A lot of people go with Supplemental plans.
There's a lot of companies who offer the plans.
And so I want to talk about really primarily the number one
danger when choosing a Supplemental plan
Welcome to Medicare School Daily,
where we help you understand Medicare, save money,
avoid making Medicare mistakes, and above all else,
get the most out of your Medicare benefits.
Now, when people begin
to use their Medicare benefits and they enroll into Medicare,
everyone has to, of course, enroll into Medicare
A and B,
and then beyond that, though,
most people are going to get additional insurance.
And when we get additional
insurance, there's only two options available.
And we cannot be on both of those the same time.
We have to decide which one.
So some people will enroll into original Medicare A and B
and then enroll into what is called an Advantage plan.
These are called C plans, or replacement plans,
which are basically a private health insurance company
that's replacing original Medicare for you.
And they will put together a network of providers,
a series of co-pays that you're responsible for
and an annual max out of pocket.
And usually some additional benefits as well.
That's the Advantage plan.
Other people will decide that they want to be in original Medicare
A and B where Medicare rules dictate where Medicare pays first.
But because Medicare doesn't pay 100% on things,
there will be some remaining gaps or some financial liability.
And most people don't want to assume that liability.
So they will transfer that to an insurance company
that in turn issues to them,
a supplemental policy also called a Medigap policy.
And they certainly have to pay a premium to that company
for that company to take the risk.
So we have Advantage plans and we have Supplemental plans.
So you have to choose what is best for you.
But during this video today, I just want to talk about
Supplemental plans.
A lot of people go with supplemental plans.
There's a lot of companies who offer the plans.
And so I want to talk about really
primarily the number one danger when choosing a supplemental plan.
Again, there's ten different plans.
And most people today either buy an F plan or a G plan or an N plan.
But regardless of the carrier we go with
or the plan that we select, there is a certain danger
that you must understand.
All right.
So we're going to talk about
basically initial rates and rate increase.
So let's talk first off about initial rates.
Now, it is the insurance commissioner in your state
that really decides
how an insurance carrier is going to provide ratings.
And there's actually three different rating systems available.
I'm gonna explain those to you.
Most states allow just one Some states will allow two.
I don't know of any state that allows three.
And so it's the state insurance
commission that dictates
how that insurance company is going to establish
those initial rates.
All right.
So first possibility is what's called a community rated
plan.
Now, community rated
plan has nothing to do with age, has nothing to do with gender
or tobacco status.
It has everything to do
just with where you live, a geographical area,
because everybody in that geographical area
that's buying a supplemental plan, whatever one they're buying,
will have the same rate, which means what younger people pay
a little bit more, people
that are older pay a little bit less,
but everybody is going to pay the same rate.
That's a community rated plan.
The one thing that matters is geographical area.
Now, the second way
and actually the most common way that insurance companies are rated
because the insurance commissioners dictate this is what is called
an attained age policy, now attained age policies.
When you initially come into that will be based
upon your age, which means a 65 year
old person pays less than a 68 year old person.
It'll also be based
upon your gender, whether they're female or male.
Normally, female rates are a little lower than male rates.
And then also tobacco status.
Some states allow the carrier to ask
whether you have had tobacco products in the last 12 months.
If the state allows that
and you say, yes,
you're going to pay
about another $10 more than what a non tobacco person would be.
But the point is this attained age rate is based upon age, gender
and possibly tobacco status,
and that establishes your initial rate.
Now, the initial rate is going to be substantially lower
than a community rate All right.
Now, what happens with the attained age policies is the insurance
carrier has the right to raise your rate a little bit every year.
So at 65 I may pay $100.
66, I may pay $103, $104.
At 67 I may pay $111.
But they have the right to raise that rate up every year
just a little bit and basically just offset medical inflation.
Now, attained age policies can also go up
if the whole group goes up.
So community is all the group going up but attained age.
We're going to see a slight increase every year
and then the potential of group increase.
Now, the philosophy behind attained age is by allowing
the carrier to raise the rate a little bit every year,
those group increases will be less frequently and less frequent
and less drastic.
All right. So that's the theory behind that.
The third option we have is to do what's called an issue age policy.
An issue age in most states is based upon just the
the age you are when the policy is issued
and whether you're a male or female.
Rates alright.
So these are going to be
a little higher than attained age because with these, the only way
those rates can go up would be if the whole group goes up.
All right.
And so all rates are going to go up
with all these different policies.
But depending upon the rating methodology
will determine how the premiums can increase.
All right.
So let's talk about that next.
So rate increases on community.
The only way it can happen is if the whole group goes up,
has nothing to do with age, has nothing to do with gender,
has nothing to do with tobacco status.
It's only if that company begins to lose money,
then the whole group is going to go up when it comes to attained age.
As I said earlier, you're going to see a slight increase every year.
It's a real minimum amount, $3 or $4 a month, something like that.
But it's going to go up and then the group can also occur.
But remember,
the philosophy is if they allow the carrier
to raise a little bit every year, we should see less of these
and certainly less drastic increases
And then the third way was issue initial rate a little higher.
But now the only way the an issue
policies, go up, is if the whole group goes up.
So as you can see,
everyone is going to go up and everyone can have group increases.
This is the only one that can go up a little bit because of age.
Now, people ask me all the time, Marvin, what's the best?
There is no best at all.
The state insurance company insurance
commissioners already determined what is available in your state.
But there is some way
to kind of mitigate the risk of these group increases.
Okay. So that's what I want to explain next.
So here's the way group increases occur.
Remember, everyone who buys a supplemental plan
is going to go into a group.
So what's happening in the group is the premiums from
the policyholders are being paid into the group.
So we got money going in.
Typically people pay through monthly bank drafts.
So we got lots of money going into the group.
And when you pay that premium, what are you doing?
Well, you're transferring the liability
of some of the Medicare gaps to that insurance company.
That's why you pay them a premium to take that.
So therefore, they have to pay money out.
They're paying money out in claims.
They're paying hospital bills and doctor
bills, and MRI's, and CAT scans and surgery.
They're paying money out.
So money goes into the group.
Money goes out.
Now, what will happen eventually with all the groups,
whether it's a community group,
an issue age group, or an attained age group.
Eventually more money will go out in claims
than what's coming in through premiums,
which means what when more goes out than is coming in,
that insurance company is losing money.
They're protected by law. They don't have to lose money.
So what they do, whenever they're losing money,
they will calculate the loss
and let's say in this example, they're losing 5%.
Premiums are no longer covering all the claims.
Now, 95% of them are covered, but we have a 5% loss.
So what happens is they take this 5% loss number
and they have to go to the
insurance commissioner to be able to get an increase to cover that.
And so the insurance commissioner
will receive the paperwork from the insurance company.
They will audit that paperwork to see if indeed
that increase is truly justifiable.
And let's say that it is.
And so the insurance company gets back
and says to that insurance company, you can raise
everybody in the group 5%.
So they are protecting the consumer.
And if they approve it, everybody has to go up.
No one will be singled out because they've had lots of claims.
They won't be singled out because of their age.
They won't be singled out for any reason
other than they're in that group and everyone goes up
the same amount. All right.
And so that that group increase can happen, whether it's community,
whether it's attained age or whether it's an issue age
policy, we're going to see rates go up.
So back to our question I'll close with this.
The number one danger when choosing a Medicare
Supplemental plan is rate instability.
Yes, I care about the initial rate,
but it's not the most important thing. What I really care about.
What would those rates look like in three years or five years
or ten years down the road?
Well, the truth is, I don't know what they're going to look like
because there's two things that determine rate stability,
and that is the size of the group and the health of the group.
All right.
And so I don't know the health of any group.
We don't know how much cancer
or knee replacements or hip
replacements are going to occur in the group.
I don't know anything about that.
But what I can find out is the size of the group.
And that's why we as a company like national carriers,
because they typically are larger.
And so what happens?
More policyholders, what it will do as that premium comes in.
More policyholders
are going to offset the risk
of some of the unhealthy people that are in the group.
So the bigger
the group, typically we're going to have more premium stability.
And so that's what we look at because we can look
at the history of these companies the last five, ten, 15 years.
How stable have they been?
How often have they raised rates?
How drastically have they raised rates?
And there are some carriers that frankly raise their rates
more frequently and more drastically.
Typically, that's because they have a smaller group.
So we like to go with large groups because usually they're going
to provide a greater stability for you.
So, yes, I care about initial premium,
but I also equally care about
the rate stability because you're going to be on this for life.
And so we want to make sure we're going with a carrier
that is proven to be rate stable
Hey, thanks so much for watching the video,
and I do hope that it was helpful.
Now if you feel like
you need to learn more about Medicare
to make sure you're making the right Medicare decision,
really the best way and the easiest way to do
that is to go to MedicareSchool.com.
That's MedicareSchool.com,
and you'll be given the opportunity to be able
to click on Get the Free Workshop.
We call that the essentials workshop
and I do all the teaching.
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to make sure that you have an accurate
and thorough understanding of how Medicare works.
The second thing you can do
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and there
you can actually set up a time
where you can discuss your situation
with a Medicare guide.
They'll explain all your options
and actually even walk you
through the enrollment process as well,
if that's what you need to do.
And so go to MedicareSchool.com,
watch the workshop or talk to a Medicare guide.
It would be our privilege to assist you further.