Plan F is, by far, the most common Medigap plan. According to the annual
Medigap trends study done by AHIP, over 53% of people that have a Medigap plan have a Plan F. This number has been relatively steady for the last 5+ years. As momma always said, though, just because everyone else is doing it, that doesn’t mean you have to. Plan F, put simply, is not always the best deal, and this article will explain.
First of all, it’s a simple numbers game. The only difference between Plan G and Plan F is the coverage of the Medicare Part B deductible. That deductible, for 2013, is $147/year. In nearly all cases, the premiums for Plan G are greater than $147/year less than Plan F premiums. In some cases, you can get the lowest-premium Plan G for $30-40/month less than the lowest-premium Plan F, saving yourself as much as $400-500/year on premiums simply in exchange for paying the annual deductible of $147.
What’s more, the Medicare deductible is Medicare’s deductible – NOT the plan deductible – contrary to popular misconception. This means that, if you change plans mid-year from ‘F’ to ‘G’, the plan may have already paid that Part B deductible on your behalf. If so, having Plan G for the remainder of the year would be equivalent to having a Plan F. In this case, the premium savings would be equal to your net savings – you wouldn’t even have to subtract out the Part B deductible amount.
A last factor that is possibly the most important is the rate stability of Plan F versus other plans, including specifically Plan G. Historically, and even more so the last 3-4 years, Plan F has not been as stable over time as Plan G and other plans. In other words, if a company has a rate increase, their Plan F may go up 8% and their Plan G may only go up 4%.
The reasons for this are a little complex, but here they are. Plan F is offered on a ‘guaranteed issue’ basis to people in certain situations (i.e. losing employer coverage, losing Advantage plan coverage, moving out of their Advantage plan’s service area), whereas Plan G is not offered on a ‘guaranteed issue’ basis in those situations. Any time that an insurance company cannot screen applicants, rates are going to be higher. So, what you have with Plan F is, on average, a less healthy “pool” of insured people than you do with Plan G. This leads to more claims and, in turn, more/higher rate increases.
Now, if you have a Plan F or if that is the plan that you are absolutely sure that you want, there’s nothing wrong with it. It is the top level of coverage offered under Medigap plans currently. And, you can certainly keep your ‘F’ plan. But, you should understand that there may be something that would be a better value for you and is more likely to hold up better over time.
Garrett Ball is the owner of Secure Medicare Solutions, Inc., an independent Medigap brokerage that works with 35+ companies in 40 states. If you want more information or a customized comparison of rates for your area, visit Medicare-Supplement.us.