So you wanted to know about supplementary insurance? You’re confused. Who isn’t?
Let me simplify the complex by first pointing out that the meaning of words always depends on context. Obviously you know that a supplement is not necessarily a vitamin. It can be an insurance product. And as an insurance product, it will mean one thing if we’re talking about Medicare and another thing if we’re talking about the Healthcare marketplace. What is a supplement supplementing? Depending on context, you might find the term “supplement” confused with other words – words like “ancillary” and “indemnity” for example.
Seeing the confusion, in this blogcast episode, I’m going to draw an analogy between supplementary insurance and a three course meal you might have at a restaurant. A cocktail or sweet drink is supplementary to a good meal. An appetizer can be attached and so can a dessert. These are optional. Similarly, an insurance supplement is all of the extras and optional stuff you can throw onto a core policy – your main course. Add some whipped cream and a cherry if you’re in the mood for a perfect ending to a memorable meal. And is there family coverage? Who is at the dinner table? As an insurance agent, I think like a server. The menu is large. Let me improve your dining experience and explain what’s on it without ruining the ambiance.
A Three Course Meal
I like the meal analogy. It centers around that main course, sure, but the perfect experience involves the total package. What you choose for your main course is actually the easy part. If you qualify for Medicare, we have either traditional Medicare or Medicare Advantage. If you’re not on disability and under 65 years old or otherwise unqualified for Medicare, your main course will either be the Federally Facilitated Marketplace or a Private Insurance product. If you have a military background, that may color your taste. If you want to wrap your head around the life and health insurance business – start with identi
fying the main course. The main course may or may not be where most of your money is spent, but this central product does typically give you the bulk of your insurance coverage. It’s the part most people don’t do without – just the basics.
Today, I’m going to cover every course beginning with the appetizer. I could make this really elaborate and detailed and probably overwhelm you with interesting choices in each part, but I don’t want you to be overwhelmed with too many plans. Instead, I’ll just highlight the value proposition for each product I’d most highly recommend. We’ll continue the meal analogy as we go. It’ll be a lot less confusing this way. I’m going to preserve the ambiance if I can. Are you ready?
The Appetizer
I don’t know what your philosophy of appetizers is. Some people like some salad and bread before the meal. Others like some finger food to share with their dinner guests. If you add drinks your choices are many. A drink usually starts the meal.
I prefer not to have the dinner conversation interrupted lengthy menu reading. It’s hard to multitask that way. And besides, its sort of like Christmas: what everyone really wants but doesn’t tell you is money in a card – a lot of money they can spend on whatever they want. At a meal, they’re always looking at the price. Shhh. Don’t tell.
So let me offer you just one thing that will save you a lot of money. The first order of business is the big picture. The big picture ahead is the fact that no matter what age or condition you are in, insurance usually doesn’t cover everything. And if you get insured for one ailment but wind up with another, then you’ve paid for the wrong thing. The right appetizer, in my opinion, is something that helps kill the pain of that almost inevitable situation. Just like good bread and wine assures pleasure and some degree of satisfaction, a Health Matching Account is highly recommended no matter what else you choose.
A Health Matching Account? What is that? Is that like a Health Savings Account (HSA)? Is it a Flexible Spending Account (FSA)? Is it a Health Reimbursement Account (HRA)? No, no and no. Don’t confuse it with anything else. A health matching account is in a league of its own. It builds value over time. After its been building value for about seven months, in its “maintenance phase,” then it’s matching feature starts exceeding its maintenance costs so that you have more value in the account than the amount of premiums you’ve paid in. Ultimately, you have about what you’ve put in by your 36th month, thanks to the matching feature.
Like good wine before a meal, a Health Matching Account is intoxicating and makes everything else palatable. While it may not cover over-the-counter drugs, it’ll cover a lot that most other health plans won’t – even elective surgeries, so long as they are performed by medical doctors. Spend it on what you want, when you want it and when you need it. It’s like getting money in a card at Christmas. Technically, an HMA isn’t even an insurance policy. It’s a debit account with a fund matching feature, but you don’t have to be employed to get the double value. And the value doesn’t disappear. In fact, it can be given to a designated beneficiary when you die. So what are you waiting for?
Well, don’t rush into it. There are seven basic HMA plans to choose from. The more you pay in the larger your account will grow. How large your account needs to grow depend on what your main course and desert don’t cover. Let’s calculate that the way you would calculate how much of an appetizer you want as you save room for the rest of your meal. That’s how you do it.
The Main Course
The Main Course is actually the easist decision there is because it is largely predetermined by your age, preconditions, your location, your wealth, income and whether you are working and if so, if you employer has you covered. This part is also the weird part that you have to wait to sign up for until certain enrollment periods come around, unless certain events happen that generate exceptions. For right now, let’s focus on the what instead of the when.
Medicare usually kicks in for those turning 65. I won’t go into the specifics because you’ve probably already figured out whether you qualify for some other reason, such as a disability, or that you don’t qualify for some reason. If you don’t know, call me and I’ll help you with it. My wife’s been on Medicare since she was forty years old. It can happen. And if you are on Medicare, then you fall somewhere on a spectrum of wellness and a spectrum of financial capability. At the low end of the spectrum, you might qualify for special help from the state or you may have a chronic illness, or you may be in an institution. If so, you may be looking at special needs plans (SNPs). SNPs tend to cost less but can limit your options.
Veterans – don’t assume you wouldn’t benefit from a Medicare plan just because you get free benefits from the VA. A good Medicare plan will cost relatively little and is likely to widen the number of choices you can make. You’ll likely find more treatments, more drugs and more convenience and benefits if you choose a good Medicare plan. Tricare recipients can benefit, as well. Talk to me.
In general, free is not always better. Some things are worth paying for. Do you want the filet mignon or a hotdog? The same thing applies to those who don’t qualify for Medicare. Here the spectrum of rich and poor, healthy and having preconditions, employed and insured or unemployed or uninsured is all the same. The main difference is the type of regulation and law. This is where Obamacare might kick in. Obamacare is also known as the Affordable Care Act (ACA) and involves the Federally Facilitated Marketplace (FFM) and HealthCare.gov.
The process is similar. You can either go to a government website to look for and sign up for a plan, or you can get help from a licensed professional certified in that area, like me. I don’t represent every plan and likely will not represent every plan in your area, depending on where you live, but I will guide you. And that could help simplify a complex decision.
What I can say about it all here is that there are two general types of plans – private plans and federally faciliated plans. The main points on the plus side of Federally Facilitated plans is they cover pre-conditions, including pregnancy and insure children up to the age of 26. What’s more, they offer tax credits that get released in advance to pay down premiums, sometimes to zero for those with low incomes. And they lower cost sharing too, for those who qualify.
But there’s the rub. Not everyone qualifies for the costsharing benefit (CS) or for the advanced tax credit (ATC). They earn too much money. A lot of people wind up with very high premiums, very high deductibles and very high cost sharing expenses because they earn too much to qualify for CS or the ATC. And there are two reasons the cost is so high for those who don’t qualify. Number One: someone needs to pay to cover those who have pre-conditions. Number Two: someone needs to pay for all that cost sharing and all those tax credits. Part of the money comes from taxing the rich. Part of it comes from people who wind up paying higher marketplace rates and either don’t qualify for or don’t realize they might have access to a cheaper private plan. These are sometimes referred to as indemnity plans. These come in all shapes and sizes because they are part of a free compeitive private market. But they are also regulated, like all insurance is, so they can’t call themselves “comprehensive” if they don’t cover pre-conditions. The trick here is finding a very reputable plan that effectively offers much more for a lower cost. Do that, and you will enjoy a great meal at an affordable price.
Here’s the gist of it all. Private plans may not cover pre-conditions but they can cover some things the marketplace plans won’t, and cost much less while doing it, even if they throw in dessert (see below). A good insurance agent will compare cost and benefits between your best marketplace option and your best private plan option. This is not something a government site is likely to show you since they only list FFM plans.
Of course, there are other considerations. Do you have a primary care provider you want to stay with? Let your insurance agent know their name. Anything that is important for you to retain – like the drugs that are important for you, a pharmacy or a hospital you feel strongly about, or maybe a specialist – all these things can be considered before choosing a plan. A good insurance agent will help you weigh the pros and cons. Don’t expect everything to be perfect. Just do the best you can. You’ll have riders you can add to policies, you’ll have that HMA for uncovered expenses if you bought it and … la crem de la crem – dessert. This is where the fun starts…
Your Dessert Options –
let’s talk Supplements!
Ahhh. Finally we are to the subject of this article. The dessert is for those who are still hungry after their main course. Or perhaps they deliberately saved room. Is that you? You don’t have to have perfect coverage in your main course. It may, in fact, not be the best place to obtain complete coverage. And while I’m on the subject – how important is complete coverage to you? I’ve read that 60% of seniors are interested in full coverage. Others are more inclined to take risks. Younger people tend to take more risks than older people because they have more years ahead to make up for their mistakes (they reason) and because they aren’t on fixed incomes. No matter what age we are, we should be frank and honest with ourselves about what is at stake and what we are risking, or protecting against risk. What is at stake? And for who?
I’m not going to try to answer that question. I’m just putting it out there so I can describe the basic considerations people have when deciding on insurance policies. In this restaurant, there aren’t many obvious advertisers. I can narrow it down to one, as we saw. But on dessert, on your supplement options, we aren’t going to make it quite that simple. What I want to do is give you a dessert menu that has some sub-menus. Some of the items are just for those on Medicare. Others are for anyone. Some are only for the healthy. Others have gauranteed issue features. I’ll touch on plans here but not carriers. If you want to know about carriers, set up an appointment and ask me about what you’ve read. Our dessert menu will be divided into categories …
Dessert Category One: Medigap
Medicare Supplementary plans, also known as Medigap plans, are letterd from A through N. They cover the cost of deductibles and copays for Medicare Part A: hospitalization, nursing facilities, emergency rooms and hospice care saving what could potentially add up to tens of thousands of dollars in out-of-pocket costs. The standard Medigap plans also cover Part B expenses, though not 100%. Part B is doctor visits, ambulence, labs, imaging and pretty much most every medical expense outside the hospital except prescription drugs. Prescription drugs are Part D. Part D is a separate plan that costs extra even if you’ve got a Medigap plan. And unfortunately, Part D has its own coverage gaps – three big gaps actually: a starter deductible, a “donut hole” gap, and a lifetime coverage limit. A good insurance agent will show you the potential costs and help you weigh out the liklihood of these gaps depleting your savings, running you into bankruptcy or putting you in a situation where you get less than optimal care or can’t afford to die with dignity. I’ve seen some very sad realities with my own eyes. Do yourself a favor and visit a nursing home during the holidays. Look around. How do you want your final days to look?
For those on Medicare, gaps matter, and fortunately, there are solutions. We’ll start with Medicare Advantage. Medicare Advantage can reduce the Part D Gap and act as a supplemental plan at the same time. To boot, some Medicare Advantage plans don’t have any extra premium to pay. It’s almost a no brainer because it’s like getting both a Supplemental Plan and a Plan D for free. All you have to do is keep paying your Part B premium, which is still under $200/month. It doesn’t matter what Medicare plan you choose, that Part B premium is still a part of it. If you are on Medicaid, that is an exception, of course. And some states offer generous dual Medicare Medicaid plans. Those can be really cheap. But they are also very limited in terms of where they are available. And low income is low income. Just qualifying is already a very miserable state of affairs.