So what is a Medicare supplement plan? It's a good question and if you're turning 65 or newly introduced to Medicare from leaving a company sponsored insurance, then it's a legitimate one. It's important since you're making a decision that may need to carry out for decades into the future so a good, solid understanding on what a Medicare supplement insurance plan is critical. Let's take a look at what they are, how work, and how to choose one that's right for you.
First, obviously from the name 'Medicare supplement plan", you might guess that they're intimately tied to Medicare and you would be correct. In fact, you can't have a supplement plan unless you have both Medicare Part A AND Medicare Part B. Some people don't realize that Part B (the physician part of Medicare to be simplistic) is required in order to even apply for a Medicare supplement plan. Part A is usually enrolled automatically or requires no payment while you must "opt in" for Part B and typically, there is a monthly premium that is paid or deducted from your Social Security check. You want to make sure to have this in place, ideally a few months prior to when you become eligible which for most people, is the 1st of the month in which they turn 65 or following coming off of group coverage. There are other triggers but these are the two main ones. So now, we know these plans require Medicare so to speak but what do they do with it?
Medicare is a government sponsored health plan primarily for those over age 65 (pre-65 disabled are also eligible) and as rich as it is, there are some holes. The biggest holes are two deductibles (one for Part A hospital and one for Part B), a 20% coinsurance that you need to meet after deductibles, and outpatient medication costs. So that's traditional Medicare. What are the Medicare supplement plans? They are insurance plans provided by private companies that fill in some or all these gaps depending on which one you select. Medicare is handled separately with the newly created Part D benefit which is also provided by private companies. Medicare supplement plans are private and many different carriers will offer them but the benefits are standardized which is really important. It makes it so much easier to choose than for the pre-65 market where there dozens of completely different plans across multiple carriers. An F Medicare supplement plan is an F plan, regardless of the carrier which brings some order to market. Knowing that, how do you go about choosing the right Medicare supplement plan for you?
The standardization helps a great deal. If the benefits are the same than there are three factors in choosing a Medicare supplement plan. First, which letter plan (which determines which benefits you will have), and second, which carrier. We've written extensively on the first front with the winner being the F Medicare supplement plan by far. As to the second concern, it's a question of monthly premium and carrier strength. How much does the Medicare supplement plan cost right now and how likely can the carrier keep those premiums stable going forward (relative to other carriers). This is a little trickier although most of the big carriers are typically within a few dollars of monthly premium for a given plan which makes sense. The easiest approach on this is to avoid carriers that are much higher or much lower than the average and we can help you quote multiple carriers to determine this average. If they're much lower for a given Medicare supplement plan, you're going to pay one way or the other since they're all dealing with the same benefits and risk. If they're much higher, well...that doesn't make sense either. Hopefully, this is a good introduction to the world of Medicare supplement plans but feel free to ask us questions about your particular situation.