The main reason most people buy a Medigap policy is to protect themselves from high out-of-pocket expenses.
In fact, the biggest perceived benefit of owning a Medigap policy is to pay premiums as a (somewhat) fixed expense to eliminate any surprises.
The Plan F high deductible option flies in the face of most people’s idea of why they are buying a Medicare supplement. But there are a number of people who buy the high deductible plan and feel good about their decision.
There are also people who buy high deductible Plan F for the wrong reason… to have a lower monthly premium.
When the Plan F high deductible option makes sense
First, a little discussion about Medicare Supplement Plan F. Plan F is considered to be the most comprehensive Medicare supplement you can buy. Plan F pays for:
- Medicare Part A deductible
- Medicare Part B deductible
- Medicare Part B coinsurance or copayment
- Medicare part B excess charges
- Part A hospice care coinsurance or copayment
- First 3 pints of blood
- Skilled nursing facility care coinsurance
- Foreign travel emergency
- Preventative care Part B coinsurance
- Part A coinsurance hospital costs up to an additional 365 days after Medicare benefits are used up
Plan F will not pay anything toward non-Medicare covered expenses, such as elective surgery or dental or vision care not covered by Medicare.
If you choose the Plan F high deductible option you will be subject to a $2000 annual deductible before you receive any benefits. The good news is that your monthly premium will be considerably lower than if you chose the standard Plan F.
There are generally two sets of circumstances that must be present for the high deductible plan to make sense. You should:
- Be in excellent health and continue to make the right lifestyle choices to maintain that state.
- Have assets available that would allow you to pay that amount (potentially yearly) without jeopardizing your finances or being emotionally bothered by the requirement.
What you are doing, in essence, is self insuring for the first $2000 of annual medical expenses that would normally be your share for covered services. Original Medicare will still pay its portion first. For example, a $100 doctor visit would require that you pay the $20 yourself. That $20 would reduce the balance of your deductible for the current year.
An alternative way to save money if you don’t fit the high deductible Plan F buyer profile
There have been cases where people who really had no business buying the high deductible option did, for all the wrong reasons. Some people just don’t do the research or are unable to understand the consequences of using the plan they choose.
There are also cases where a commission hungry insurance agent went for all the money on the table rather than discussing the option of choosing a Medicare Advantage plan. After all, buying a Medigap policy is not the right choice for everyone.
If you are uncomfortable with buying High deductible Plan F, there is another plan you should consider that may allow you to save money.
Check out Medicare supplement Plan N. There are only a couple differences between Plan F and Plan N. These differences include:
- You are responsible for the Part B deductible
- You may pay up to $20 for a doctor visit
- You may pay up to $50 for an emergency room visit
- Part B excess charges are not covered
Plan N generally has a lower premium that Plan F and if you are good health, you may realize some savings without exposing yourself to the possibility of paying a $2000 deductible.
Plan N is not offered by all insurance companies, but for those that do, the benefits will be identical as Medigap plans are
If you fit the buyer profile for high deductible Plan F, you may come out ahead. But you should also think about the future. If you need to change plans, there is a good chance that you will be subject to medical underwriting. If this concerns you, do a comparison between the Plan F high deductible option and Plan N.