Medicare Supplement Plans – Benefits & Hidden Risks
If you are researching Medicare and you want to know about Medicare supplement and their role in your healthcare, this video is for you. In this video I will explain Medicare Supplement Plans Benefits & Hidden Risks. Even if you have already looked at different Medicare supplement plans, this video will have new information that will help you make an informed decision and avoid taking on a hidden risk.
In this video I am going to help you
- Understand Medicare supplement plans and their role in your healthcare.
- I am going to reveal to you how to determine what a Medicare supplement will cover and what it will not.
- We will take a look at the new Medicare supplement benefit table for 2020 that includes a new Medicare supplement plan.
- Lastly, if you stay until the end of the video, the last item I discuss is a very important hidden risk in choosing a Medicare supplement insurance company that most consumers are not even aware of. This will refer to an issue that has really come to the forefront in the last two years.
Hi, I am Matthew Claassen with MedigapSeminars.org. My company is an independent insurance brokerage specializing in Medicare and retirement needs. We help people with their Medicare decisions in virtually every state of the country. And our services are free to the consumer.
This video and the information in it will be different than any of the other videos on Medicare supplement plans. It’s designed to help you understand Medicare supplement plans and their role in your healthcare, as well as select the right plan and insurance company for your situation.
Let’s get started. Medicare supplement Plans.
My philosophy when helping people with their Medicare choices is to first review and understand Medicare supplement plans. You should first shop the Medicare supplement plans available to you and only if there is no plan that fits your needs and your budget should you then explore your Medicare Advantage Plan options. Why? Well, that’s part of what we will answer in this video.
The first thing to understand about Medicare supplement plans is simply this; if you are choosing to purchase a Medicare supplement plan it means you have chosen to keep Original Medicare as your Primary Insurance.
That red, white and blue Medicare card is your primary coverage.
Because Original Medicare is your primary coverage, it pays first and the benefits of that coverage pass on to your Medicare supplement which is your secondary insurer, This is true No matter which Medicare supplement you have or which insurance company you choose.
This is very important and too often misunderstood.
What are those benefits of Original Medicare that pass on to your Medicare supplement?
One…With Original Medicare you can see any doctor, go to any hospital in the US or its territories, as long as they accept Medicare. Because this is a feature of Original Medicare, any Medicare supplement you choose will also have this benefit.
Two…Medicare’s intent is to cover everything that is medically necessary. Let’s stop at that point for a second. I mentioned at the start of this video that I would tell you how to determine what your Medicare supplement will cover. This is where I answer that question. Your Medicare supplement will cover the copay’s and deductibles of all your healthcare approved by Medicare, and Medicare will cover what is medically necessary. I am often asked “what does Medicare cover?” Does Medicare cover this procedure or that procedure? The answer to that question depends on Why?. Why is the procedure being done? For example: If you have a mole on your face will Medicare cover its removal? It depends on why it is to be removed. If you want it removed because you don’t like the way it looks. I doubt Medicare will cover it. It’s not medically necessary to remove it. On the hand, if it’s cancerous then it is certainly medically necessary that it be removed and Medicare will cover it. So instead of thinking about your Medicare coverage in terms of what is covered, look at Why the procedure is being done. What condition makes a procedure medically necessary.
To build on this subject so you better understand, there are certain steps a doctor will have to take to make a test medically necessary. For example; in the comment section of one of my videos a person who identified themselves as a chiropractor of 30-years was frustrated that Medicare would not cover the cost of an X-ray. Medicare has very limited coverage with a chiropractic care and only covers the correction of a spinal subluxation. To diagnose a spinal subluxation does not require an X-Ray. It’s done manually, with the hands. So, while an X-ray may be convenient, it’s not required. An X-ray is not medically necessary.
The first thing to understand about Medicare supplement plans is simply this; if you are choosing to purchase a Medicare supplement plan it means you have chosen to keep Original Medicare as your Primary Insurance.
As an aside, if you have comments or questions please do feel free to leave them in the comment section. I work hard to answer every question. But please do not leave any personal information.
The term “Medically Necessary” is important. It is used consistently in your Medicare & You guidebook when describing Medicare services. How does Medicare determine medical necessity? They lean on your doctor. It depends on your doctor’s diagnosis and your doctor’s opinion. With Original Medicare as your Primary Healthcare, any supplement you have will follow the direction of Medicare to determine what is or is not covered and Medicare depends on your doctor’s diagnosis and opinion. The bottom line: Your Medicare supplement will cover the copays and deductibles of all your healthcare approved by Medicare, and Medicare will cover what is medically necessary.
Which bring me to my favorite benefit of having Original Medicare, the “for-profit” insurance companies are taken out of the decision making process. No insurance company has a say in what is or is not covered, who gets paid or how much. All those decisions are made by Medicare.
This means that because you have Original Medicare, no matter which Medicare supplement plan or insurance company you choose, you retain the right to see any doctor or go any hospital that accepts Medicare. Your doctor’s decisions and opinion guide your healthcare and neither you nor your doctor ever have to ask an insurance company for permission to have procedure.
See more about Medicare supplement plans here: Medicare Supplement Plans Explained
Before I go on, I want to make certain that one thing is clear; Medicare Advantage Plans are not Medicare supplement plans. I repeat, Medicare Advantage plans are not Medicare supplement plans and do not have these benefits.
This is a Medicare Supplement Plans Explained video, focused on Medicare supplement plans. I explain Medicare Advantage plans in detail in a separate video. In fact I will have a new Medicare Advantage Plans Explained Video produced shortly after this video is made public.
What does a Medicare supplement do?
The role of a Medicare supplement is to pay some or all of the copay’s and deductibles from Original Medicare so you limit your out of pocket expense. Limit your financial risk in the case of a health event. With the more popular plans your out of pocket maximum exposure is less than a couple hundred dollars a year.
Original Medicare Part A & Medicare Part B all by itself has no maximum out-of-pocket limit and some large copay’s and deductibles. A Medicare supplement will reduce your financial obligation and can set a limit on your annual out-of-pocket risk for medical bills. You can reduce your out-of-pocket costs down to virtually nothing.
A Medicare supplement plan cost extra, it has a monthly premium. But your out-of-pocket cost are much less when you need medical services. With a Medicare supplement you can virtually eliminate your financial risk when you need medical services and you get the care your doctor advises.
This brings me to an important piece of advice I would like to share. In this business I have seen a lot of people make decisions about their Medicare and then live the consequences of those decisions. The #1 most common mistake I see is when a person looks at their current health situation and chooses a plan based on their current health.
I can’t count how many times I have heard “I am healthy, I never see a doctor so I am just going to get the cheapest plan.” In all but a few states, you can’t change Medicare supplement plans once are critically or chronically ill.
My advice; you should get the insurance you will want to have when you are seriously ill, not whatever is cheap because today you are healthy.
When you consider your freedom of choice, choosing any doctor that accepts Medicare, the extreme low financial risk or out-of-pocket costs for medical bills and the fact that no insurance company has to pre-approve your procedures, the Medicare supplement plan is the best choice for most and, in fact, is most chosen by those that do their research.
When can you get a Medicare supplement?
In most states you can apply for a Medicare supplement plan up to six months before you turn 65. Even before you can apply for Medicare itself. Some states restrict the consumer to only two months before the month you turn 65. Keep in mind, the Medicare supplement benefits cannot start until both Medicare Part A and Medicare Part B are active. Applying for the Medicare supplement early simply gets the process out of the way. It gets the monkey off your back, so to speak. So you can go on with your life and tell all those pesky cold-callers your Medicare decision has already been made.
Now, this is also very important.
The Federal Medicare rules are such that your Medicare supplement initial enrollment period is the first six month that you have Medicare Part B. This is important. Your Medicare supplement initial enrollment period is linked to the start date of your Medicare Part B. Once your Medicare Part B coverage starts, the clock starts ticking. You have a six-month window where you can get any Medicare supplement plan available to you and no one can so no. No one can require you to reveal your medical history. No one can charge you more because of your medical history. And, you can change your mind and switch from one Medicare supplement to another as you wish during that six-month period.
Once that six-month Medicare supplement initial enrollment period is over, you can still switch plans as you wish, any day of the year. But the insurance company will look at your medical history and has the right to reject your application to change insurance companies or supplement plans due to your health history.
When they review your medical history it is referred to as medical underwriting.
Medical underwriting does not involve getting a physical or blood tests. The insurance company simply reviews your medical and prescription history.
Now, keep in mind that many states have special rules that override Medicare to the benefit of the consumer. The rules I just mentioned are the Federal rules. Some states have special rules that provide annual special enrollment periods and more.
I am going to go over how to find out if there are special rules for your state and what those rules are in just a moment. This will save you hours and hours of research.
But first understand that Federal Medicare rules do not allow for an open enrollment or annual election period for Medicare supplement plans. That annual open enrollment or election period is only for your Medicare Part D prescription drug plan or a Medicare Advantage plan.
Federal rules indicate you can change Medicare supplement plans at any time as long as your medical history shows no recent critical or chronic illness or major health condition.
Unless your state has rules to the contrary, the insurance company has the right to decline your request to change Medicare supplement plans.
Which Medicare Supplement Plan is the right plan?
Once you decide that you want to keep your Original Medicare and add a Medicare supplement, the next question is which supplement?
I know there are videos out there suggestion that one plan or another is “the best”. I don’t subscribe to that theory. All of the Medicare supplement plans are good plans. All will do exactly as they are supposed to do. All Medicare supplement plans pay everything they are supposed to pay and follow Medicare’s instructions.
The right plan for you is found by determining which plan fits your budget and your needs. It is really not that complicated. I am going to show you how to approach those questions and come to a conclusion in just a minute.
But first, as I noted just a moment ago, before you dive into the different Medicare supplement plans, you need to know if your state has any state-specific rules that override Medicare in the Consumer’s favor that could impact your decision.
This is very important.
Some states dictate how a Medicare supplement can be priced. Some restrict or outlaw certain doctor charges which completely favor one Medicare supplement over the other. Some states have set up rules that provide each person an annual Special Enrollment period so you can never get stuck in a plan due to your health. You also don’t have to worry about a plan being discontinued. And more. Heck, there are three states that don’t even offer the standardized Medicare supplement plans. They have designed their own sort-of look- alike plans where in some cases the benefits are ala-carte. Those states, by the way, are Wisconsin, Massachusetts and Minnesota. I intend to do a specific video for those states, but until then it might be easiest to just discuss them over the telephone.
The bottom line is there are a lot of rules and they are very difficult to find on the internet. That’s why every time someone requests a free Medicare supplement price quote from us we include a paragraph or two on any special rules your state might have. That way you are fully informed and can use that information to help you make your decision.
So how do you find out what special rules your state might have? Just ask us for a price quote. We give you the prices for those insurance companies I recommend for price stability and low cost over your lifetime and include any state-specific information you need to know.
That brings us to another important point.
In just the last three or four years I have seen a flood of insurance companies move into the Medicare supplement market. Some are old companies but new to Medicare, others are new insurance companies or spin-offs. They each bring with them a whole new series of consumer risks that you need to be aware of when choosing an insurance company. I am going to tall about this and how you can avoid these risks just a moment.
But, before you choose an insurance company, you need to choose a plan. Let’s cover that first.
I would like ask, however, if you like this video so far and have found this information helpful, please click the LIKE button below and include the bell to be notified of new videos. Of course, if you subscribe you will easily find my other videos, more than 40 of them on Medicare. Of course, feel free to leave a comment or question. I read and respond to both.
Choosing a Medicare Supplement Plan
When it comes to choosing a plan, rather than trying to figure out a best or worse Medicare supplement, I suggest looking for value in the plans. Yes, I know. Value can often be subjective. In a way, that’s the point. Value often is a personal decision as should be your Medicare supplement.
To explain, let’s take a close look at the Medicare supplement benefit table for 2020
Show 2020 table
As of 2020 this is what the Medicare supplement benefit table will look like.
Notice there are really two tables.
The table with two columns on the right-hand side show the plans only available to people who were first eligible for Medicare prior to January of 2020. These are the plans that are being phased out.
The larger table on the left are plans available to everyone that has Medicare; people who will be new to Medicare after December 2019 as well as people who have had Medicare for years.
Now, I am not going to go through the details of each plan. I have separate videos for each of the specific Medicare supplement plans you should consider and can find very easily when you subscribe to my channel.
In this video I am going to give you a high-end view of the plans and how to go about evaluating which one might be right for you. You can then use this knowledge as you view my other videos detailing the benefits of each plan.
The first thing that you need to consider is that none of the premiums for these plans are static. They will increase over time to one degree or another. So when you decide which plan is right for you, you need to consider potential future cost and how it will impact your budget. Let me repeat that, it’s critically important. When you decide which plan is right for you, you need to consider potential future cost and how it will impact your budget.
How much a plans price will increase depends on three factors. The first is geography. In some states, like California for example, prices tend to rise at a higher annual rate than average. This is something we talk about in detail when helping people shop for their Medicare supplement.
The second factor is the plan itself. Some plans are going to increase at a higher rate than other plans. I will have more on this in a minute.
Last, but by no means least, is the fact that some insurance companies have more persistent and / or higher rate increases than other companies. When people request a price quote from us I quote those companies who, in my experience and knowledge base, are less likely to have high or persistent price increases. Or, put another way, are more likely to have stable prices that will not be a surprise or shock to the you.
I have a new video I will be producing that details how to research a Medicare supplement insurance company. When I publish it you will see a link just above me. So I am not going to detail that here. But I do want to talk about which plans are expected to have higher price increases and which more stable prices in the years ahead.
Let’s go back to the Medicare supplement benefit table. You may have already noticed the difference between the benefits for the plans on the left versus the plans on the right hand table.
The difference is this; the plans that are being discontinued all pay the annual Medicare Part B deductible. The plans that are available to all do not.
The Medicare Part B deductible is an annual deductible. In 2019 the annual Medicare Part B deductible is $185.
When Medicare decided to phase out the Medicare supplement plans that payed the Medicare Part B deductible they did so because of the conclusions of their research on Medicare waste.
They found that when a person can go to the doctor without any money out of pocket, some will go to the doctor for frivolous reasons. They go because they are lonely. Because they want someone to talk to. That is a burden on Medicare. Thus, by requiring some money out of pocket, they reduce Medicare waste.
You can conclude from Medicare’s own research that Medicare supplement Plan F and Plan C can have higher expenses because they have more consumers that will go to the doctor for frivolous reasons. If a Medicare supplement plan has high expenses, those expenses are passed on to their policy holders through higher premiums.
If you are concerned about higher premiums or higher premium increases in the future, the first step may be to avoid Medicare Supplement Plan’s F and C.
That’s the first step, the second step is even more important.
Now, if you only get a couple things out of this video, this next concept I am going to present should be one of them. I mentioned at the beginning of this video that I will go over a hidden risk and how to avoid it. This is it.
There is a huge misunderstanding out there that is, in part, from some of the videos that I and others have posted. People see these videos, mis-understand that the only difference between one insurance company and another offering a supplement plan is the price. They then proceed to step in…a land mine. There is no difference in benefits from one Medicare supplement offered by one insurance company and another. But there is a big difference in insurance companies.
Let me explain.
The reason we get insurance, any insurance, whether it be car, home or our health, is to take the financial risk of an event and move from our shoulders to that of an insurance company. It’s to transfer risk.
Unfortunately, in Medicare, selecting the wrong insurance company can introduce other risk you don’t even know exists.
What I have seen in the last couple of years, just since I did my last video on Medicare supplement plans, is an enormous influx of insurance companies into the Medicare market. There is a lot of money in Medicare and these companies want in. But are not here for the long run.
In some cases, these are new companies. A new organization freshly capitalized by hedge funds. In other cases, they are older insurance companies that are new to the Medicare supplement market. In either case, they bring a new risk that most consumers are not aware of.
Let’s look at a couple examples and to do so I will mention some company names. Keep in mind that what I am about to say is a combination of fact and my opinion. I am not speaking poorly of these companies. I am just pointing out that their goals and your may not be in sync.
About four years ago Central States Indemnity (aka (CSI) Life) moved into the Medicare Supplement market. CSI is primarily a Property & Casualty insurance company, that means cars, houses, boats. There was a lot of fanfare with their new Medicare supplement policies because it is a Berkshire Hathaway company. A + rated with Warren Buffet on the Board. It’s a good company.
Great company, easy to sell for those agents that did. Consumers thought they were going to have a great partner with their Medicare.
Fast forward four years and CSI Medicare business in about half the states it’s in is being sold to another company. The company is CSO Health & Life also from Omaha, but not a Berkshire Hathaway company.
Now, I am not saying or suggesting anything bad about either company. Berkshire Hathaway is in the business to make a profit for their shareholders and they did. CSO is a good company. It’s a Mutual Company. Mutual companies don’t have stockholders to answer to. CSO originally sold their Medicare business, they got out of Medicare supplement plans completely in 2004. Maybe they saw that was a mistake and want back in fourteen years later with the purchase of CSI in some states.
But, unlike a company that would be committed to entering the Medicare supplement market for the long-run, CSO has outsourced all the servicing of Medicare supplement plans to a third party. I think in the poker business thy call that a “Tell”.
So where I am going with this?
The companies are fine, the problem is where they leave the consumer. The consumer doesn’t have a Medicare supplement transferred to the new company. In fact, those CSI policy holders in the states where this happened are now in a closed pool and if they want out, even if it’s to go to a CSO policy they must qualify medically. If anything happened to their health where they don’t qualify, they are stuck in a company that is not writing anymore policies in their state. They will likely face much higher premium increases in the years ahead. It’s no different than owning a Medicare supplement Plan F before it’s discontinued in 2020. They are at a higher risk of unusually high price increases.
I have no idea what is going to happen with CSI in states where it is still writing Medicare supplement plans. But it appears to me that Berkshire Hathaway does not intend to be in the Medicare supplement business over the long run. I don’t believe they ever did. In the last annual report for Berkshire Hathaway they indicated that CSI had 47 employees. That’s a far cry from Geico’s 40,000 employees. That means they are outsourcing the servicing of their Medicare supplement plans.
If a companies intent is to gain market share and then sell the company to another insurer, by outsourcing the administration and underwriting they reduce the redundancy of employees that happens when to companies merge or one is bought out. It reduces the cost and disruption of a buyout.
Companies that intend on being in the business for the long-haul tend not to outsource their business to a third party non-insurance company.
Example # 2
In some a number of cases there are small organizations that enter that have entered the Medicare supplement market with the best of intentions. But, for whatever reasons don’t last. Case in point is Loyal Christian Benefit Association. They started offering Medicare supplements about four years ago too. And, if you purchased a Medicare supplement policy through them, they would donate $200 each year to your church or the charity of your choice.
Insurance only works when you have large numbers so that the risk of a health event can be shared over a large number of policyholders. It appears they could never get large enough numbers and policy holders were subject to regular double-digit price increases.
In April of 2019 Loyal Christian Benefit announced they would stop selling Medicare supplement plans. Existing policies will still be serviced because the company wants the revenue. But that is a worst-case scenario for the Medicare supplement policy holder.
You see, if an insurance company goes out of business and stops servicing a Medicare supplement policy, Medicare gives the policy holder the right to get another plan. It’s called a Guarantee Issue. But, if the company just stops selling supplements but doesn’t go belly up, the policy holder can be stuck. Stuck in a plan that is or will experience much higher price increases.
To pull all of this together into something actionable for you:
As you are listening and watching this video there are at least a dozen companies that are a mixture of the two examples I noted above. There is a company that is a subsidiary of a large swiss insurer. They started offering Medicare supplement plans in 2017 and their business is small. In fact, without naming names or blowing horns, I know of individual insurance agents and agencies that do more business than this insurance company. But you, the consumer, wouldn’t know that by their beautiful, professional website.
In one example above, the consumers were just pawns used so a corporation can make a large profit. In the other example the consumer was an unaware Guinee pig in an organization that wanted to do well, but didn’t have the management or expertise to pull it off.
I can go on. But here is how you avoid these risks.
I have a rule in my company to avoid and never go anywhere near these companies. I will not offer or quote any insurance plan from a company that has not been in the Medicare business, not just insurance, but Medicare, for at least five years. In addition, they must have an A rating. Period.
I suggest you do the same.
None of us have a crystal ball. But we can reduce unnecessary risk by the actions and decisions we make. If you want to go with the cheapest plan today, understand that you may be introducing a risk you are completely unaware of.
I prefer to go with the companies that have a solid foundation in Medicare and history of price stability. That is reflected in our price quotes where intentionally avoid some of these companies lowballing their price quotes to build market share.