Buyer Beware in Medicare

More than 20 years ago private insurance companies offered such wildly different policies to supplement Medicare that it was virtually impossible for seniors to compare the costs and benefits.

To address the confusion, Congress passed a requirement that all policies that supplemented Medicare (Medigap plans) must meet the standards of ten defined categories of coverage. Since, by law, all policies within a category had identical benefits, seniors could buy a plan with coverage they wanted by the price alone.

One would assume that the transparency this law required would, along with the invisible hand of the market, bring premiums into line. That has not turned out to be the case. Medicare Supplement (Medigap) insurance policy premiums are often way overpriced.

As an example, if a senior wants a Medigap policy that only covers the minimum benefits defined by the law (these policies are classified as “A” Plans), the premiums charged by the companies authorized to sell plans in Connecticut range from $122.75 per month to $481.30 per month.

Since both the most expensive plan and the least expensive plan must provide identical benefits, a senior who doesn’t know the range of premiums may pay four times as much for an “A” Plan. That adds up to $4,302.60 per year wasted on a plan that offers no more benefits than the least expensive one.

The range of premiums in the other plans is not quite so dramatic, but the difference between the least and greatest premiums of companies offering the most popular “F” Plan is still $2,522.64 per year.

It’s easy to say that seniors should be better shoppers, but the premium information isn’t as easy to find as a price sticker on a box of cereal (actually, those are hard to find now as well). 

If you don’t believe me, try to find the premiums of all the “A” Plans offered by Medicare approved companies in Connecticut (hint: there are 14 of them). Even if you can use the Internet, which many older seniors can’t, you’ll be entering your name and address into sites that will give you individual quotes and not comparisons. The invisible hand of the marketplace is so invisible as to be non-existent.

Do you need help to find if your Medigap policy is overpriced for the coverage you want? Call the Greenwich Commission on Aging office at 203-862-6710 and we will meet with you in a confidential, no-cost session to review your coverage and tell you the premiums of all the plans offered by all of the companies in Connecticut.