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Shop Smart for Medicare Supplement Insurance

09/02/2016

Shop Smart for Medicare Supplement Insurance

Managing the cost of your Medicare supplement insurance, also known as Medigap, can be tricky. There are many different plans at many different prices. But according to Kiplinger’s article “How to Save on Medicare Supplement Insurance,” those choices may depend upon your health and what state you call home.

Even though each Medigap plan with the same “letter designation” provides the same coverage, the price can fluctuate considerably by insurer. For example, a 65-year-old man could pay anywhere from $1,092 to $6,519 in 2016 for Plan F—which is the most popular plan—based on the insurer.

Those are nationwide numbers, but prices can even vary within the same zip code. While everyone loves a bargain and a better rate, switching to another policy can be tough since insurers in most states can charge you more, hit you with a waiting period or deny you coverage based on your health if more than six months have passed since you signed up for Medicare Part B. However, you may be able to switch to a lower-cost plan after that initial enrollment period in some instances.

It’s best to apply for a new policy if you’re healthy because you may qualify for a new policy. Some folks who are healthy and around 65 can get a new Medigap plan, but other insurance companies won’t answer the phone if you’re over age 70.

See if your insurer will allow you to switch to a less expensive policy. Some will let you switch to a less comprehensive policy without medical underwriting. For example, if you have Medigap Plan F, your insurer may let you switch to a high-deductible Plan F without new underwriting. Look at the difference in price: the average premium for traditional Plan F is $2,293 for a 65-year-old man, and for the high-deductible version, it’s just $668.

Note: With the lower premium, you’ll have to pay the $2,180 deductible out of pocket before any benefits will begin. That might work if you have few medical expenses, but you may have larger out-of-pocket costs as you get older—when it’s tougher to switch to a different plan.

Before making any changes, do a real cost analysis. As you age, you are likely to have more health issues. Will the savings on the premium be worth the potentially higher out-of-pocket costs from a cheaper plan? Also, your state may have rules about when you are allowed to change plans, so you may have to wait for that window of time. There are special instances when you are permitted to purchase a Medigap policy without medical underwriting, usually if your insurer stops offering the plan or when you are switching from a Medicare Advantage plan. Do your homework first because mistakes here can be very expensive.

Reference: Kiplinger’s (August 4, 2016) “How to Save on Medicare Supplement Insurance”

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