Medicare Supplement Plan F and Plan G key facts

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Plan F is by far the most common Medicare Supplement Plan, and usually the most expensive.

It covers 100% of the gaps left from Medicare Parts A and B. There are no co-pays, no deductibles, no extra costs whatsoever. But if you want to save money, not only now but for years to come, then take a moment to understand why you should consider Plan G.

Plan G is identical to Plan F, except for only one difference: Plan G does not cover the Part B deducible, which is $147 per year in 2014 (Update – the Part B deductible in 2016 is $166).

This deductible is unchanged from last year (original article written in 2014 – on Jan 1, 2016, the Part B deductible increased to $166), and actually slightly less than it was in 2012. So that’s it…that’s THE only difference between the two plans. Once you have met this deductible of $147, for the year, your Plan G effectively becomes a Plan F, and will work exactly the same way.

Now, let’s do some math: $147 for the year, spread out over all 12 months, works out to exactly $12.25 per month. But, there is always a bigger difference than $12.25 in the monthly Premiums from Plan F to Plan G, from the same company. Sometimes this difference is $40 per month, or more! So, no matter how often, or little, you go to the doctor, you will ALWAYS come out better on Plan G if the premium difference is at least $12.25/mo ($13.84 /mo in 2016), because you will save more in premiums each year than you can be charged for the deductible. For example, If Plan G costs $20 less per month than Plan F, then you will save $240 for the year in premiums. So even if you have to meet the $147 deductible, you are still coming out ahead by $93. That’s because you are saving $240 but spending only $147, a difference of $93, which stays in your pocket.

This information alone should be enough to convince you that Plan G is a better value, but there is a better, and more significant reason, and it’s this:

Historically, Plan G rate increases are less than Plan F rate increases. By law, all insurance companies in the Medicare Supplement Market must make Plan F available to those in a guaranteed issue situation, i.e. when they are leaving a group plan and joining Medicare. But not Plan G. There is no guaranteed issue for Plan G, meaning they will require health underwriting to qualify. Therefore, Plan G has a higher number of applications that have to go through underwriting than Plan F.

So how does this affect you? To answer this, you need a basic understanding of how insurance companies go about the process of rate increases, year after year. In order for a Medicare Supplement company to raise your rates, they must first file for approval with your state insurance department. They cannot single you out, nor can they raise your rates, but not your neighbor’s, except for age. They must raise rates uniformly, for a defined geographical area, and for a single plan. And, they must justify WHY they are raising rates…which comes down to one thing: what they have paid out in claims. So you should ask yourself, which pool of people do you want to be in, the ones with Plan F, or the ones with Plan G?

To give you a real-life example, a national insurance company that writes Medicare Supplements just filed for a 10% rate increase in Texas for Plan F, and only a 1.8% increase for Plan G. In 2015, another company filed for a 6% rate increase on Plan F, and a 0% increase on Plan G.

If you have been on Medicare with a Supplement for over 6 months, you must qualify on health to change your Supplement, whether you are applying for Plan F, or G, or any other Plan, so there is no better time than now to make the switch to Plan G.

Plan G has lower utilization than Plan F.
Another reason Plan G sees lower rate increases than Plan F is that Plan G sees lower utilization. That small $147 deductible is enough to make some people think twice about going to see the doctor, and therefore keeps claims lower. Yes, even a small deductible makes a difference in how often some people use their plan. Plan F tends to be over-utilized, because there is no deductible associated with going to see the doctor.

Now that you know how Plan G will benefit you, it’s important that you understand the process of applying if you have already had another plan. Generally, changing your supplement will require that you answer health questions, and different companies ask questions slightly differently. If you haven’t had any heart, stroke, or cancer issues in the last two years, and you don’t take more than 50 units of insulin per day, there are companies out there who will consider your application. But, if you don’t change now, then you run the very real risk that a sudden change in health will make it difficult or impossible for you to change later.

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