Advantage vs Supplement
Medicare Enrollment… What’s so Hard about That?
By: Andrea Bulen
After working for the same company for 50 years, my father in-law (Bob) recently retired at the age of 68. Up until this point, he was covered through his employer’s health plan. Like many retirees, he figured that because he was 68 and eligible for Medicare, continuing health care coverage would be straightforward and inexpensive. Ha!
Little did he know the hoops he had to jump through to continue health care coverage… and because his daughter in-law is a financial planner (ahem!), she (I) was nominated to help with this process. Bob often says he knows I will take good care of him because I don’t want him living in my basement someday… there is some truth to that.
Untangling the Process:
STEP 1: Apply for Medicare Part B:
Once you turn 65 you are eligible for Medicare Part B. You have a 7 month period to sign up (3 months prior, the month of your birthday, and 3 months after your 65th birthday). However, if you are still working and covered by your employer health plan, you may not need to enroll at age 65. This was Bob’s case. He didn’t need Medicare coverage until age 68 (well past his 7 month sign up period). He was eligible to enroll under the “Special Enrollment Period,” which is the 8 month period after he lost his group coverage. You may ask: Why is the first period 7 months and the second period 8 months? My only conclusion: To make things more confusing.
Signing up for Medicare itself was relatively easy and done by completing the Application for Enrollment in Medicare form provided to us by our local Social Security office. Things got a little stickier when we realized his employer needed to fill out a special form attesting that he had in fact had coverage through his employer up until now. This form is cleverly called the Request for Employment Information form, which his HR department completed.
We sent these two forms in together to our local Social Security office (via snail mail) and voila, a week or so later, he received his Medicare card in the mail. His $104.90 premium will be withheld from his Social Security check each month.
Card # 1: Bob’s Cost $104.90/month withheld from Social Security Check
Ah…success! (Not so fast!) Medicare Part B was only the first step in the process. Now we had to tackle how he was going to pay for the health care expenses that Medicare didn’t cover. On to Step 2.
STEP 2: Medigap/Medicare Supplement Insurance:
There are two ways to insure expenses not covered by Medicare: 1. Purchasing a Medicare Advantage plan; or 2. Purchasing a Medicare Supplement policy. This discussion warrants its own blog, and I won’t go into the differences in this message; but I will tell you that we decided that Bob would go with option 2, Medicare Supplement policy. Note: In case there are not enough details to keep track of, Medicare Supplement polices also go by the name “Medigap.”
The good news is that, in Wisconsin, all Medicare Supplemental policies are standardized and required to offer the same basic benefits and optional riders. Some companies offer a few extra bells and whistles, e.g. “Silver Sneakers” annual membership to a health club and coverage for annual eye exams, but for the most part, they are standardized in what they cover. There are 5 additional riders that you can opt to add to your basic coverage. You can pick and choose which options you want added to your policy. These options are: Coverage for your Part A deductible (which is $1,216); Part B deductible ($147); Part B Excess Charges; Additional Home Health Care; and Foreign Travel Emergency. You can read more about each of these options in http://oci.wi.gov/pub_list/pi-002.pdf. Bob opted for ALL of the options given the relatively small increase in premium.
Now that we understood how the supplement policy worked, we needed to actually find a policy. The good news is that the state provides a list of approved Supplement Policies, which includes contact information and premium information by age and by zip code. The list can be found here: http://oci.wi.gov/pub_list/pi-010.pdf. The bad news is that this list is 124 pages long! Once you understand how the information is presented, it is not too difficult to scroll through the list of companies and compare prices. After we found a policy, we used the contact information to get in touch with an agent that represented that insurance company and he took Bob through the actual application process. This was relatively easy because he was enrolling in the Special Enrollment period referenced above, which meant no medical questions and/or underwriting. He received another insurance card and the monthly premium of $147.50, will be drafted directly from his bank account.
If you do not have the time or interest to look through the 124 page booklet (a.k.a “you have a life”), you can contact an insurance agent who sells Medicare Supplemental policies and represents several insurance companies. He/she can run quotes for you and walk you through the process. The only downfall to this process is that I have not found an insurance agent that represents more than 4 or 5 companies.
Card # 2: Bob’s Cost $147.50/month drawn from bank account
Ok, so now Bob has Medicare Part B and the Supplemental policy to cover everything Medicare does not. We are done…right? Nope, on to Step 3.
STEP 3: Medicare Part D – Prescription Drug Coverage
Medicare Part B and the Supplement Plans do NOT cover prescription drugs. Bob isn’t currently taking any prescription drugs. So, no need to look for additional coverage, right? WRONG! When you turn 65 (or after you lose other creditable coverage as Bob did), you are eligible to enroll in Medicare Part D/Prescription Drug coverage. If you don’t enroll in the initial 7 month period or the same Special Enrollment period referenced above, you’ll need to wait until the annual enrollment period (October 15–December 7) and you’ll pay a penalty if and when you want to enroll. Plus, you never know at what point you will start on a medication during the year. So, it was time to shop for coverage. The easiest way to do this is to visit https://www.medicare.gov/find-a-plan/questions/home.aspx and enter your zip code and any prescription drugs that you may be taking. The system will find all eligible plans in your area and quotes for premiums. Once you find a plan, you’ll have to contact the insurance company directly to enroll in coverage. Your premium will vary greatly depending on your prescriptions and can be withdrawn directly from your Social Security check AND you’ll get a THIRD insurance card.
Card # 3: Bob’s Cost $12.60/month withheld from Social Security check
Step 4: Wait, how much am I paying per month?
In summary, Bob had to enroll in 3 different health plans when he retired: Medicare Part B, Medicare Supplemental Insurance, and Medicare Part D/Prescription Drug coverage.
Medicare Part B and D premiums can be taken directly from his Social Security check and will total $117.50/month and his Supplemental Insurance premium of $147.50 will be drawn directly from his bank account. That is over $3000/year and is on the low end of the spectrum for most retirees.
He’ll have to keep track of his three new insurance cards and make sure to get them on file with his doctors and pharmacies (good thing he is retired). Hopefully, given his type of coverage, he will see very little in terms of bills. Chances are he won’t have to repeat Steps 1 and 2, but he will want to review Step 3 (prescription drug coverage) every fall during the annual enrollment period. No sweat.
COMING SOON:
Medicare Advantage vs. Medicare Supplement policies – What is best for you? STAY TUNED.