Medicare Supplemental Insurance
How do you choose the best Medigap policy?
There are 12 standardized Medicare Supplemental insurance plans - A through L - also called Medigap plans. Each plan has different benefits. Plan A has the fewest and is the least expensive. Plan J has the most and is the most expensive.
(All 12 Medicare Supplemental insurance plans aren't available in every state. And, Massachusetts, Minnesota and Wisconsin have their own (with different names), but their benefits are similar to the "national" plans.)
Within each standardized Medicare Supplemental insurance plan, benefits are identical from one company to the next despite what a salesman may imply. But, premiums do vary significantly. So, how do you pick the best company for Medicare Supplemental insurance? And, when should you buy the insurance?
The best time to buy a Medicare supplemental insurance policy is during the first 6 months after you enroll in Medicare Part B. This is the only time when insurers have to accept you regardless of any preexisting health conditions.
Regarding Medicare Supplemental insurance premiums, there are 3 things you should know:
1. Paying a higher premium for a standardized Medicare Supplemental insurance plan will NOT get you anything more except perhaps a nice smile from the insurance agent. Not only are the benefits the same from one company to the next, their claim filing requirements are also identical.
Caution: Some companies imply that their plans are better because they don't require you to file claim forms. This leaves you with the false impression that other companies do. In truth, whether you do or don't have to file a claim form doesn't depend on the company. Instead, it depends on your doctor or other health care provider whether they file the forms for you, or they expect you to file the forms yourself.
2. Every January 1st, Medicare's benefits are adjusted to keep up with inflation. Because all Medigap benefits are coordinated with Medicare's, premiums for Medigap plans usually increase each year.
3. Three different methods used to set premiums for Medigap policies:
Attained age. This produces the lowest apparent premiums, particularly for people who just turned 65. Premiums increase as you get older, typically every year, three years, or five years. These increases are IN ADDITION TO the hikes caused by Medicare's annual benefit adjustments for inflation. Attained age premiums often reach their highest point when retirees can least afford them in their 80s and 90s.
Issue age. Premiums are based on your age at time of purchase. They will NOT increase as you grow older. But, like attained-age policies, they will increase due to Medicare's inflation adjustments.
Community-rated. Everyone in the same geographic area pays the same premium regardless of age.
Our recommendation: After picking the benefit combination (Plan A through L) that best suits your needs, buy the issue-age or community-rated Medigap policy with the lowest premium. Even though they are a bit more expensive at the start, your premiums won't go up every year just because you get older. (AARP's Medigap plans use a combination of issue-age and community-rated methods; their premiums don't increase as you get older, but their younger retirees do receive a discount.)
New in 2011
Starting next year you will have more time to choose. Medicare open enrollment will begin on October 15th, 2011 - December 7th, 2011. If you decide to make a change, the new coverage will start on January 1, 2012. Another thing to keep in mind, is that coverage and costs change yearly. Make sure to review your plan each year in September to see if you are in the best plan that suits your needs.
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