MEDICARE SUPPLEMENTS: A PRIMER
If you are ready to choose a Medicare supplement insurance policy, this section presents useful considerations.
Guaranteed Renewable -- This means the policy can never be cancelled as long as you pay the premiums and as long as you answered all the questions in the application truthfully. It can't be cancelled even if you have a lot of claims or even if the insurance company stops selling Medicare supplement insurance. "Conditionally renewable" means your policy can be cancelled under certain conditions, such as if the insurance company cancels all of the policies like yours in your state. If this happens and you have health problems, you may not be able to qualify medically for another policy. Federal guidelines require that policies be "guaranteed renewable."
Rating of the Insurance Company -- Even if a policy is guaranteed renewable, if the insurance company goes broke, your policy will not stay in force. Buy policies from insurance companies with an A.M. Best Rating of "A-" or higher. Lower ratings (B+, B, C, etc.) put you at risk of losing your policy if the company experiences financial difficulties. Also, if the company has assets less than $1 billion, it's wise to ask the agent if it is "reinsured" by a company with a larger asset base. "Reinsured" means another larger company has agreed to pay after claims reach a certain amount.
Pre-Existing Conditions -- If you replace your old Medicare supplement policy with a new one, the new policy has to cover you immediately for health problems you already have unless the replacement occurs in the first six months after purchasing your first Medicare supplement policy. This means no waiting period for pre-existing conditions. If you are just becoming 65 and buying your first Medicare policy, the longest you have to wait for coverage for pre-existing conditions is six months.
Underwriting -- Unless it is your first policy, Medicare supplement policies you apply for can decline you or charge you more if you have health problems. To get a replacement Medicare supplement policy, you must answer questions about your health. Some companies need time to review your answers and many companies get more information from your doctor. Other companies give your insurance agent the authority to issue you a policy immediately if you can answer "no" to the health questions on the application. In these cases, your agent will leave the policy with you as soon as you complete and sign the application and pay your premium.
Open Enrollment -- Federal guidelines guarantee that for six months following enrollment in Part B Medicare, persons age 65 or older can't be declined or charged more for a Medicare supplement because of health problems. The insurance company can, however, refuse to cover you during the first six months of the policy for any conditions you had diagnosed or were treated for during the six month's period before the effective date of your policy. Beginning January 1, 1995, Federal law extends open enrollment for 6 months at age 65 to those persons who were first enrolled in Part B of Medicare prior to age 65 by reason of disability or end stage renal disease.
If you purchase a Medicare supplement policy as a disabled person prior to age 65, you probably will be able to get Plan A or B. This new law means you can get a better policy (Plans C - J) at age 65.
If you or your spouse continue to work past age 65 so that you are covered under an employer's group plan, you can delay enrollment in Part B of Medicare until you are no longer covered under the group plan. When you know your group coverage is ending, you can apply for Part B of Medicare (with no penalty) and you will have the six-month open enrollment period to obtain an individual Medicare supplement policy regardless of any health problems you may have. As already stated, however, the Medicare supplement policy may contain a waiting period up to six months for pre-existing conditions. Some policies exist that apply only a three-month pre-existing waiting period or no pre-existing waiting period for applicants who obtain a policy during this open enrollment period.
Balanced Budget Act Changes -- For Medicare supplement policies on or after July 1, 1998, insurance companies can no longer impose a waiting period for pre-existing conditions during the initial open enrollment period if you have had at least six months of health insurance coverage before you apply for the Medicare supplement policy. If you've had less than six months, you get credit for the amount of time you have had health insurance coverage. (Certain states may not have this change in effect on July 1st if new sate legislation is required. Check with your insurance department to see the status of your state.)
Premiums -- Many insurance companies allow you to save money if you pay once a year (annually) or twice a year (semi-annually) versus paying monthly or quarterly. If you decide to cancel the policy for any reason, the insurance company does not have to, but may refund the balance of the monthly premiums not used. The three most common methods for premium calculation for Medicare supplement polices are:
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Community Rating -- all policyholders pay the same rate regardless of age |
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| 2.) |
Issue Age Rating -- premium is based on the age you apply for the policy |
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| 3.) |
Attained Age Rating -- age 65 premium is usually lower than Methods 1 and 2 but increases either annually or in age bands such as every 5 years as you get older. |
With methods 1 and 2, premiums go up only to reflect inflation in the cost of benefits; i.e. as Medicare deductibles and co-payments increase, the policy has to pay out more in benefits so you may see a slight increase from year to year. Method 3 usually has sharper increases as you get older because premiums are actually rising with your age.
"Free-Look" Period" -- By law in most states, you have 30 days after you receive your policy to send it back and get your money back. You can either return it to the agent or send it to the insurance company with a letter saying you do not accept the policy and you wish to have your money returned. Call your state's Department of Insurance if you have any problems getting your money back.
Multiple Policies -- You don't need more than one Medicare supplement policy. The reason some people have taken out more than one is because some policies pay better than others, and people think they can get all of their bills paid if they have more than one policy. This is unwise use of your money. There are excellent policies on the market today that will take care of most of your expenses with just one policy. Also, Federal guidelines don't allow an insurance company to sell you a Medicare supplement policy in additions to one you already have. This means if you buy a new Medicare supplement policy, you agree to cancel the one(s) you already have.
Benefits -- An ideal policy will pay both Part A deductible ($764 per hospital stay in each 60-day benefit period) and the Part B deductible ($100 per calendar year). It will also pay the coinsurance for additional hospital days and for skilled nursing facility days.
Excess Physician Charges -- If your doctor does not accept Medicare assignments, you owe the difference between the actual charge and the amount Medicare approves. After 1993, however, the doctor can charge only up to 115% of the Medicare approved amount for excess charges. Medicare supplement policies are available that will pay these balances. Again, you don't need multiple policies to get these excess charges paid.
Miscellaneous Benefits -- Some policies pay extra benefits in addition to Medicare deductibles and coinsurance and excess physician charges.
High Deductible Plans -- The Balanced Budget Act of 1997created a $1,500 deductible option for some policies issued in 1998 and 1999. This means that covered expenses are paid at 100% after the deductible is met. The deductible will increase each year thereafter based on the Consumer Price Index.
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Foreign Travel Emergency -- If you become injured or get sick unexpectedly during the first 60 days of a trip outside the United States, the some standardized plans will pay 80% of hospital, physician and medical care, subject to a $250 annual deductible and a lifetime maximum of $50,000, if the care would have been covered by Medicare if it had been provided in the United States.
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Preventive Care -- Some standardized plans pay up to $120 per year for such things as an annual physical examination, cholesterol screening, hearing test, diabetes screening and thyroid function test. this benefit can also cover mammograms, Pap smears, and/or flu shots if Medicare stops paying for them.
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At Home Recovery -- There are standardized Plans which pay up to $1600 per year for short term, at-home assistance with activities of daily living (bathing, dressing, going to the bathroom, taking medicine, eating, etc.) up to seven visits per week. the visitors can last up to four hours and must be received either while you are receiving Medicare-approved home health services or no more than eight weeks after the last Medicare-approved home health visit.
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Basic Drugs -- Some standardized plans pay 50% of the cost of outpatient prescription drugs up to maximum annual benefit of $1,250 after a $250 annual deductible.
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| Extended Drugs -- there are plans that pay the same as the Basic Drug benefit except the annual maximum is $3,000. |
Claims -- Medicare supplements usually can't pay unless Medicare pays first. This means that the Medicare supplement insurance company needs to see a copy of the Medicare Explanation of Medical Benefits (EOMB) before processing the claim.
If your doctor participates in the Medicare program (accepts assignment of benefits) and you have assigned the benefits of a qualified Medicare supplement policy to your doctor, the company that processes Medicare claims for your state will automatically send your physician claim to the Medicare supplement insurance company for processing. You don't have to handle the paperwork of claims processing, if your doctor accepts the Medicare assignment.
Of course, if your doctor does not accept assignment, you are responsible for filing your claims.
Appeals -- If you are not satisfied with how the Medicare supplement policy handled your claim, contact the insurance company or your agent. If you are still not satisfied, you can call the Department of Insurance in your state for help.
If you have any questions, please contact us at 214-803-3797 or email skovich@sarahkovich.com
