“My mama told me, "You better shop around, (Shop, shop)
Oh yeah, you better shop around" (Shop, shop around).”
Smokey Robinson and The Miracles, Shop Around
Oh yeah, you better shop around" (Shop, shop around).”
Smokey Robinson and The Miracles, Shop Around
“The way to build your savings is by spending less each month.”
Suze Orman
Suze Orman
Such is the case for elderly Medicare enrollees shopping for suitable Medicare supplemental insurance products. These supplemental products place caps on the annual out-of-pocket costs routinely associated with utilizing federal Medicare insurance, and most often pay for costs not covered by Medicare.
The sky is the limit for individual Medicare costs for enrollees who foolishly leave Medicare insurance coverage un-supplemented and uncapped. Coinsurances and co-pays for enrollees practicing unsafe Medicare might total hundreds of dollars, thousands of dollars… or even hundreds of thousands of dollars in any given year. To infinity and beyond.
Words to the wise? Use protection, buyer beware and… you better shop around.
Consider the process of shopping for the Medicare supplemental insurance products commonly known as Medicare Supplements, or Medigap. Medigap is a very affordable private insurance product that is sold to Medicare enrollees by large, private insurance firms.
Medigap policies work in direct concert with Medicare to: pay for all or most of the co-insurances and co-pays generated while utilizing Medicare insurance, and to place a finite cap on annual Medicare out-of-pocket expenses. Medigap plugs Medicare gaps.
Medigap policies are designed by and closely regulated by the federal Medicare program. There is an alphabet of different types of Medigap products to choose from; varying in extent of insurance protection, risk coverage, and monthly premium assessed.
Federal oversight guarantees that any one particular type of Medigap product will offer the exact same extent of insurance protection as all others of the same type… regardless of which insurance company sells the policy.
However, premiums for identical types of Medigap products can vary crazily from one insurance company to the next. Federal control over these products assures uniformity of insurance protection for each and every particular flavor of Medigap product… but offers zero uniformity of price or premium. There are some very good reasons for these price differences.
Like most health insurance products, Medigap insurance generally requires that an enrollee be in good health to qualify to purchase the insurance. History of poor health, pre-existing medical conditions, extensive use of prescription drugs, family health history… can each-or-all serve as disqualifiers of insurability.
However, the folks at Medicare have mandated a sweetheart deal for all new Medicare enrollees regarding the purchase of Medigap. All new Medicare enrollees MUST be allowed to purchase a Medigap policy regardless of health status and of health history. Even gravely ill and terminally ill new enrollees must be accommodated.
This guarantee is offered for only a limited seven month period of time: the three months prior to a sixty-fifth birthday, the month of a sixty-fifth birthday, plus the three months after a sixty- fifth birthday.
If Medicare enrollment is delayed until after a sixty-fifth birthday because of documentable other credible health insurance coverage, the same generous guarantee is offered to latecomer new enrollees… for the three full months following the month of new Medicare enrollment.
After these limited guaranteed enrollment periods expire, all bets are off… and all enrollees must health-qualify to enroll in Medigap policies. Do not procrastinate, or otherwise squander this golden enrollment opportunity. You snooze, you lose.
The federal mandate that Medigap insurance enrollment must include even unhealthy and dying Medicare enrollees wreaks holy havoc on the underwriting of risk for these insurance products… and creates a climate perfect for big fluctuations in the premium costs of the policies.
In effect, the longer a particular insurance company’s Medigap policy hangs around, the larger becomes the number of seriously ill and dying enrollees that populates its pool of insured persons. Over time these policyholder pools get sicker, and riskier. The pools become more expensive to insure against risk… and premiums for coverage are necessarily increased to cover the enhanced risk. In a nutshell, older products are always sicker, riskier, and more expensive.
Several geographically distinct Medigap insurance territories are carved out in each State for use by the collective of insurance companies that sell Medigap policies… to make fluctuating insurance risk easier to analyze and manage. Each territory operates as its own micro-market for Medigap policies.
Each geographically defined area generates localized insurance premiums based on the collective risks presented by the policyholders in that pool. A State that contained five separate territories might list five different insurance premiums from a particular insurance company… for the exact same type of Medigap insurance product sold in each of the areas. The level of risk in each area is the pricing key.
Similarly, the insurance premiums charged for Medigap policies by several different insurance companies operating concurrently in the same territory can vary greatly based on how sick and risky each firm’s Medigap policies have become.
Ten individual insurance companies operating in five separate State territories might each present a set of five distinct insurance premiums for each type of Medigap insurance product. It is likely that each set of five different insurance premiums for each type of product… would be unique for each and every one of the ten competing insurers.
In practice, a crazy quilt assortment of insurance premiums for each type of Medigap product is exactly what occurs. Consider the following true example of a distinct type of insurance product from the Medigap alphabet, a Medigap-N-Plan. This product is sold by several different insurance companies in a geographically defined territory situated in southeast Michigan:
o Company #1 Monthly Premium: $174.00 (men) $151.00 (women)
o Company #2 Monthly Premium: $131.00 (men) $115.00 (women)
o Company #3 Monthly Premium: $120.00 (men) $112.00 (women)
o Company #4 Monthly Premium: $113.00 (men) $106.00 (women)
The need to shop wisely when purchasing a Medigap insurance product should by now be abundantly clear. If you lived in the territory described above, which of the identical Medigap-N-Plan products would you buy?
Shopping is the only way to winnow out a shopping list of available premium prices like the list above. Picking the least expensive product in your geographic area will result in significant annual savings. Because these products are designed to serve for decades, the savings will continue to mount as time goes by.
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It is important to buy a Medigap insurance product from an insurance agent who brokers for many different insurance companies. The agent who provided the information for the example shown above, brokers for each of the four listed companies… and is able to offer the best available pricing based on the most current conditions.
Brokers continually add companies and drop companies from their portfolios as circumstances dictate… to be able to continue to offer the best wide variety of pricing as market conditions change. They maintain a stable of young, healthy, low-risk insurance products with the best pricing… to keep their offerings current and competitive.
A smart shopper should ask an insurance agent to provide a shopping list of product choices for each of the many available types of Medigap insurance products. The more choices contained on the list… the better. Expect four or more choices for each type of Medigap product from a good broker.
Ask the insurance agent to help you isolate the type of Medigap product that best meets your insurance needs and your budget… then pick the most affordable of that type of Medigap product from the shopping list.
Agents who work directly for a single large insurance company are called captive agents. They are not brokers. They are only able to offer one choice, (the parent company choice), of each type of Medigap insurance product. That choice never changes... take it, or leave it.
As these one-choice-only Medigap products get older and sicker, premiums tend to increase. If these products are already old and sick when you buy one… you will pay dearly for that unwise choice for many, many years.
It is important to remember that Medigap products are standardized by the federal Medicare program. Under federal law, all apples of the same variety must perform comparably to all other apples of that variety… so you cannot make a bad pick from the barrel.
To follow through on the pricing example from above; each of the Medigap-N-Plans on the shopping list will work exactly the same… no matter the insurance company of origin. This is true for all types of Medigap products.
The only thing that distinguishes one insurer’s apple from the next in the barrel… is the monthly premium. There are no bad apples… only bad price choices. Always pick the lowest priced product out of the lot.
If you have already bought a Medigap insurance product without first shopping around, consider revisiting your choice with the help of a reputable insurance broker. If your current health and health history are good, and if you are lucky… you may still health qualify to switch to a more suitable and more affordable insurance product.
If your health is poor and your luck is bad… you may just have to live with your choice.
Live and learn… and happy shopping.
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