The Tragic Story of Choosing the Wrong Medicare Supplement
by John Claeys
Once upon a time a couple turning 65 trusted their insurance agent to enroll them on a Medicare supplement. The agent signed them up on the one insurance company with which he was contracted to sell supplements. The company offered low premiums on its supplements, and it had a name that the couple recognized. So, the agent sold them each a Medicare supplement with that company.
But this is not the kind of once-upon-a-time story where the couple lives happily ever after. Although the supplements worked well when they saw their doctors—and paid well on medical tests they had run—six months after their supplements went into effect, the couple received their first rate increase. And it seemed like a hefty one—12%!
Although they were startled by such a rate increase—and so soon after buying the supplements—they said to each other, “Well, this must be the way it works with supplements. After all, aren’t all Medicare insurance companies the same?”
Yet, these increases kept coming—every six months. When added together, these increases averaged 20-25% per year! Was everyone experiencing this kind of rate increase?! And if this pattern of rate increases were to continue on their fixed income, how would they be able to afford their premiums in ten years?!
After three years, they decided that something needed to be done about their situation. They remembered the agent telling them when they signed up for these supplements: “This is a good company, so there is nothing to worry about. And, after all, you can change your supplements at any time.” So, they called their agent. They didn’t reach him, so they left a message.
Weeks later, after not hearing from him, they called the insurance company that carried their supplements. When they asked about their agent, they were told he was no longer contracted with that company.
So, where to turn? They talked to friends who referred them to an agent they used; and they called that agent. They explained their situation to their friends’ agent who, in turn, asked them some questions about their health.
In response they asked, “Why do you ask about our health?” “Because,” he explained, “after you move out of your introductory open enrollment period, you can only change to another supplement or to another supplement company if you are able to health qualify. The introductory open enrollment period for a supplement typically ends six months after your Medicare Part B goes into effect.”
They were shocked! But our agent told us we could change supplements at any time!” “Well,” responded their friends’ agent, “You can change anytime you can health qualify. So, let’s see if you can qualify.”
When he found out that the husband was diabetic with a history of heart issues, he shook his head. “I’m sorry,” he said, “I won’t be able to find a company, at this time, that will take you.” Upon learning that the wife had COPD and was taking three different blood pressure medications to try to control her high blood pressure, he gave the same response to her. “I am so sorry! I would love to help; I just can’t. The only option we currently have of reducing your premiums is to look at a Medicare Advantage Plan in the fall—between October 15 and December 7. As long as you don’t have End-Stage Renal Disease, your health won’t be an issue for enrolling on an Advantage Plan. Just keep in mind that Advantage Plans work very differently from supplements.”
The couple was shocked and disappointed. They loved how their supplement worked, especially the fact they could use any doctor [only 2% of seniors have reported difficulty finding a doctor who took Medicare] or hospital that works with Medicare—without having to get a referral. In addition, they have loved the financial protection their supplements had given them, as they had little or no out-of-pocket expense on their medical claims. [This, of course, depends on the kind of supplement one gets.]
The couple felt even worse when they learned from their friends’ agent that not all insurance companies have the kind of rate increases that their insurance company had doled out to them. Some companies only raise rates every twelve months, instead of the six-month increase they had been receiving from their company; and, of those, some have had a rate history of single digits (well under 10%), rather than the 20-25% increases they had experience on an annual basis. If only they had talked to this agent first!
There is a moral to this story: Not all supplement companies are created equal. Find a trusted insurance agent who is experienced with Medicare coverage and who is independent—preferably, one who represents many different insurance companies. If you do, you can inquire about the history of rate increases different insurance companies have had on their supplements. While no one can predict the future, a reliable, experienced, independent agent can give you wise guidance based on past performance. As a result, there is a greater likelihood that you will continue to enjoy the benefits of your supplement for years, while affording the premiums of that supplement.
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