Premiums for my medigap policy have been increasing over the past few years. What can I do to lower the cost?
If you like the coverage offered by your current policy, see if other companies are offering a better deal for the same-letter plan. Under federal law, insurers who provide medigap coverage -- which helps pay out-of-pocket costs for Medicare services, including Part A and Part B -- may sell only standardized policies identified by letters A through N in most states. Each policy identified by the same letter must offer the same benefits. Usually, the only difference between same-letter policies is cost -- and the price range can be surprisingly large. A man who recently enrolled in Medicare may be charged $934 to $5,590 annually for the most popular, Plan F policy, according to PlanPrescriber.com, a plan-comparison tool.
Some insurers also offer high-deductible Plan F policies, which require you to pay $2,070 before coverage kicks in. Premiums for these policies range from about $600 to $960 per year.
Also look at Plan N, a newer plan that includes some cost-sharing. Plan N covers many of the same expenses as Plan F, including the full $1,156 Part A deductible for inpatient hospital services. But it doesn’t cover the $140 Part B deductible, and there is also a $20 co-payment for doctors’ office visits and a $50 co-payment for emergency-room visits. The average Plan N policy in PlanPrescriber’s database costs a man $1,470 a year, compared with $2,107 a year for Plan F.
Or consider switching to a Medicare Advantage plan during open enrollment this fall. These all-in-one plans provide medical and prescription-drug coverage through private insurers, and you cannot be rejected or charged more because of your health. The premiums for Medicare Advantage plans are generally lower than if you buy medigap coverage plus a Medicare Part D prescription-drug plan, but you are usually limited to a network of doctors and hospitals. Open enrollment for Medicare Advantage plans runs from October 15 to December 7 for plans that take effect on January 1, 2013.
If you go with a medigap policy, pay attention to the pricing system. Some plans base their pricing on “issue age,” which means that their rates rise with medical inflation. Some are “attained age” policies, whose prices increase every year with the policyholder’s age and also track medical inflation. And some are “community rated” policies, which charge everyone in the community the same price regardless of age. The lowest-cost issue-age or community-rated policy is usually cheaper than an attained-age policy over time.
Unlike Part D prescription-drug and Medicare Advantage plans, there is no open-enrollment season for medigap policies. Insurers can’t reject you or charge more based on your health if you get a medigap plan within six months of signing up for Medicare Part B. After that, you may switch medigap policies at any time, but you could be rejected or charged more because of your health. Because some medigap policies cost much more than others, you could still save money on a new policy even if you have moderate health issues. Also, a few companies do offer policies without medical underwriting in some states, and some insurers let you switch into Plan N regardless of your health as long as your old plan was with the same company.
To compare prices for medigap policies in your area, go to PlanPrescriber.com, or get a list of prices for medigap plans in your area from most state insurance departments (see the state regulator map for links). For a list of companies selling medigap policies in your area, see the medigap page at Medicare.gov. You can also get help from your State Health Insurance Assistance Program (go to Shiptalk.org to find your local program).
For more information about medigap plans, see "Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare" from the Centers from Medicare & Medicaid Services (click the link at the bottom of the Learn about Medigap Policies box on the Medigap Policy Search page).
And for information on choosing a Medicare Advantage or Part D plan, see What to Know About 2012 Medicare Open Enrollment for more information about choosing a Medicare Advantage or Part D plan.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.