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.
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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.
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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.
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.