Sunday, July 21, 2013

Buying a Medigap policy

Most IBM retirees use IBM secondary insurance instead of buying a medigap plan on the market.  However, some of you might decide to buy a medigap plan instead.  There are several reasons why you might do it.  I won't go into those reasons right now. 

Over the last several months I have helped a couple of friends pick a medigap plan and then they try to buy it.  Notice, I said try to buy it.  I just filed a complaint with the NYS Department of Insurance because it turns out that it is not easy always to get companies who are offering the plans to respond.

As I have mentioned in the past - there are at least ten varieties of medigap plans that are strictly defined by the federal government.  The plan types are identified by letters like K, L, F, A and so on.  There are some medigap plans that are "high deductible" meaning they don't kick in unless you are really sick.  The offset to those plans are low premiums.  For example, the medigap F high deductible plan has a $2010 annual deductible but the monthly premium can be as low as $50/month.  If you are healthy, you'll end up spending way less in premiums and that will offset the part A &B deductibles and part B copay bills you will pay.  It takes a lot of being sick to be worth paying a premium of, say,  $200/month to have immediate coverage.

There is absolutely NO difference between one insurance company's K plan and another company's K plan.  These plans are defined by law. There are no doctor networks associated with these plans.  They simply work as secondary to Medicare so if the doctor takes Medicare then the doctor takes the medigap plan.  That means the logical thing to do is to buy the cheapest offering in your zip code.  The premiums can vary as much as 200% from one company to another. How do you know who is the cheapest?  Sometimes your state's department of insurance has the rates.  New York State publishes the rates. How do you know who sells a policy in your zip code?  Either call 1-800-MEDICARE or go onto to find out.

Why did I file a complaint?  Because the insurance companies with the lowest premiums are very, very difficult to reach or insist you must be contacted by an insurance agent in order to buy the policy.  I know this will shock you - the agent will then try to up-sell you to a Medicare Advantage plan or a no deductible medigap plan.  Many times the insurance companies did not even return phone calls when the buyer insisted they wanted a high deductible medigap. In one case - the agent hung up on a buyer when she insisted she wanted an F+ plan.  Some insurance companies (like AARP United Healthcare) won't even sell a high deductible plan (which is perfectly legal) but won't tell you that you can get one - just not from them.  Why don't they sell the plan?  Because they don't make much money on it.

If you decide you want a high deductible medigap plan - be persistent.  If the insurance company with the lowest premium is not responding COMPLAIN to the state department of insurance that they are doing bait and switch selling.

ACA Insurance Pools and Medicare

Several people have asked me if they can participate in the ACA individual policy provider insurance pools instead of being on Medicare.  The short answer is no.  Once you are over 65 years old most private insurance companies do not want to sell you insurance unless it is a Medicare Advantage or a medigap policy.  If you can find a company that will see you an individual policy still be very wary of doing so as it is highly risky on two fronts.  First, they can drop you at any time and tell you to go onto Medicare. That often happens when you get really sick.  I know this because 65+ people think they can stay on COBRA plans when they are terminated because it is offered. The insurance companies take the premiums until they get sick and then say WHOOPS you are too old to be on this plan.  And you cannot just go onto Medicare whenever you want - you have to wait for an enrollment window to enroll. Second, you will pay a Medicare premium penalty of 10%/year for every year you are not on Medicare which is a forever penalty and is calculated using the current year Medicare premium.  That means, as yearly premiums go up so does the cost of your penalty.

As the ACA begins insurance pool implementation I predict there will be a lot of erroneous reporting.  Do a lot of fact checking before you believe what you read.