Medicare supplement is when you first join Medicare part B.  You have 6 months after joining to also join a Medicare supplement with no medical underwriting. 

The following chart (taken from “Choosing a Medigap Policy”) shows the various situations that allow you to be in a guaranteed issue when you are outside of 6 months from initially joining Medicare:

If you don’t fit into any of the above scenarios then you will have to go through a relatively lenient medical underwriting to qualify for your Medicare supplement.  This typically involves answering a series of medical history questions and sometimes answering medical questions from a Medicare supplement underwriter via the phone.  The companies will also sometimes check medical records with your consent.  These companies will not come out to draw blood or take urine samples and the like.

Based on the Medicare supplement insurance underwriters findings you can typically either receive your policy at the rate stated initially by the insurance agent or you could get a slightly elevated rate based on health conditions or you can be denied coverage.  It’s important to understand that each Medicare supplement insurance company has different underwriting guidelines.  So, something that may be considered a declinable condition by one insurance company might be acceptable to another insurance company.  This is another reason to work with a GoMedigap agent as we have a good understanding of the various companies’ medical underwriting guidelines and can help you try to avoid declined applications.

Why Such Big Differences in Pricing for the Same Medicare Supplement from Different Companies?

There are a few things that can factor into your Medicare supplement premiums including age, zip code, tobacco usage, gender. 

There are 3 ways that Medicare supplement companies can set their pricing:

Attained Age Pricing – This seems to be the most popular method of setting pricing.  Essentially, the older you get the more expensive the premium will get.  However, age isn’t the only factor in your rate increase.  Companies will use age and medical inflation (the increase in cost of medical treatments) to factor each year’s annual premium increase percentage.

Issue Age Pricing – This form of pricing is not very common.  There are a few companies that offer this pricing model in which you set your rates at a certain age and will always get rates as though you were the age at which you took the policy.  These policies sound ideal; however, they can be a bit deceptive.  Although they do not use increased age as a factor in their annual rate increases they can still use medical inflation to increase rates each year.  To compensate for the lack of an increase in age they can increase the amount of their medical inflation increase.  Also, these policies tend to be more expensive to begin with then an age-attained plan.

Community Rating – This pricing model provides the same rate for a particular plan for everyone in a certain area without consideration of their age, gender, or whether they use tobacco.  This type of pricing tends to be high if your younger and don’t use tobacco but may be good if your older or use tobacco.

What’s your situation?

Typically, we find our clients fit one of four general categories when shopping for a Medicare supplement.  Please select the category that best describes your situation to find additional information on what to search for:

I Am New to Medicare and Am Shopping for a Medicare Supplement for the First Time
I Got Another Medicare Supplement Rate Increase and am Shopping for Better Rates
I Have a Medicare Advantage Plan and Want to Consider Switching to a Medicare Supplement
I Have Had Medicare Only For More Than 6 Months and Would Like to Now Get a Medicare Supplement

Situation: New to Medicare

When you’re just getting on Medicare you have a lot of rights & privileges that make it fairly easy for you to ensure you get the best deal on your Medicare supplement.  You are in s guaranteed issue situation which allows you to go with whatever plan and with whatever insurance company is going to give you the best deal.

You will first have to make a fundamental decision on how to receive your Medicare benefits.  You can get them through Original Medicare or you can choose one of the privatized Medicare Advantage plans.

Original Medicare allows you to see a greater number of doctors and medical facilities and is pretty black and white about what they will cover and what they won’t for Medicare supplements. 

Medicare Advantage plans typically have a more restrictive physicians and medical facilities network and, although they have outlines of coverage, it has been proven that they will sometimes make decisions on medical bills based on whether they feel a particular treatment was necessary.  Medicare Advantage can also include some “bells & whistles” including your Part D drug plan and sometimes dental, vision, or even gym memberships.

So, in summary, you might look at Medicare supplements at being easier to use in that you have a much wider choice of doctors and medical facilities and typically are not surprised by Medicare’s claim decisions.  You can look at Medicare Advantage plans at being lower cost plans that can provide additional benefits above and beyond what Original Medicare will provide but that have a smaller doctor’s network that is frequently changing and that may surprise you with medical claims denials due to the insurance company’s decision that a particular procedure or treatment was deemed unnecessary.

If you decide to stick with Original Medicare you will still need to get a Medicare supplement policy and a Part D drug plan.  This is where a GoMedigap agent can be of most help.

Medicare supplements are standardized with plan letter designations from A-L.  However, typically only 3-4 of these plans will make most sense for most people.  For instance, plan F is currently the most popular plan on the market.  This is probably because plan F covers all of the deductible, coinsurance, co-pay, and excess charge gaps in Medicare.  The great thing about the standardization of these plans is that once you decide which plan you want to go with you can then price shop pretty comfortably.   The standardization of these Medicare supplement plans includes:

• Benefits – a plan letter F from one Medicare supplement insurance company will work identically to a plan F from any other Medicare supplement insurance company in regards to what it will cover.
• Claims processing – claims will be processed electronically from all companies.  This is mandatory per Medicare.  So, you don’t have to worry if it’s easier to work with one company’s coverage versus another.
• Claims decisions – the Medicare supplement insurance companies cannot make decisions on claims.  Medicare makes the decision on whether a claim.  So, unlike under 65 health insurance coverage you don’t have to worry about how one company handles claims versus another.
• Doctor’s Network – any doctor that takes Medicare will take any company’s Medicare supplement insurance.  So, you don’t have to worry about whether one Medicare supplement insurance company allows you to see more doctors or would be better received by doctor’s than another.

So, once you figure out all of the above information it’s time to shop.  You can take a couple of different approaches here.  You can do all the research yourself on which companies offer which plans and then call each company and get their pricing.  If you’re analytical and have some time on your hands you can look at this as a challenge.  You can also apply directly with a lot of these insurance companies and never have to talk with an agent.  What’s the downside to this?  There really is only a couple of areas that might hurt you if you decide not to work with an agent:

1. There may have been a company or a few you didn’t contact that had better rates for the plan you decided to go with.  Your GoMedigap agents work with all the major providers and can let you know within a 5-10 minutes conversation which companies will offer the best deals.  Also, if you are not in a guaranteed issue situation, your GoMedigap agent can help you understand which company would be best for your medical history to try to avoid a decline for coverage.
2. As you rate increases each year your GoMedigap agent can help you re-evaluate your coverage to determine if another company might provide a better rate.  This can help you save hundreds or thousands of dollars over your lifetime.

Situation: I Have a Medicare Supplement but Shopping For Better Rates

This is a pretty straight-forward situation and comprises about half of our new clients.  We have found that many Medicare supplement insurance agents will sell a Medicare supplement to a client and not check back with them annually to re-evaluate options.  Over the years the client forgets who their Medicare supplement agent was and they start researching other plans after their rates go up and many of them find GoMedigap.

We can help you look at other Medicare supplement insurance companies that can provide the same plan you currently have and help you find the best rate available to you.  At this point, we’re more than likely going to have to answer the medical questions and qualify for coverage.  Your GoMedigap agent can help you understand which companies would be most likely to cover you based on any medical conditions and get you the best combination of good pricing and coverage.

Of course, occasionally we run across situations in which the Medicare recipient is in the best plan available to them.  This is typically because the client has a health condition that would exclude them from switching to another company … or at least another company that would offer a lower price.
When our clients switch from a particular Medicare supplement plan, let’s say plan F, with one company to a Medicare supplement plan F from another company we tell them they are typically going to see 3 main changes:

1. They’re going to pay less for their plan
2. They’re going to pay it to another Medicare supplement insurance company
3. They will have a different Medicare supplement insurance company’s logo on their card

Other than the above they:

• Can continue to see the same doctors
• Claims will continue to be paid electronically
• Medicare will still make the claims decisions – not the Medicare supplement insurance company

Switching to another company is a pretty easy process and the application typically only takes about 10 minutes to complete and your GoMedigap agent can handle most of it for you over the phone.

There’s nothing to lose by switching if you can save some money and get the exact same benefits you had before.

Situation: I Want Off Medicare Advantage and Back to Original Medicare & a Medicare Supplement

Our agency used to sell Medicare Advantage plans.  When they first came out we were told they were the best thing to happen to Medicare recipients since well … Medicare.  The insurance companies called them “all-in-one” plans and their name “Medicare Advantage” plans seem to promise a lot.  We sold quite a few of these plans and our clients were fairly happy with them for the first year or two.

What we started to notice is that the premiums were creeping up each year and the medical benefits were being reduced and the accompanying drug plans were becoming more restrictive each year.  We started to notice that although it might not be too difficult to find a primary care physician that it was becoming increasingly difficult to find a specialist and that some of the premier medical facilities had quit taking Medicare Advantage plans.  We also noticed that some of our clients that had medical procedures or treatment that we felt would have normally been covered by Medicare without any push back were getting claims denials by some of the private Medicare Advantage insurance companies.

What we’ve come to realize is that these Medicare Advantage plans can only continue to exist as long as the providing insurance company remains profitable.  Compared to Original Medicare we didn’t feel that this was the ideal situation for our clients.  Also, after dealing with all of the related customer service issues and having to help clients resolve bad issues we decided that it made sense to not offer these plans any longer.

So, if you’re reading this section and want to switch from a Medicare Advantage plan you have probably experienced some of the same issues that we and our Medicare Advantage clients went through.

Situation: On Medicare A & B Only for More than 6 Months and Now Want a Medigap Policy

This situation is not all that common because most folks that have stayed on just Medicare parts A & B have done so either because they didn’t feel they needed a Medicare supplement or felt they couldn’t afford one.  In both these situations we often find that when they are ready to go ahead and get a Medicare supplement they have a medical condition or conditions that would cause them to be declined by most or all Medicare supplement companies.

There are some folks who have been blessed with good health that just didn’t want to spend the money for a Medicare supplement if they didn’t feel they would use it and only decide to now strongly consider purchasing a Medicare supplement because a close friend or relative just went through a major medical event and either didn’t have a Medicare supplement and had to pay out a lot of money for their treatment or they did and were very happy they didn’t have to pay a lot of money for their treatment when they otherwise would have.

Whatever the case, in this situation, you will have to go through medical underwriting to qualify for your Medicare supplement at this point.  The easiest thing for you to do is contact a GoMedigap agent to help them understand your options and guide you through the various plan options. Pricing, and underwriting requirements.

Medicare Supplements are not One Size Fits All

Although certain Medicare supplement insurance companies sell more policies than others and certain plans are more popular than others, there is not one Medicare supplement choice that makes sense for everyone.  There a lot of considerations for your Medicare supplement shopping criteria including medical underwriting guidelines, financial stability of Medicare supplement insurance companies, and the rate increase history of the Medicare supplement companies. So, to ensure you get the best deal on a Medicare supplement, call GoMedigap and speak with one of the caring agents that will be able to understand your situation and preferences, educate you on your Medicare supplement options, and make recommendations for your best Medicare supplement option as though you were a member of their own family.