Plan F – Moving Forward
You may want to consider moving away from the Medicare Supplement Plan F that you love to a Plan G or Plan N if “value” and premium saving are important to you. I will explain why by reviewing the status of Plan F in 2020 and looking at the future trajectory of Plan F premiums.
Plan F Overview
Medicare Supplement plans (also known as Medigap plans) are sold by private insurance companies to help you pay for the out-of-pocket costs you’re responsible for once you enroll in Original Medicare. Medigap plans are needed because having just Medicare A & B won’t cover all of the expenses you’ll incur for events such as a hospitalization or cancer.
For example, Medicare Part B doesn’t have a cap the 20% payment responsibility you have for doctors or specialist appointments, going through chemotherapy or having an outpatient surgery. To cover the gaps inherent in Medicare A & B, most people add either a Medicare Supplement or Medicare Advantage plan to protect against any unforeseen future out-of-pocket expenses.
Plan F is the most comprehensive Medicare Supplement plan. For this reason, it’s also been the most popular plan for the last 20. Plan F essentially picks up all the deductibles, co-pays and coinsurance gaps in Medicare Part A and B. Policyholders with Plan F love that they can see their doctor, go the Emergency Room, or be hospitalized and never see a bill!
More specifically, Plan F picks up the Part A deductible of $1,408 for hospitalizations and the Part B deductible of $198 for doctor or out-patient services. It pays the Medicare Part B 20% coinsurance for you when you have an out-patient surgery or a MRI. And if you see a Cardiologist who bills the allowable Part B Excess Charge of up to 15%, your Plan Fl pays it.
When Plan F pays the Part B Deductible for you, you what is known as “first dollar coverage”. This means that if you were sick on January 1 (1st day of your new plan year) and went to an Urgent Care or Emergency Room for treatment, you supplement would pick up what Medicare Part A & B doesn’t pay. You have no “skin in the game” when it comes to cost-sharing with Plan F.
Effect of MACRA Legislation On the Plan F
Congress can enact laws to eliminate Medicare Supplement plans. For instance, in 2010, Medigap plans E, H, I and J were eliminated. In 2015, congress passed the Medicare Access and CHIP Reauthorization Act, referred to as ‘MACRA’. The two most significant changes from this legislation were increasing payments to doctors for their Medicare services and ending enrollment into Medicare Supplement Plans F and C for those turning turning 65 after Jan. 1, 2020.
MACRA legislation was passed to eliminate supplement plans with “First Dollar Coverage”. Congress is clearly of the opinion that First Dollar Coverage leads to over-utilization of medical services when you don’t have to think twice before running to an Emergency Room if you have a fever or cough. Thus, as of 1/1/2020, there are no supplement plans for those turning 65 that cover the Part B deductible. Eliminating firs-dollar coverage plans means all supplement plans now have a cost-sharing mechanism for out-patient services which will provide an incentive for you to “think twice” before making a trip to an ER or Urgent Care clinic for a condition that’s not life threatening.
Grandfathering of Plan F
Medicare Supplement Plan F will not go away. It’s more accurate to say Plan F has just been “retired”. If you were enrolled in a Plan F prior to 1/12020, you can keep your plan for as long as you continue paying your premium.
If you were eligible for Medicare prior to 2020 but delayed your enrollment in Part B because you’re still working and are on an employer’s health insurance plan, you still have the right to enroll in Plan F (or Plan C).
Plan F will be around until there are no longer any Plan F policyholders paying premiums, living out it's "retirement".
Stability of Future Plan F Premiums
If you are enrolled in a Medigap Plan F, it’s very likely that your premiums will increase at a higher rate than those of the other two most popular options, Plan G and N. This is because Medigap premiums are based on a plan's ratio of the policyholder's paid claims versus the premium collected. If the claims expense to premium collected ratio is low, rates are stable and premium increases are low to nil. If the claim expenses to premium collected ratio is high, rate increase sharply from year to year.
Here are factors that with this policyholder group that will put upward pressure on rate increases:
Aging Population: The grandfathered membership base in Plan F will be an aging population with declining health and therefore higher healthcare costs.
Excluding Younger Enrollments: Those turning 65 after 1/1/2020 won’t be able to enroll in Plan F; thus, the plan won’t be able to continue adding younger and healthier members to the policyholder base to help keep the claim expense to premium ratio level.
Healthy Policyholders Leaving the plan: As Plan F premiums escalate, policyholders healthy enough to pass medical underwriting are likely to switch to lower premium supplements such as Plan G or N. Those policyholders unable to switch plans will have to stay on their Plan F.
There’s no denying that Plan F offers the fullest coverage. Plan F premiums are also the highest because it is the most comprehensive Supplement Plan. Over the past two years, we've already seen higher rate increases for Plan F rate than for other supplement plans such as Plan G or Plan N.
If you become “uncomfortable with your Plan F rates, or are thinking about switching to another supplement plan while your healthy enough to, I suggest talking to an independent Medicare agent (or private insurance company offering Medicare Supplement Plans). Ask about switching to another more “Premium Friendly” Medigap plan such as Plan G or N, and what kind of Health Underwriting questions there are. If you don’t have or know an Independent Medicare agent, I would love to jump in and help you.
I am a licensed Independent Insurance Agent and I run Medicare Plans and Enrollment from my office at 539 Main St. Suite 500 in Lafayette, IN. I’m also the writer of this blog. You can connect with me through my website (www.Butzinsurance.com), Facebook by searching Medicare Plans and Enrollment, or email at firstname.lastname@example.org.