Medicare Supplement and Guaranteed Renewable
What happens if your health changes?
When you're picking a Medicare supplement insurance plan, it's a decision for years most likely. What if things change with your health or you move out of the area? Is the Medigap carrier going to drop you from the plan or make changes to your plan such as downgrading your benefits because of your change in health. Car insurance can increase your specific rate based on driving record (such as tickets). Can Medicare supplement carriers do the same? We have two words for you...Guaranteed Renewal and it's your protection against the future of change (for Medicare supplements, at least). We can't promise anything for your car insurance however. Let's look at Medigap and find out what Guaranteed Renewal means in the insurance world.
Put simply, Guaranteed Renewal means that you can continue the policy (generally indefinitely) as long as you pay the premium. The policy will not end due to changes in health status no matter how serious and really, any plan not Guaranteed Renewable make absolutely zero sense. The whole point of insurance is to cover you when things get really bad. That's why you pay those premiums in the good years. With guaranteed renewable coverage (an actual term in the insurance world and in your policy) protects you. The carrier cannot cancel your policy outside of non-payment of premium. Let's take a look at non-payment of premium then.
Basically, you need to make sure to pay your policy's premium. That's where we see issues of policies getting cancelled and each carrier will generally have a grace period and/or a re-instatement period so the issue tends to arise when someone is traveling for a long period of time, moving to a new location, experiencing a long illness, or changing the automatic payment source such as a credit card. Double check what your carrier's payments grace period is but most are 30 days. Laws may also offer a 2 month re-instatement period but it's best to avoid this altogether if possible. You should get a notification from the carrier in case of a payment being late so make sure that the address on file with the term Medicare supplement carrier is correct. Auto-payment options via credit card or automatic checking account deduction can help to avoid a lot of different issues such as missed mail.
The important point is that your health status will not single you out for cancellation or specific rate increases. What does this mean and how come rates continue to increase every year? Medicare supplement insurance carriers are allowed to increase their rates by class. This means that they can increase the premiums across a wide demographic group like a region of the State or the entire State itself or across an age band. This generally means that you will be grouped together with a lot of people in the same age band (say age 65-69) in a general area (say great Los Angeles). The carrier will look at the claims experience from the recent past and adjust the rates. If you have really big health expenses (outside of what Medicare picks up), these expenses will be averaged across the entire group of people which may be 10's of thousands or even 100's of thousands. The more people, the better which is the whole point of insurance in the first place. This is to protect you from having very large health bills and then your resulting Medigap premium spiking as a result.
Guaranteed Renewal is an important qualify of any Medigap policy worth it's salt on the market. Outside of fraud on the application, it protects the carrier from cancelling your coverage unless the premium is not paid. The ultimate take-away is to make sure your premium payment is effortless and automated.