Lesson 2: Medicare Supplements

Welcome to lesson two. In this lesson, Understanding Medicare Supplements, we will discuss what a Medicare Supplement is and what it covers. We will also discuss what it costs, how to figure out if a Medigap plan is the right fit for you, and when to enroll. 

Let’s talk about Medicare Supplement Plans and how that works with Original Medicare. You may have heard the term Medigap, and that is the same thing as a Medicare Supplement. It’s just tomato tomahto. 

As I mentioned in the previous lesson, Original Medicare only covers 80% of Medicare approved charges, and a Medicare Supplement Plan is designed to fill in the gaps left behind by Original Medicare. These are insurance plans sold by private insurance companies and are designed to supplement the benefits from Original Medicare. A Medicare Supplement or Medigap plan is designed to help pay for things such as copays, coinsurance, deductibles, and other out-of-pocket costs that Original Medicare just doesn’t cover. Before we discuss the benefits, let’s first discuss the gaps left behind in Original Medicare to get a better understanding. 

Medicare Part A has an inpatient hospital deductible, and that deductible for 2023 is $1,600. This deductible resets every 60 days as it is based on a per 60-day benefit period. If you have a long term stay in the hospital, you will be responsible for a coinsurance in the amount of $400 per day, for days 61 through 90. If you’re in the hospital past 90 days, your coinsurance will go up to $800 per day. If you are in a skilled nursing facility, Medicare only covers the first 20 days. After that, you are responsible for $200 per day for days 21 through 100. 

Medicare Part B is your medical and outpatient doctor coverage. This is where you could potentially see the largest out-of-pocket exposure. Part B has a deductible of $226 per year. After that, Medicare kicks in, but it only covers 80% and there is no cap on that 20%. So, you’ll have to pay the full 20% of things such as office visits, chemotherapy, MRIs, CAT scans, etc. 

This is where a Medicare Supplement Plan comes in. Original Medicare pays first, Medicare Supplement insurance pays secondary and picks up the remainder of the coinsurance, copays and other things left behind by Original Medicare Parts A and B. Now, Medicare Supplement plans are standardized by the federal government, so when it comes to the basic benefits, it’s all the same, regardless of the company. Even though the benefits are the same, there are still some variables like cost and underwriting that we’ll be diving into a little later. 

When it comes to Medicare Supplement Plans, they are guaranteed renewable, as long as the beneficiary is paying their premium. You do not have an enrollment period each year like you have for Medicare Advantage Plans. Also, you don’t have to worry if a provider is in network or not. If a doctor or hospital accepts Medicare, they will accept the Medicare Supplement Plan.

It’s important to note that Medicare Supplement Plans do not include Prescription Drug Plans, so that can be sold in a stand-alone drug plan. Also, Medicare Supplement Plans can be written year-round since Medicare plans come secondary to Original Medicare. When a client goes to the doctor or hospital, they will first, hand over their red, white, and blue Medicare card, followed by their Medicare Supplement insurance card. The provider will bill Medicare in full. Once Medicare receives a bill, Medicare will pay its 80%. Then Medicare will send the 20% of that bill to the Medicare Supplement insurance carrier. 

There are multiple factors when it comes to calculating the premium for a Medicare Supplement. Every time you run a quote or start an app, you will always enter the client’s age, gender, tobacco status, zip code, plan selection, and household discount eligibility, to calculate the premium. Medicare Supplement Plans offer a discounted rate to the premium if the client is married or living with someone over a certain age. That’s referred to as the household discount. It does vary per state and per carrier, so be sure to refer to the application to see if your client qualifies for that discounted rate as it will ask the specific qualifying questions. 

Medicare Supplements are divided into plans. There are a lot of plans, but we are only going to be focused on the three most popular plans, and that is Plan F, G, and N. So I want you to think of Plan F as being full coverage. When you look down the column (please see video above for visuals), you’ll see everything is covered 100%, meaning all the client is responsible for paying is their premium. They will have no additional out-of-pocket expense if they are enrolled to a Plan F. However, not everyone can qualify for a Plan F. In order to be eligible for a Plan F, you must be 65 or older before January 1 of 2020. If you turn 65 after January 1 of 2020, you will not be able to enroll to a Plan F. Now, Plan G I want you to think of G as two things, ‘greater value’ and ‘go to’. Plan G doesn’t have the age restriction that the Plan F has,so for those who have turned 65 after January 1 of 2020, plan G will be the go to. And if you look down the column here, you’ll see there’s only one thing that differentiates a Plan F from a Plan G, and that is the Part B deductible.

 If you recall from the last session, the Part B deductible for 2023 is $226. So the client pays their monthly premium and the only out-of-pocket expense they have is to meet that deductible of $226. Once that Part B deductible of $226 is met, it’s like a Plan F kicks in and everything is covered 100% for the rest of that year. The Part B deductible resets every January. 

The reason a Plan G is a greater value is because if you look at the annual rates of a Plan F and a Plan G, a Plan F can sometimes be anywhere from three hundred dollars to five hundred. Dollars more expensive than the Plan G. So the amount that you save on premium alone can be enough to cover that Part B deductible plus some in most cases. So I always recommend you look at the annual rates and see if you could save that client more than the Part B deductible by going with the Plan G. 

Okay, let’s talk about Plan N. Some say that a Plan N is like the new Plan G because it’s even more affordable premium. But there could be some additional out-of-pocket costs. Just like the Plan G, the Part B deductible of $226 is not included. Now, once the Part B deductible is met, then you could have copays. It could be up to $20 for doctor visits and $50 for Er visits. If you get admitted to the hospital, however, that $50 copay would be waived. 

Also, on very rare occasions, you could have a Part B excess charge. That is where a doctor who doesn’t accept Medicare assignment may charge up to 15% more than the Medicare approved amount. It’s not very common that can happen, but if you do go to a provider that doesn’t accept Medicare assignment, you could have a Part B excess charge. 

Keep in mind that certain states prohibit Part B excess charges. Those states include Connecticut, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, and Vermont. Medicare Supplement Plans have three different types of enrollment. You have Open Enrollment, Guaranteed Issue, and Underwritten. 

A beneficiary’s Open Enrollment Period begins when he or she enrolls in Medicare Part B, that is a triggering event. Whenever they enroll in Medicare Part B, usually that is when they are aging in for the first time at age 65. And in that case, their Open Enrollment Period begins three months before their 65th birthday, the month of and three months after their 65th birthday. However, it could be at a later time if a senior defers their Part B. Open enrollment is important because a client does not have to answer any health questions. So, pre existing conditions will not factor into eligibility. 

Next, you have Guaranteed Issue. This is when a beneficiary receives a 63 day letter from their previous insurance carrier from loss of credible coverage, whether that is voluntary or involuntary. A few common examples include a senior coming off their employer provided group insurance plan, having their Medicare Advantage plan pull out of the county or state they are in, or if their Medicare supplement insurance company goes bankrupt and they lose their coverage. For additional information, you can refer to the carrier’s underwriting Guide. Lastly comes underwritten this is the reason Medicare Supplements can be written year round unless an application is written during Open Enrollment or qualifies for a specific Guaranteed Issue scenario, the applicant will be underwritten for coverage. This is where pre existing conditions can factor into eligibility. 

If an applicant has to go through medical underwriting, they will have to answer all of the health questions on the application, including their prescription medications. They will have a validation of their pharmaceutical information. They will have to disclose their height and weight, their tobacco use status, and they could be subject to a telephone interview if an underwriter needs additional information. I know that sounds like a lot, but the good news you are not a licensed underwriter. So all you, as the agent, have to do is read off the health questions. In the last twelve months, have you had a seizure? Yes or no? There are some cons to Medicare Supplement Plans. Each plan has a monthly premium and not every senior can’t afford a monthly premium, especially if they are on a fixed income. Also, Medicare supplement plans can and will take rate increases. The market trend of an annual rate increase is three to 5%. That’s sort of the norm. 

Let’s do an example. Let’s say I am a 70 year old female and you, as the agent, has enrolled me into a Medicare Supplement Plan when I was 65. Since Medicare Supplement Plans are guaranteed renewable, I have had that same plan now for five years. Each year I have taken on a relatively small rate increase, but now I wanna try to save some money. So, I call you, my agent, to see if I can save some money. You run quotes, and see that I can save a few hundred dollars annually  by switching to another carrier, but I will have to go through underwriting and answer those health questions. So, let’s say I pass underwriting. Then, all is well. My new policy goes into effect, and I save some money. It’s a win-win. However, let’s say I get declined because I am a diabetic that takes insulin. Well, not to worry, nothing bad will happen to me. I won’t be penalized or lose my coverage because I got declined. I just won’t be able to switch at that time. And, I say at that time because you can try to enroll me into another plan that will consider applicants that take up to 50 units of insulin per day. So, you can try to enrollment to that plan to see if  I an able to be considered for coverage. So you do have some wiggle room with that.

The best way to explain a Medicare Supplement plan to a Medicare beneficiary is that you pay a premium upfront to alleviate the out-of-pocket costs you have on the back-end. They would have a flexibility to see any provider they wish and won’t have to worry about  the network  restrictions, as long as the provider accepts Medicare. The cons, as I mentioned previously, not every senior can afford a monthly premium. If you are talking to a prospect that is paying a lot on their premium, don’t be afraid to ask how much they are paying. Perhaps they are on an old Plan F and could save a considerable amount of money by switching to a Plan G or a Plan N. 

Well, that wraps up our lesson 2 Understanding Medicare Supplements. Before we move to lesson 3 Understanding Medicare Advantage Plans, take this short quiz to test your knowledge.