Traditionally, the Medigap supplement policies were relatively simple. However, these private insurance policies are evolving as of late to cover other different types of benefits such as healthcare provider networks and health club memberships. The primary purpose of this shift is not only to address needs that policyholders have today but also to save money for the policyholders and the insurance companies. These evolutions mirror the private Medicare advantage shift that has also occurred in recent years.
Medicare A-D: What You Must Know
Most agents already know that Medicare has four primary parts. Part A is for hospital care, b is for medical procedures, equipment, and doctors, and D is for prescription drugs. These three work together to provide a basic layer of care for people aged 65 and over in the U.S. Why most people want supplement coverage has to do with the things that are not covered by A, B, and D: deductibles, co-pays, and other expenses. If a patient was to become critically ill, his or her savings could be obliterated by these costs. For this reason, clients often want to consider supplemental coverage or they may already have it. As an agent, you need to know what’s covered by Medicare and what isn’t.
There’s a lot of misinformation out there about these issues, but being informed can allow you to direct the conversation the right way. Medigap policies allow clients to go one step further, but they might not always be the right fit for each client.
What’s the Difference with Medigap Plans?
Legally, both plans have to cover everything that is protected by basic Medicare but typically some additional benefits will draw in buyers and policyholders. Since the same insurance companies are dominating both the Medigap supplement and the Medicare Advantage market, this development is perhaps unsurprising to insurance agents. However, it should be used to their advantage as successfully as possible. In 2015 more than 12 million individuals had Medigap policies.
That represents just over 20% of the 55 million Medicare enrollees in the country, according to research from the American Association for Medicare Supplement Insurance. A much higher portion of people who have traditional Medicare now have Medigap plans too. This is because up to one-third of Medicare enrollees also have MA plans which give supplemental coverage. Furthermore, those individuals are not allowed to buy Medigap plans.
Those who are not able to afford Medigap premiums include 10 million low-income Medicare enrollees who qualify to receive Medicaid benefits. This means that up to 50% of primary Medicare enrollees use Medigap plans to cover things that Medicare will not cover in full.
The annual Medigap Guide put forward by the government explains the various individual letter designations available for Medigap protection. Nearly two-thirds of all outstanding Medigap plans qualify for plan F and are followed by N, D, G and C. Insurance agents should be aware that due to the evolution in Medigap supplement plans, not all same letter plans will have the same features.
How Do the Letter Plans Work?
Letters C and F plans provide for all uncovered Medicare costs and are the most popular and most expensive. In 2014, these plans took up 74% of the market. Plans C and F offer the greatest payment protection and come with an average annual premium of $2,400 in 2015. Those with limited payment protections, the high deductible F, K, L and N offer an average annual premium of $1400.
A large number of policies that are standard plans or non-standard, that were sold a long time ago that can no longer be sold to new enrollees but are available for renewals, will begin to include the popular F and C plans in the future. These plans may become less attractive because the loss of the first dollar protection feature in Plans C and F will decrease interest in them. In 2020, newly sold F and C plans will no longer repay their annual part B deductibles for policyholders which total approximately $183 a year.
As Medigap evolves, insurance agents should be prepared to more effectively cater to the market and be able to point out the individual differences between various letter plans and what makes the most sense for a client. Stay tuned to this blog for further information about Medigap.
Here at T.R. King, we’re happy to help you sell Medicare Insurance plans for Parts A-D, but understanding all of the different letter policies can give you a better opportunity to present options to your clients. When you are informed about the different types of policies, you can help to point your clients in the right direction.
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