With Cheryl Duberman, Brokerage Manager, LTC/DI/MedSupp, and Lois Rosenthal, Sales Vice President, Zenith Marketing Group
With how often the media and industry talking heads throw around terms like Medicare Supplement and Medicare Advantage, you can hardly blame your clients for getting a little confused about the differences between the two. And even more concerning is the fact that a fair amount of insurance professionals are also not as well-versed on the differences between the two types as they should be; this can lead to conflicting information, or worse, professionals that don’t feel comfortable discussing the topic with their clients – leading to unfortunate gaps in coverage. So without further ado, let’s jump right into the nuts and bolts of each type of insurance, and what sets these distinctly different insurance products apart from one another.
Medicare Supplement plans (also commonly known as Medigap plans) are insurance plans designed to pay for specific out-of-pocket healthcare expenses (such as co-payments and deductibles) not covered by Medicare Parts A (hospitalization) and B (doctor coverage). They can only be used by clients enrolled in traditional Medicare, and clients must be enrolled in both Parts A and B to apply for a supplement. While Medicare Supplements are used in conjunction with government-run Medicare, they are actually policies issued by private insurance companies. As of 2013, there are 10 Medicare Supplement plans that are each named by a separate letter, such as Plan F or Plan G. These 10 plans are structured by the government and are the same no matter which insurance company you purchase them from. The only real difference between Medicare Supplement plans is the premium cost charged by each company, and any secondary considerations, like customer service preferences. Since these plans are administered by private insurance companies, premiums and fees may vary, so it definitely pays to shop around. One important item to note is that Medicare supplement plans do not cover the cost of prescription drugs, therefore a prescription drug plan (Medicare Part D) must be purchased separately, or a permanent penalty will be incurred. Neither Medicare nor Medicare Supplement plans cover other expenses, such as most dental, vision, or hearing costs. Additionally, if your client is not in a “guaranteed issue (GI) period” (the most common being usually 6 months before or after age 65, but this can vary), they will be medically underwritten and can be denied coverage.
Medicare Advantage plans are also offered by private insurance companies, but are similar in structure to HMO plans. As such, they have a bit more variation than the standardized Medicare Supplement plans; therefore, clients will experience larger differences in plan options. Medicare Advantage plans are a single product that includes Medicare A, Medicare B, and most times Medicare D. These plans are offered in lieu of traditional Medicare coverage. Standard Medicare Advantage plans must offer comparable coverage to traditional Medicare plans, with a few exceptions (such as hospice care), and also can also include dental, vision, and hearing aid coverage. (1) However, due to the increased amount of options available, Medicare Advantage plans tend to be more complicated and more difficult for clients to navigate. Since these plans operate on an HMO model, clients must be sure to check that all of their doctors, pharmacies, and medications, and hospitals are included in their plan. There are also co-pays and deductibles for hospitalization, medications, and doctor visits. Although many of these plans may have a “zero” premium, clients who take a variety of prescription drugs, or that anticipate larger out-of-pocket healthcare spending, may incur many charges based upon these co-pays and deductibles. Persons who have many health issues, and are outside a guaranteed issue period may be more suitable for these policies, as they ask fewer health questions and require less underwriting. (2)
What’s The Difference Between The Two?
The differences are fairly straightforward once they’re broken down. Even though both Medicare Supplement and Medicare Advantage plans are both government-structured plans administered by private insurance companies, Medicare Advantage plans are offered in lieu of traditional Medicare coverage, and Medicare Supplement plans are in addition to traditional Medicare coverage.
Medicare Supplement plans:
– Have no required open enrollment period, and clients can change plans at any time
– Have no networks; clients can continue to see any doctor that accepts Medicare patients
– Cover co-pays and deductibles not covered by Traditional Medicare A and B
– Do not include drug plans. You must purchase a Medicare D prescription drug plan
Medicare Advantage plans:
– May only be switched during the open enrollment period (usually Oct 15th to Dec 7th each year)
– Are HMO plans, so be sure to verify exactly what coverage is included in the plan/network
– May have a “zero” premium, but will have co-pays and deductibles that can add up
– Ask fewer underwriting questions, so may be suitable for persons with health issues who are outside a GI period.
Is One Plan Better Than The Other?
The short answer? No.
Just like virtually every other insurance and financial product out there, Medicare Supplement and Medicare Advantage plans are not one-size-fits-all; the correct plan must be selected only after careful research and analysis of an individual client’s situation and goals. Variables such as premiums, benefits, deductibles, plan availability, and other factors must all be carefully weighed and considered. This is why it’s so important for producers to partner with the Medicare experts at Zenith Marketing Group; our staff has years of experience in dealing with the ins and outs of Medicare plans, and we are constantly expanding our knowledge about available plans and how they best fit into the overall competitive marketplace. Give us a call today to consult with our on-staff Medicare experts before your next appointment.