Supplementary Medicare plans or Medicare supplement insurance are also referred to as Medigap plans or Medigap insurance. These terms are interchanged one for the other. The first thing you should understand about Medicare supplementation plans is that all plans are “standardized.” This means that all Medigap plans are the same or have the same coverage and must comply with federal and state laws. For example, a Medigap F plan offered by Insurer A has exactly the same coverage and works the same way as a Medigap F plan offered by Insurer B, the only difference being the monthly premium between the two insurers. These Medigap plans are identified in most states with the letters A, B, C, D, F, G, K, L, M, & N. The most popular Medigap plan is Plan F. It is the most expensive, but it is not The best value plan is necessary for you. Plan F is the most expensive because it provides “first dollar coverage,” which simply means that the insured does not incur an initial cost after an approved claim is made and benefit coverage begins.
When you try to determine which Medicare supplement plan is best for you, do not let coverage be the deciding factor, but determine what the best plan is in terms of monthly premium cost. The reason you want to consider the amount you get for coverage is because each insurance company that offers these Medigap plans will evaluate a percentage increase in monthly premiums annually. Each insurance company reserves the right to increase or not to increase its premium rates annually. Not all insurance companies will evaluate rate increases every year. Therefore, it is very important to be able to buy from the most qualified insurance companies in your area.
When evaluating an insurance company, I look for a company with solid finances that offers long-term price stability. As you are aware, when you become retired and you do not have a paycheck anymore, you must have predictability and price stability to be able to make a budget for your expenses. Surprising price increases on your health insurance can wreak havoc on your budget. So, prior to making any recommendations to any of my clients, I examine these things;
- How long has the company offered Medicare supplement plans?
- What is AM’s best financial rating?
- Your price history, philosophy and claims ratio.
- Does the Medicare insurer supplement fraternal identity or brand loyalty to promote insurance?
- Does the company have a national presence or is it a local or regional company?
- Last but not least; Are there any changes in the industry that could affect the insurance company?
Let’s review each of these briefly.
- How long has the insurer been offering Medicare supplement plans? This issue is important because we want to filter companies that are new to the Medicare supplement market. Because? Because every time an insurer enters a new market, it starts offering its product at a very low price, sometimes even at a loss, to increase its market share.
Once you have created a solid customer base, you will increase your prices by increasing your insurance premium to the point where you can make a profit. Often these price increases are significant and can last for several years. This is an easy problem to avoid. We avoid this problem by disposing of an insurance company until you have offered supplemental Medicare plans in your area for at least five years.