As food and gas prices rise many people on fixed incomes are looking for ways to cut their budget. Some people on Medicare have gone as far as cancelling their Medicare supplement policies.
A Medicare supplement, also known as Medigap, is designed to control your budget by limiting your exposure to expenses from Medicare covered services that would normally be your responsibility.
These expense could include a deductible for an inpatient hospital stay or the annual deductible and 20% coinsurance amount for outpatient services.
So, is it a good idea to cancel your Medicare supplement insurance? That depends on several factors ranging from your health, budget and even the time of the year.
But first, why is Medicare insurance, of all types of expenses, even on the table as a possible item to eliminate? Why not cut out cable television, meals out or other extravagances?
One reason why some people consider eliminating their Medicare supplement insurance is reflected in the fact that they are routinely confronted with premium increases.
In some cases this is coupled with limited use of their policy due to the good fortune of being healthy. In this case people tend to forget why they have insurance in the first place and begin to see the premium as wasted money.
Before you cancel consider these 4 things
Before you make a rash decision, there are some thing to consider that may help you accomplish your goal of saving money. After all, you need to think about why you purchased a supplement in the first place.
1. Medicare supplement plans include standardized coverage. The benefits with Medicare supplement Plan F, for example, will be identical no matter which insurance company you buy from. And you more than likely have several companies offering plans in your State from which to compare. Monthly premiums can vary widely… sometimes by as much as $100 per month for the same coverage!
Saving a substantial amount of money on your monthly premium may be enough to to keep your coverage and accomplish your goal of cutting your expenses. Call (888) 310-0376 to speak with an agent and get personalized quotes for plans in your area.
2. Another way to keep your supplemental coverage and potentially save money is to look at a plan with less comprehensive coverage. Medicare supplement Plan N is one option that may work for you. Plan N normally has a lower premium because you are responsible for the Medicare Part B deductible, up to $20 for a doctor visit and up to $50 for an emergency room visit.
If you were considering going without supplemental coverage anyway, the small amount out-of-pocket should pose no problem. If you have some pre-existing health conditions, you may be limited to getting a quote from your current carrier, as underwriting may pose a problem with a new carrier. Your current insurance company will more than likely accept you due to their having less liability.
3. If you can hold off on cancelling your supplement for a few months, you may want to consider switching to a Medicare Advantage plan. An Advantage plan is not considered a Medigap policy, but is merely another way to receive your Medicare benefits. Plans are available from private insurance companies and Medicare Advantage enrollment begins on October 15th and ends December 7th each year.
During the enrollment period you can compare Medicare Advantage plans and choose a plan that suits your needs and budget. Because Advantage plans typically require that you share in the costs of medical service in the form of deductibles, coinsurance and copays, the monthly premium is normally much lower than a Medicare supplement’s monthly premium. Many plans have premiums of $0 per month.
Plans are available County by County and benefits can vary from one area to the next. Plans are not standardized and you should really research plans before you cancel your supplement. Visit medicare.gov to find plans in your area.
4. If shopping for a different insurance company, changing plans or enrolling in a Medicare supplement are either not an option or unappealing, you could follow through and consider self insuring. But if you original motivation for cancelling your coverage was that the premium was becoming unaffordable, you should really think twice.
If on the other hand you were seeing the monthly premium as wasted money, you could do worse than being covered by original Medicare alone. Think it through, because if your health deteriorates, your only option in the future may be to enroll in a Medicare Advantage plan.
More things to think about before dropping your Medicare supplement
Before you cancel your supplemental policy there are some other things you should consider as well. These have to do with your Medicare coverage going forward.
The first thing you need to recognize if you cancel coverage is that if your health is poor or may become poor, you may not be able to buy a Medicare supplement policy in the future. Unlike Medicare Advantage plans you will be subject to medical underwriting unless you qualify for guaranteed issue rights.
Additionally, you may have cancelled a supplemental plan that is no longer available. For instance, Medicare supplement Plan J was phased out in 2010, but was grandfathered in for those who were enrolled at that time.
Some people still have supplements that include drug coverage. If you drop that type of plan, there will be no going back and you will be required to enroll in a Part D plan to receive drug benefits.
Another thing to consider relates to Medicare Advantage plans. First, you may have few options where you live, especially if you are in a more rural County. Advantage plans, unlike supplements, typically require you to utilize a provider network and you not have the same freedom afforded under a Medicare supplement.
If you are considering an Advantage plan, here are the most important documents to research before joining:
- Summary of Benefits – Includes all plan details
- Provider Directory – Networks can have provider changes each year
- Part D Formulary – If Part D is included this will list covered medications and tier placement
Medicare Advantage plans are a completely different type of Medicare plan than Medigap policies, so do your homework before you cancel your Medicare supplement. Most importantly, don’t cancel you supplement until you have been issued a letter of acceptance with an effective date from a new plan. Also be certain that you do not have a lapse of coverage between the two plans.
Keep in mind that Advantage plans do not begin until January 1st of the following year, even if you submitted an application in October. To be certain that you are not placing yourself at a disadvantage, speak with a knowledgeable insurance agent. Call (888) 310- 0376 to check on plans in your area.