Millions of Americans choose to supplement their Original Medicare benefits with additional coverage that helps to cover the gaps. Medigap plans in America are standardized, and for decades, Medigap Plan F has been a top seller. This is largely because it covers all of the deductibles, coinsurance, and copays that would normally be your responsibility after Original Medicare pays its share. Beneficiaries insured with a Plan F policy pay nothing for doctor visits, lab work, surgeries, hospital stays, and much more.
This type of first-dollar coverage provides huge peace of mind to Medicare recipients as they age because their costs are predictable. If there is an illness that requires extensive treatment, they don't need to worry about what kind of bills will be showing up in their mailbox.
However, in 2020, this will be changing because Plan F and Plan C are being discontinued.
Why Plans Are Being Discontinued
In 2015, Congress passed the Medicare Access and CHIP Reauthorization Act. Part of this legislation will outlaw the sale of Medigap plans (on or after January 1st, 2020) that pay for the Part B deductible to a newly eligible Medicare beneficiary. In 2018, the annual Part B deductible is $183.
Since Plan C and F both pay for this deductible, they will no longer be available to new beneficiaries. The reasoning behind the law is that Congress doesn't want people to have plans that pay for literally everything because that might encourage people to access medical care more often.
Individuals who know they must pay for their own Part B deductible once a year might think twice about visiting the doctor for a minor ailment. Fewer doctor visits equal less spending by Medicare itself.
To be sure, there are many people who don't agree with the thinking behind this. Opponents of the legislation pointed out that Plans C and F cost more than other Medigap plans. So, if someone has the funds to actually purchase first-dollar coverage, why shouldn't they be able to?
Nonetheless, the legislation passed, so we must all abide by it.
Considerations for Your Plan Choices
One silver lining in this change is that people who are already insured by a Medigap Plan C or F will be able to keep their coverage. It is only new enrollees who will not have the option to buy it.
Therefore, this leaves many current Medicare enrollees with some decisions to make: enroll in Plan F now so you can keep it or switch out of Plan F before it is discontinued.
Beneficiaries who stay insured on these plans could find that after 2020, the rates for these plans will begin to creep up. This is certainly possible, as the block of insured individuals will be aging with no new and younger policyholders joining the group.
However, people with Plan F will still be able to shop their policy when rate increases happen. If they find another Plan F with better rates, they can switch if they are able to pass the medical underwriting to do so. In some states, including California and Oregon, individuals with Medigap policies have a short annual window for 30 days after their birthday to change to an equal or lesser Medigap policy without any underwriting.
Some beneficiaries are choosing to leave Plan F now and enroll in other Medigap plans that are not going away. Plan G is a good example. It covers all the same services that Plan F does except for the Part B deductible. Although Plan G policyholders will have to pay the Part B deductible if they incur any medical services, the premiums for Plan G are often considerably lower, making that plan a good value either way.
Soon-to-be Medicare enrollees should review pricing and coverage for various options before choosing. It's important also to consider the costs of Medicare itself so that you can be sure you've adequately saved for the costs of healthcare in retirement.
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