Over the past few months, I’ve noticed a rather disturbing trend, particularly in the Lowcountry. Agents are using scare tactics to mislead their prospects into enrolling in the popular Medicare Plan G rather than the lower-cost Plan N.
Why are they doing this? Agents, on average, make 22% of the total premium their clients pay each year. Keep in mind, rates are the same for everyone, no matter where you buy your Medicare supplement plan.
You can buy your supplement from an agent in an agency, an independent agent who works alone, or directly from the insurance carrier. Either way, you pay the same.
So rather than being scared and choosing a supplement based on fear, I want you to choose a plan based on risk avoidance and knowledge.
Plan G and the Plan N offer virtually the same benefits, with a few exceptions. Both plans have an annual $226 Part B deductible, but the Plan N has a $0 to $20 doctor copay after hitting the $226 deductible and a $50 dollar ER copay. The only other difference agents exploit to get a higher commission is excess charges.
There are three types of providers in the Medicare space: participating (they accept Medicare assignment in full), non-participating (they don’t accept Medicare assignment, but will bill Medicare), and lastly 1% of providers opt out and are private contract providers that will not work with Medicare.
About 96% to 98 % of participating doctors accept Medicare assignment, which means excess charges never come into play. Three percent are non-participating doctors – most of which are psychologists or podiatrists, according to the Kaiser Foundation, and these doctors are allowed to bill Medicare only 95% of the Medicare fee schedule, not 100% like the participating providers, but they can charge 15% above the Medicare assigned rate for a procedure.
So Medicare pays 80% of the procedure, your Plan N pays the other 20%, and the doctor could charge 15% above the assigned rate (excess charge). Again, only 3% of doctors can charge excess charges.
For example, let’s say you get a claim of $100 from a non-participating doctor. They are allowed to charge you 95%, or $95 of the $100 dollar claim. Let’s say they charge 15% excess charges from $95, then that leaves you with an excess charge of $14.25 after Medicare, and your Plan N supplement pays its share, which equates to a 9.25% excess charge.
Now let’s look the rate increase history between Plan G and Plan N. My few same-aged Plan G clients averaged 9% rate increases per year over the past five years and my Plan N (same age) clients received, on average, 2.9% rate increases during that same period.
So if you start out at $85 per month with Plan N at a 3% average annual rate increase, in 10 years you will be paying $111.23.
But Plan G folks will start off at $111.58 per month and based on the 9% rate increase they incurred, they’ll pay almost double that, at $222 per month in year 10.
My Mutual of Omaha Plan G clients in Georgia received an 8% increase back in December, but my Plan N Omaha clients had a zero rate increase for the year.
Don’t be scared into making the wrong choice. You’re on Medicare for life. Consider the impact of rate increases over time.
Chris Dewey is the founder of May River Medicare Insurance in Bluffton.