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I spend most of my time showing investors new ways to boost their investment income. But I have to tell you that I also love finding new ways to save money, too!
So when I recently helped some of my colleagues research the rising costs of healthcare for retirees, I was amazed at how rampant ripoffs were.
I’ve already explained much of this to my Income Superstars subscribers, but I think it bears repeating here … especially because open enrollment for Medicare starts in just a few days.
And if you or a family member has — or is considering — Medigap insurance as a supplement to Medicare, it’s critical that you understand the ins and outs of shopping around.
Reason: Different providers may charge wildly different prices for the exact same coverage!
More on that in a moment though.
First, Let’s Cover Some Background Information …
Once you’re 65, you are able to enroll in our country’s Medicare system, which will help pay for many of the common expenses you might face in your golden years.
However, even if we put aside the major fiscal problems facing that program right now … the simple truth is that Medicare was never designed to cover all your health costs in retirement.
For example, it was never meant to cover chronic conditions or prolonged medical treatments.
Rather, it was just to help Americans age 65 or older deal with minor incidents and short-term care.
Meanwhile, the number of treatments and drugs available today are only growing in number and cost.
So the end result is that the gap between what is covered and what is not covered is growing wider and wider.
And if you happen to suffer some type of major accident or get a serious illness?
Well, you could find yourself out tens of thousands of dollars — or even hundreds of thousands!
One way to cover part of the shortfall is to get a Medicare Advantage plan … formerly known as Medicare Plus.
However, you can also opt for a Medicare supplement insurance policy, commonly called a “Medigap” policy. And with one, you’re free to choose your own doctors and see a specialist whenever you need one.
But it’s very difficult to sort through this stuff!
The government does require that all insurance companies offer exactly the same benefits on their Medigap plans. The Medigap Plan F with Humana, for example, is identical to Plan F with Blue Cross.
That’s where the helpful regulation stops, however.
In fact, even though a given level of Medigap plan literally carries the exact same benefits and coverages, you might pay markedly different prices from one provider to another!
For example:
Based on my quick research, a 65-year-old male living in West Palm Beach, FL who’s paying $4,354 for Plan F with Humana Health Insurance Company of Florida would save $1,834 — a whopping 42 percent! — by switching to Standard Life & Accident Insurance Company.
What if he wanted a more bare-bones plan?
Well, for the basic plan A the same 65-year old man might pay $3,189 with Humana … but again switching to Standard Life & Accident would save him a great deal of money.
Reason: That company is charging just $1,564 for the exact same coverage!
Now, since I don’t want you to think I’m picking on Humana (or endorsing Standard Life & Accident), let me show you another example for the same hypothetical person.
If he were to get Plan F coverage from Colonial Penn Life, he would pay $3,154.88. Worse yet, he’d be doing business with a company that currently gets a Weiss financial strength rating of D+.
Meanwhile, by switching to United Healthcare he would not only save $814.88 a year … but also be getting a company with a better Weiss financial strength rating (C+).
Mind you, these aren’t nearly the biggest differences I’ve seen. In some cases, you might be able to cut your costs by as much as TWO-THIRDS!
Again, for the exact same benefits and coverages!
Of course, most agents don’t want to tell you about companies they don’t represent. And even those who do want to be helpful lack access to all the information they need.
What about the state insurance department? Their websites may have some information, but it won’t be enough to help you avoid getting ripped off.
And as I just alluded to with my examples — especially at a time like this — the financial health of the issuing companies can also vary greatly … so just because you’re getting a low annual rate doesn’t mean you’re getting a good deal!
So here are four things to look for when selecting a Medigap plan:
First, if you are living on a fixed income and are able to afford only the most basic coverage, favor Plan A, the core plan. Among other things, you’ll get an extra 30 days hospitalization per year beyond what Medicare pays. It also covers 100 percent of the Medicare Part B coinsurance for approved medical services, which is usually 20 percent of the approved amount.
You may also want to consider plans K or L if they are available in your area. These policies help limit out-of-pocket costs for doctor’s services and hospital care at a lower premium; however, you will have to pay more of Medicare’s coinsurance and deductibles before the policy pays its share of the costs. These policies also do not cover ‘excess’ charges billed by your physician. Wisconsin, Massachusetts, and Minnesota also offer a core or basic plan to choose from.
Second, if you or your family’s medical history is such that you want to be prepared to pay for nursing care, consider Plan C. Your $155 per-day co-payment under Medicare would be covered up to 100 days for skilled nursing facility care.
Third, if you travel overseas extensively, you can get coverage for emergency care in a foreign country with Plan C through G, M and N. In Massachusetts and Minnesota foreign travel coverage can be found in the Supplement 1 Plan and the Basic Medigap Coverage, respectively. In Wisconsin, a Foreign Travel rider can be added.
And fourth, make sure you know what type of financial rating a given provider receives!
If you were to experience the double misfortune of becoming seriously ill and having your insurer fail, you may be responsible for much of your unpaid claims, and it would be difficult to find replacement coverage.
Personally, I agree with most of my colleagues that you should choose a company with a B+ or higher Weiss financial strength rating if you can.
You should also consider an insurer’s level of customer service and timeliness in reimbursing claims. Ask friends about their experiences and contact your state’s insurance department or counsel for aging to find out if they keep public complaint records. As an industry, Medigap insurers have a good reputation for paying claims.
But no matter what you decide to do, please remember that, when it comes to healthcare insurance policies like Medigap, a little research can literally lead to thousands of dollars a year in extra retirement money.
Best wishes,
Nilus
P.S. And if you want to make absolutely sure that you get the very best rate on Medigap insurance, I urge you to read Dr. Martin Weiss’ latest letter to seniors here.
