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One way to save money each year is by switching your Medicare Supplement Plan to a Plan F High Deductible in 2019.

A High Deductible Plan F pays for everything a regular Plan F pays AFTER you meet an annual deductible.

Medigap Plan F, currently still the most popular choice.  It provides the most expensive coverage among all current Medigap plans. Some people cannot afford a traditional Plan F, especially in their older years.  Premiums tend to increase as you get older.  Also starting in January of 2020, no new Medicare Beneficiaries will be able to join a Plan F.  Existing Medicare enrollees will still be able to keep their plan, and if they are healthy, will still be able to obtain a Plan F even after the year 2020, according to the rules.

With a Plan F high deductible in 2019, you'll pay the deductibles.  You'll pay co-pays.  You'll pay co-insurance amounts of original Medicare.  You'll pay all these until you reach your deductible. Once you reach your deductible, the Medigap High Deductible Plan F kicks in and pays 100% after that.

Medigap Plan F High Deductible in 2019 has low premiums compared to regular Plan F policies, though it comes with a cost. That cost is a yearly deductible amounting to $2,300 in the year 2019.

Find out which plan is right for you by taking the premiums of a Plan F and compare it to the premiums of Plan F High Deductible in 2019.  Then add the deductible to that amount.  It should be an easy comparison.  But you need to add in the “hassle factor”.  If you like the idea of not having to keep track of how much you spent, then a High Deductible Plan F might NOT be for you.

Here's an example for a 75-year-old nonsmoking female in Bluffton, SC, compiled for a June 2019 effective date.

Regular Plan F:  $168.68 per month x 12 months = $2024.16

Plan F High Deductible in 2019:  $47 per month x 12 months = $564 + $2300 (deductible) = $2864

If the Plan F with High Deductible in 2019 could be more money, then why would you want to purchase this instead of a regular Plan F?

Usually, it's because you are willing to gamble a bit.  You are very healthy and don't anticipate going to the doctor.  Yes, you are taking a little bit of a gamble.  But the difference between the two plans (not counting the deductible) is $2024.16 – $564 or $1,460.16.  So if you are very healthy, and don't see the doctor very often, your gamble would pay off over a thousand dollars!

However, the Journal of Accountancy sees it a different way.  They think that your financial adviser should do a cost-benefit analysis before purchasing a High Deductible Plan F based on age.

At certain ages a client's annual savings in Medigap High-F premiums compared to Medigap F premiums will exceed the annual deductible. This is what is referred to as the “break-even” age. In the example below, age 81 is used to illustrate the point, but the break-even point can be lower for some beneficiaries, depending on Medigap prices and the state they live in.1

For an 81-year-old woman, the annual premium cost of Medigap F from a large, financially strong insurance company in a Midwestern state is $3,084. The annual premium cost of the same company's Medigap High-F is $847.08 for a total cost savings of $2,236.92. The annual deductible in 2018 is $2,240, or within a few dollars of the break-even point. Therefore, it may make sense for this client to switch to a Medigap High-F plan, especially if she is in good health and anticipates spending less than the deductible in health care costs.2

Chart that shows the costs of a High Deductible Plan F based on a doctor's visit.

Even if a client is younger than the break-even age, a Medigap High-F plan may still make sense. It does mean that the adviser should perform careful analysis of the potential savings from selecting a Medigap High-F plan and determine the amount the client is “at risk.” For example, a 72-year-old female client may purchase a Medigap F for $2,808 per year. A Medigap High-F plan from the same provider in her state would cost $864. The $1,944 in premium savings is less than the annual deductible of $2,240. But if your client considers herself in good health, she may decide that the amount she would save by choosing a Medigap High-F plan is worth chancing the “at risk” amount of $2,240 minus $864, or $1,376.3

Chart that shows the cost comparison between an 81 year old and an 85 year old for Medigap Plan F and Medigap High Deductible Plan F

*Note these numbers are for 2018.

*To review the article go to https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html

Another time to consider a Plan F High Deductible in 2019 is when you don't want to be restricted by a Medicare Advantage Plan Rules, but the monthly premium for a Plan F is beyond your reach.

The Journal of Accountancy also admitted that “Finances aren't the only factor” when deciding which Medicare Insurance Plan to purchase.   They used an example of a 96-year-old who had a Medicare Advantage Plan and paid only $25 per year.  The plan included prescription drug coverage, which Medigap Plans do not cover.  The article discussed the fact that the MAPD must have a MOOP (maximum out of pocket) and the fact that MOOPs can vary based on a plan.

In their example, the mother was homebound and that meant her family member had to take her to doctor's appointments.

Medicare Advantage plans typically have networks which means that you must use their contracted doctors or the plan won't pay.  In their example, the daughter wanted to take her mom to a doctor that was near her, but since she lived in a different county, she couldn't.

By moving from her MA plan (during the Annual Enrollment Period) to traditional Medicare plus a Medigap High-F, the mother could select a new doctor very close to her daughter's home.4

For them, it didn't matter as much that the new plan had a higher monthly premium, the most important factor was that she would have more choice in care providers.  However, they still saved money in their example:

Annual premium cost of traditional Plan F  $4,164

Less: Annual premium cost of Medigap High-F  ($1,320)

Plus: Savings from dropping the MA plan*  $300

Total savings before the annual deductible  $3,144

*Premium of $25 monthly or $300 per year; does not include the MA plan co-payments and co-insurance amounts.5

What Should You Note While Comparing?

If you are comparing Medigap policies between two providers, ensure that you compare the same type of policy. Don't call your Plan F High Deductible in 2019 a “Plan F” because they aren't the same.  The monthly costs of these two plans are much different.

Remember that we don't know what the deductible will be in the future.  Although it's set by the Center for Medicare And Medicaid Services (CMS) and not the insurance companies, the deductible can, and does, increase.  The increases have been small in the past, but we can't guarantee it.

If you have questions regarding Plan F High Deductible in 2019 and whether it is the right plan for you, give us a call at 866-445-6683 or use our contact form to send an email.

  1. High-deductible Medigap plan makes sense for some, High-deductible Medigap plan makes sense for some, https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html
  2. High-deductible Medigap plan makes sense for some, High-deductible Medigap plan makes sense for some, https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html
  3. High-deductible Medigap plan makes sense for some, High-deductible Medigap plan makes sense for some, https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html
  4. High-deductible Medigap plan makes sense for some, High-deductible Medigap plan makes sense for some, https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html
  5. High-deductible Medigap plan makes sense for some, High-deductible Medigap plan makes sense for some, https://www.journalofaccountancy.com/newsletters/2018/mar/high-deductible-medigap-plan.html

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