Medicare open enrollment season is a big time of angst for many retirees, especially those being pressured to swap plans or medical providers.
New York City’s retired municipal workers were told they’d be automatically enrolled in a privately administered Medicare Advantage plan on Jan. 1, 2022, unless they opted by Oct. 31 to keep their old Medicare plans. To stay put, they’d have to pay about $200 a month more, as would covered spouses. But they had little info on how the new plan would impact total healthcare costs, provider choices and eligible services. Days before the deadline a state Supreme Court judge indefinitely halted the switch, ordering the city to retain retirees’ current healthcare plans. Many beneficiaries feel relieved but don’t know what plan to choose if the stay is lifted.
Also recently, a big medical practice in Central New York notified patients enrolled in Excellus Medicare Advantage plans that it’ll no longer take care of them as of Jan.1 unless they switch to a different Medicare Advantage plan or enroll in original Medicare. That’s because the practice is severing ties with Excellus, the region’s largest health insurer.
Scary But Not Necessarily Bad
“Significant changes and reductions in employer-provided retiree Medicare coverages have been a trend over the past 20 years,” says Dr. Katy Votava, PhD, RN, the founder and president of GOODCARE.com, an online resource for planning and paying for healthcare. “Sometimes the changes make it into the news, and sometimes they don’t.”
“Changes like these are always scary to clients!” she adds, because they worry they won’t get the care they need at a price they can afford.
Medical practices “telling seniors to switch health insurers or get new doctors is another phenomenon that is more common than advisors might think,” says Votava. “Large practice groups have the power to realign their contracts to meet business objectives more effectively. However, clients can be left out in the cold if they don’t take action quickly.”
In either scenario, she says the best thing for advisors to do is to recommend their clients give themselves their annual “Medicare Check-up” to see if the available plans will meet their needs for the coming year. Clients also need to check if their healthcare providers and medications are included in the Medicare offerings, she says — and at what costs.
On the bright side, “Some people are pleasantly surprised to find out that newer coverage options can work even better than current ones,” says Votava.
Broach the Subject
Clients may not always volunteer that they’re struggling with health-insurance confusion. Financial advisor June Schroeder makes a point of broaching the subject.
“Covering health insurance is part of our usual inquiry and often the confusion is right at the start of age 64 when they are beginning to plan,” says Schroeder, founder of Liberty Financial Group of Elm Grove, Wisc. “Then, as time goes by and they are blasted with one ad after another about Medicare, the confusion mounts,” she says.
She and her colleagues provide some basic health-plan education to clients. “Years ago — maybe 30? — we did try to advise on supplements and Advantage and the difference, but things have gotten so complicated we haven’t done that in a long time, even though I am an RN and insurance licensed!” says Schroeder.
These days, she refers clients to Diane Omdahl, RN, MS, co-founder and president of 65 Incorporated, a Wisconsin-based Medicare consulting firm that’s paid on a fee-for-service basis and doesn’t sell insurance.
According to Omdahl, one of the biggest problems Medicare beneficiaries are now struggling with — and they may not know it — pertains to their drug plans. Many are being auto enrolled in new, pricier plans as their old plans vanish amid industry consolidation. Some could see their monthly drug premiums jump from $11 to more than $50 if they’re not paying attention, she says.
Wellcare is streamlining its prescription drug plan offerings from six plans to three plans in 2022, she says. Participants in the Express Scripts Medicare prescription drug plan are being auto enrolled in a Cigna prescription drug plan for 2022. Back when Humana got rid of its $21 per month plan, it automatically enrolled participants in its $56 per month plan although it was also offering a $13 plan, says Omdahl.
“No matter how satisfied you are with your plan, pay attention because you’re going to be stuck come January 1,” she says. And clients will need help. The names of many of the drug plans are confusingly similar and to read their required Annual Notice of Change, “you need a magnifying glass if you’ve got old eyes,” she says.
Omdahl and Schroeder have been talking together about the Medicare Advantage commercials. Senior hear “zero premium, zero deductible, zero co-pay, but if you think you’re not going to pay, you’re in for a shock,” says Omdahl. “You have to dig into the fine print.”
For example, that $0 co-pay may only apply to a primary doctor in their local community, and some plans may charge 20% for cancer treatment, says Omdahl. She says she’s seen Medicare Advantage plans east of the Mississippi with a maximum out-of-pocket cost of $7,550 for in-network services. Seniors must also be made aware that if they want to give up Medicare Advantage and go on original Medicare and get a supplement, they will likely have to go through medical underwriting in all but four states [Massachusetts, New York, Connecticut and Maine].
“When the wheels fall off, they want a supplement,” says Omdahl, “but they can’t just dump their Advantage plan” most of the time.
Cast a Wide Net
David F. Smith, PhD, CFP, a long-time planner who now specializes in Medicare assistance, says he also understands the confusion many beneficiaries face. “They are stressed and do not receive objective advice often. No one can be ‘forced’ but they can be ‘sold,’” he says.
Smith, a board member of the Financial Planning Association’s San Diego chapter, says his first piece of advice to every Medicare beneficiary — the newly eligible and those contemplating a change during annual enrollment — is to work with someone who represents the majority of options. This includes Medicare with prescription drug and supplement plans, and Medicare Advantage plans.
“If a planner is not that person, they should help their clients find that person,” he says. Finding someone who represents most plans “allows the possibility of a more objective process” says Smith, who represents 80% of the plans available in San Diego County.
The first step is to determine if your clients want managed care or freedom to choose, he says. “Managed care generally costs no more than continuing to pay for their Part B and whatever co-pays, etc. are in the Medicare Advantage Prescription Drug Plan (Part C),” he says. “Freedom of choice has the Part B cost, the cost of a prescription drug plan (Part D), and the associated co-pays and deductibles which will be much higher than under a Part C plan.”
When people first become eligible for benefits when they are 65, they can enroll in original Medicare and buy a supplemental policy (Medigap) without any medical exams. The guaranteed issue period for supplemental policies is a six-month span that starts on the effective date of their Part B coverage. However, some beneficiaries don’t purchase a supplemental policy – either because they decide to go without one or enroll in Medicare Advantage instead. But they may be ineligible to purchase one later on if they wish to manage high out-of-pocket costs, says Smith. Although this can make it difficult to leave Medicare Advantage, not everyone gets stuck there.
We already mentioned the four states that may not deny the sale of a Medigap policy. Elsewhere beneficiaries healthy enough to pass a medical exam can qualify for Medigap at a later time. Some carriers hold an additional open enrollment period from time to time, says Smith, “but there is no requirement and it is rare as only unhealthy people would likely take advantage of the guaranteed acceptance.” And carriers occasionally allow beneficiaries to exchange an existing supplemental policy without evidence of insurability, he says.
Meanwhile, California and some other states require carriers to allow an equal plan exchange each year around a beneficiary’s birthday, he says.
Clients also need to know that plan options don’t always look that different on paper. When beneficiaries have several plan options that are pretty much identical, “it almost always comes down to the doctors and facilities they want to have in their plan,” says Smith. Most multi-option search engine results include whether a selected provider is in the option or not. “If the beneficiary is unwilling to change providers, this narrows the scope of choices,” says Smith, who reviews each option in terms of costs, providers, and benefits.
“The only times I’ve seen clients feel ‘forced’ to adopt Medicare Advantage is if a Medicare supplement was never in their budget from the start, or if their Plan F or Plan G supplement premiums got to be too high over time,” says Scott Schwalich, CFP, a wealth strategy advisor at Anderson Financial Strategies, a fee-only financial services firm in Centerville, Ohio. “It’s not uncommon for clients who enrolled in Plan F or Plan G at age 65 to see their premiums practically double by age 75.”
“I would certainly recommend anyone feeling pressure to leave their Plan F or Plan G due to rising premiums, who isn’t sure about Medicare Advantage, to evaluate switching to High Deductible Plan G first,” he says. It gives the beneficiary the ability to see any doctor in the U.S. that accepts Medicare, its premiums are often a fraction of Plan G and Plan F, and it typically has much slower premium increases, says Schwalich, who was a Medicare agent before becoming a financial planner.
He clarifies that anyone who was new to Medicare prior to January 1, 2020, is eligible for High Deductible Plan F and anyone new to Medicare on or after that date is eligible for High Deductible Plan G.
With High Deductible Plan G, clients must first satisfy the deductible ($2,370 in 2021, $2,490 in 2022). But since Medicare already covers 80%, this means beneficiaries must pay 20% of their medical bills for outpatient coverage, until they hit $2,370, and then they pay $0 for the rest of the year, says Schwalich. Looking into a high deductible supplement “makes even more sense if someone is relatively healthy and not using their current supplement all that much,” he adds.
With a Medicare supplement, clients who are diagnosed with something very serious could likely travel to other states to see top specialists, he says. “Think Mayo Clinic, MD Anderson, etc.” With Medicare Advantage, they’re almost always going to be limited to the local specialists, he says. “Supplements are also better for snowbirds who split their time in different states and for avid travelers who explore the country in retirement.”
Overall, supplements also tend to be smoother to use and have less billing issues, he says, noting that if Medicare covers a service, it’s nearly always approved.
“I’m a huge advocate of keeping doors open when making Medicare enrollment decisions,” adds Schwalich. “If someone has the financial wherewithal to afford a supplement and they aren’t 100% sure they want a Medicare Advantage plan for life, I think they should always start out on a supplement and keep their Medicare ‘trial right’ in their back pocket.” This enables them to switch to a Medicare Advantage plan in the future and get a risk-free 12 months to try it out while preserving the right to return to their old supplement plan without underwriting.
“I say this because the number of clients who would come to me in their 70s and 80s looking to go from MA to supplement — but usually couldn’t due to health issues — far outweighed the number of clients in that age group looking to go from supplement to MA,” says Schwalich.
Clients should look to see if their existing insurance carrier offers the high deductible option. “If so, oftentimes a client can switch without medical underwriting, which is a big plus if there are any health history concerns,” says Schwalich.
For clients newly eligible for Medicare, “it’s best to use Medicare.gov to see all the carriers who offer HD G in your zip code, and then do some shopping from there on the carriers’ websites,” he says. “Since all HD G plans are the same in terms of coverage, and every carrier raises rates in a reasonably close manner, it’s usually best to look for the lowest starting premium you can find.”
Smith offers some encouraging words for advisors and their clients: “It’s really not hard to plan for Medicare if you work with an ethical, educated, multi-carrier professional.”
Jerilyn Klein is editorial director of Rethinking65.