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Turning 65: Finding a Medigap Policy
Trudy Lieberman | May 12, 2011
This is the third in a series of posts that examine the process of signing up for Medicare, navigating its rules, choosing supplemental coverage and planning for health care in a program with a very uncertain future.
The first step after reading my collection of Medicare Advantage, prescription drug, and Medigap sales brochures was to find a way to fill in core Medicare coverage gaps'the deductibles for hospital stays and doctor care and the coinsurance for physician visits, lab tests, and hospital outpatient treatment that could really leave me with an unwelcome bill.' I would have to pay 20 percent of those bills if I didn't have supplemental coverage.
The option I considered first was traditional Medicare supplement insurance, commonly known as Medigap policies, products I knew a lot about having reported on them for years at Consumer Reports. These policies have been around since the beginning of Medicare, but they have a blemished history because insurers used misleading and deceptive tactics to sell them. Congress ended those practices 20 years ago when it standardized the benefits for 10 different kinds of Medigap plans and designated them by using letters of the alphabet. That meant that all consumers had to compare were the premiums and how they were calculated. The idea then was to simplify shopping and end deceptive selling practices.
Today shopping for a Medigap plan is anything but simple. Congress has taken away some of the standardized plans and added new ones with very skimpy coverage'a potential landmine for consumers on fixed incomes who choose them. The push to give consumers more information has actually made the job of picking a Medigap plan so much harder. The government's website tells me that I can choose from among 96 Medigap different policies offered by sellers in New York City. Do I really need that many on top of some 43 choices for Medicare Advantage plans and 30 for prescription drug plans?
Like any reasonable shopper, I checked out what the government's handbook Medicare & You had to say about Medigap plans. Not much, it turned out. It said there were two new plans, M and N, and that plans E, H, I, and J are no longer available. It didn't say what those plans covered.
For an explanation of the coverage provided by any of the standardized plans either old or new'I had to visit www. Medicare.gov or phone 1-800-Medicare, the New York insurance department, or contact the state health insurance counseling and assistance program. It almost seemed like the government does not want seniors to choose Medigap policies but rather steers them toward Medicare Advantage plans, for which there was far more information in the handbook. (I will discuss those in a later post.)
I tackled the government website, which was confusing from the get-go. The first page of all the Medigap policies available in New York had columns listing the benefits with green checks and red x's showing what was and was not covered. Okay, I got that, but what were the question marks that appeared next to the benefits? Take Policy A, for example, the page showed there was no coverage for the Part A hospital deductible'this year $1,132. But a blue question mark raised the question: was it covered or not? From that page, I was supposed to choose which combination of benefits and coverage I wanted and find out what policies were sold in my Zip code.
Plan F was my choice, and the website advised that there were 14 policies for sale in my Zip code. Plan F is the most comprehensive and would cover me in case doctors don't take Medicare's payment as payment in full, sticking me with what's called an excess charge. In the past, most docs have accepted Medicare's payment levels, but that may be less likely in the future as doctors get more persnickety about not taking Medicare patients. I wouldn't take that risk. Others might, since Plan F is the most expensive. It's a risk benefit calculation'higher monthly premiums versus the possibility of a large bill down the road uncovered by insurance.
Since all insurers selling Plan F must offer the same benefits, I needed to know only two things'the monthly premium and how companies figure premium increases each year. Medicare's website was not very helpful. It gave only a price range for Plan F policies'$197 to $422 and contact information for the 14 companies. I guess I was supposed to call them. When it came to how premiums would be calculated, I would give the website a grade of C. A section called Additional Tools & Information, gave a clear explanation of the three ways to determine premium increases, but crucial information was missing.
Pricing by Age?
In general, community-rated policies are best because premiums don't change just because you get older. Issue-age policies are cheaper for younger buyers, and their premiums don't increase with age. However, they are not common. Attained age-rated policies become the most expensive in the long run because premiums do rise as you get older. In all cases, premiums will go up each year because health care will only get more expensive. That's a good reason to avoid policies that might pile on extra costs just because your biological clock is ticking. Since income often shrinks in the later retirement years, this is need-to-know stuff, but the government apparently believes that insurers don't have to tell you. Only five Plan F sellers disclosed their pricing methods: they all used community rating. Were the others mum because their methods are unfavorable to consumers? I would not buy a policy from a company that failed to reveal its pricing method.
Still, I needed actual premiums so I called the Health Insurance Information Counseling and Assistance Program. HIICAPs, as they are called, can be found all over the country. The one for New York City was lodged at the city's Department for the Aging. I wanted to know more about how premiums would be calculated in the future, but the counselor I talked to didn't know much. "When I asked what community rating was", she replied, "Every state has a different rating depending on where you live." As for attained-age rating, I don't know what that is, she admitted.' The department offered a booklet that listed prices for only eleven companies selling Plan F. There was no plan with a premium of $197 as the website suggested. I did learn that all Medigap plans sold in New York were community rated, a protection unavailable in most other states.
As the booklet directed, I visited the website of the New York State Department of Insurance for more current information. Eleven sellers offered premiums ranging from $251 to $409. State Farm, one of the sellers that sent a marketing brochure, had the highest premium; United Healthcare, the other marketer contacting me, had the lowest. I ruled out State Farm; it was too expensive. The UnitedHealthcare/AARP policy seemed ideal. I still had questions so I called the company's toll-free number seeking answers.
Can I always buy a Medigap policy even if my health changes? A qualified yes, said a customer service rep. If I am outside of my open enrollment period the six months that begins in the month I turn 65 and enroll in Part B' and outside the 63-day period for previous coverage, then there is a pre-existing condition waiting period, he explained. Does an insurer have the right to refuse me coverage if I get sick in the future? If I stay on my previous employer's retiree plan and the employer drops the coverage as many have been doing, then I might need a Medigap plan someday. Yes they can refuse, he said, but not in New York. If I moved to another state, I could be out of luck.
Having picked a Medigap policy, it was time to choose a prescription drug plan to go with it. Congress won't let insurers sell drug coverage as a benefit included in a Medigap plan. Picking the right prescription plan adds a whole new layer of difficulty to an already-complicated task. I'll tackle that challenge in next week's post.
More Blog Posts by Trudy Lieberman
Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She is a longtime contributor to the Columbia Journalism Review and blogs for its website, CJR.org, about media coverage of health care, Social Security and retirement. As a William Ziff Fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Follow her on twitter @Trudy_Lieberman.
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