One of the questions a new Medicare beneficiary is likely to ask is, “Should I get a Medigap Plan F or Plan G?”
The answer, if this were 2014, would likely have been Plan F; the answer today, Plan G.
Once enrolled in Medicare Part A and Part B, a person has hospital and medical insurance. However, Part A and Part B come with a slew of out-of-pocket costs. For example, in 2019, there’s a $1,364 hospital deductible, a $167.50 per day copayment for days 21-100 in a skilled nursing facility, and a 20% Part B coinsurance (once the deductible is met). And, most important, there is no maximum limit on out-of-pocket costs. A person stricken with cancer, for example, would be responsible for 20% of every radiation or chemotherapy treatment.
To control these costs, a Medicare beneficiary can purchase a Medigap policy, officially known as “Medicare supplement insurance.” This is coverage sold by private insurance companies to help pay bills that Medicare Part A and Part B do not cover.
In 47 states, Medigap policies are standardized. There are 10 plans, each labeled with a letter. Each letter-plan represents a different package of benefits and cost sharing. For example, Plan A is very basic, covering 100% of four benefits. Plans K and L offer coverage of six benefits. However, for five of the six benefits, the individual must pay a portion of the cost (50% or 25%).
Plan F has been called the “Cadillac of Medigap plans.” It covers the maximum allowed for all nine benefits. Pay the premium and there’s first dollar coverage, which means the plan pays from day one. The beneficiary faces no out-of-pocket costs when using healthcare providers who will accept Medicare patients. According to AHIP, in 2016, 55% of those with Medigap policies had Plan F or its high-deductible version.
Plan G is one notch down from that. It covers eight of the nine benefits. The individual is responsible for the Part B deductible, which is $185 in 2019. Once the individual has paid the first $185 for outpatient services, the plan will cover the Medicare costs for the remainder of the year.
So, what happened in 2015?
The Medicare Access and CHIP Reauthorization Act was signed into law in April 2015. Primarily focused on solving the problems with the physician payment system, it had other impacts as well. One of those: as of January 1, 2020, insurers will no longer be able to sell to newly eligible Medicare beneficiaries Medigap policies that cover the Part B deductible, specifically Plan F and Plan C. But those who have one of these plans now will be able to continue with it.
If Plan F is still viable until December 31, 2019, wouldn’t newly eligible beneficiaries want to get one? Probably not, for one simple reason. Plan F has lost its competitive pricing edge. Many plans now charge more to cover the Part B deductible than its value ($185 this year). Here are some examples from state websites.
- In Florida, one company charges an annual premium of $2,738 for Plan F and $2,496 for Plan G, a difference of $242.
- In Washington, a Plan F’s premium is $2,568 and the Plan G—$1,896, a difference of $672.
- Most striking is one company in North Carolina that offers a Plan F with an annual premium of $3,556. Their Plan G’s premium is $2,552, a difference of $1,004 to cover a benefit worth $185.
Why pay more than $185 for the Part B deductible?
Plus, there are concerns about what will happen to the monthly premiums for Plan F once new beneficiaries, mostly younger and healthier, are no longer able to enroll in the plan.
The other three states
Massachusetts, Minnesota, and Wisconsin have their own standardization for Medigap policies, so there is no Plan F in those states. However, this change applies: there will be no coverage for the Part B deductible in policies sold to newly eligible beneficiaries in 2020.
What about those who have Plan F now?
Beneficiaries who enrolled in Plan F before these changes may be concerned about increases in premiums down the road. Can they make a change?
- There are states that allow a beneficiary to switch plans. For example, New York has a continuous open enrollment period to get a policy. The insurer cannot deny an application because of pre-existing medical conditions. California has a birthday rule, which allows individuals to change to a plan with the same or lesser benefits, at the time of their birthday.
- In states without these opportunities, one can apply for a Plan G. However, the insurer may impose medical underwriting and pre-existing conditions can lead to a higher premium or denial of the application.
In 2019, Plan G is the smart choice. Why pay more than a benefit is worth?