Welcome to Medicare School Daily, where we help you understand Medicare, save money,
avoid mistakes, and above all else, get the most out of your Medicare benefits. I've been
doing a series called Avoiding Medicare Mistakes. And today's topic and the mistake that I want
to address is focusing on monthly premiums alone. Now, I don’t know about you, but
I like a bargain. I like a good deal. I like to know that my money is being well spent.
I really do like a good value. As a matter of fact, if I'm in need of gas and I pull
up to an intersection and there's a variety of gas stations to choose from and there are
maybe three or four cents difference a gallon at these stations, I guarantee I'm going to
pull into the station that has the cheaper gas. Why? Because I know the gas really is
all the same. So I'm buying based upon the prices at the pump. Well, such cannot be the
case when you go on Medicare, folks. The price at the pump or the price of the premium alone
really is not the only determination for you when you decide to take a Medicare plan. Now,
premium is important for sure. And I know you want a good value, but there are some
other factors that go into that as we make our decision about Medicare. It really should
not be price alone. All right? And so let me explain why. As you go on Medicare, you
may choose to get a supplemental plan.
And if you get a supplemental plan, as you look at the premiums, you have to realize
that there are a couple of things about premiums. Number one, we have an initial premium. That's
the premium you pay when you first start the plan. And these premiums are almost always
based upon your zip code or your area, maybe a county. It's also gonna be based upon your
age; be based upon your gender. We'll have female rates and male rates typically. It's
also gonna based upon your tobacco status. Now, some states do not ask about tobacco,
but some allow that. And so this determines our initial rate. And what I want you realize
is that the initial premiums, if I make a decision based upon that alone, I may get
in with a company that's offering a lower premium initially, but those premiums may
increase rapidly over time. Now, there are actually some companies that play this game.
They'll come in and they'll lowball. And we know those companies. We know what's going
to happen. They're not going to stick with that price very long because once they start
losing money because of claims, they're going to raise those prices. So initial premium
based upon that. But we can't make a decision just on the initial premium alone. Here's
why. Because all of these companies are going to have premium increases. All right? Now,
premium increases are going to occur.
They typically occur every year in most states, not all states, but most states, just simply
because of age. You'll have an age rate increase at your policy anniversary. You'll be a year
older, a year later, at policy anniversary. So we always see a slight increase because of
age in most states. But the second increase is the one that's more concerning, and that
is the group increase. Now, these are not necessarily every year. This is going to be
based upon how that group is doing financially, because when you buy a supplemental plan,
you’re placed in a group of thousands of policyholders and all the policyholders in
the group are paying the premium and the company is processing claims and paying money out
to providers. You've transferred the risk of your health claims to them and now they are
paying money out. So we get money going in the group and money going out. So eventually,
more money will go out of the group than what’s coming in and that's when they have the right
to do a group increase. Now, this group increase has to be approved typically by the state
insurance commissioner before it can occur. But here's my point. There are some companies
that tend to take these more frequently than others. And that takes us to our third point,
and that is the stability of the rate. And typically, folks, that's going to be determined
on the size of your group. Right? And this is why, we as a firm, typically are cautious
and avoid regional supplemental companies because they don't have near the size of the
group.
They don't have near the policyholders. We like national based companies because those
sizes are going to be larger. So that means more people in the group, the more risk is
spread out to policyholders and that will result in stable premiums. So, again, a premium
may be a little bit lower initially, but the issue is what's it gonna look like over the
long term. And as a firm, we track all of this to make sure that we're going with companies
and recommending companies that are proven to us to be stable in the rates. OK? So premium
alone does not make that determination. We have to look at these other factors as well.
Now, that takes us to our second part of our coverage, and that would be prescription drug
plans. And again, prescription drug plans are going to vary throughout the country.
Right now we have plans that are going to vary on the low side from about 13 dollars
a month, upwards to about 75 dollars in monthly premiums. OK? So what is it that determines
these particular premiums? Well, first off, as you look at plans in this varying range,
you have to realize that pharmacies are going to vary. Every drug plan is going to identify
one or two pharmacies that are going to offer to you what we call preferred pricing. And
all the other pharmacies in that particular plan are going to be standard pharmacies.
All right? And so it may be that you're on a plan that's 13 dollars or less, but there
may only be one or two pharmacies you can go to to get that best pricing. And you may
be at a pharmacy that you like and it may be standard. So you may have saved money in the
premium, but you have to pay more money at the pharmacy. And so our goal as a company is
of course, to find out where you will get your prescription filled and we try to find
a plan that will be preferred so you get your best prices both ways in premium as well
as copays at the pharmacy. But that's the way pharmacies are going to vary versus preferred
and standard. All right? And then secondly, formularies vary. In fact, this is probably the
biggest decision that you make when you pick out a prescription drug plan would be what's
the formulary? Are my medications being covered? And again, this is the reason we have a range
in prices, because these plans here on the low-side are going to have about 3000 medications
to choose from, in the mid-range maybe 5000, in the higher range more like 7000 medications.
And so if you're on a plan and you require a larger formulary, what's going to happen
is you may choose a plan that has a smaller formulary, and therefore you're going to pay
more in copays at the pharmacy.
So I save money in premium, but because that formulary was smaller, I may have a medication
here that only offers 2 generic meds that are available, but I can't get by with a generic
medication. I actually need a brand name medication. Well, if I'm on this low cost plan, maybe the
generics are the only thing available. And so now my brand medication is not covered in
that cheaper plan. And so that's why I'm saying formulary is the most important part, not
the premium alone of the drug plan. And then thirdly, copays will also vary. You may be
on a very low cost plan and let's say you may be taking some type of an insulin, maybe
Novolog, Humalog, or Lantus. In this cheaper plan, that copay may be, let's call it, you
know, 55 dollars a month for that medication. But if you pay a little bit more in premium,
let's say we're up to 30 dollars. Well I may be able to get that medication now for 15 dollar
copay. So every month I'm saving about 40 dollars. I may have to spend a little extra
on my premium, but my copays are much more attractive. And so that's why we're saying
premium alone is not the only determination when we're picking out a drug plan. And then
lastly, advantage plans. Now advantage plans oftentimes will be at actually a zero premium
on a monthly basis, upwards to about maybe 49 dollars a month.
OK? And so, once again, premium alone is not the only factor when we pick our advantage
plan, and this is why, because there are different networks, there are HMO and PPO networks.
HMO networks are always smaller, less hospitals, less doctors, less specialists. PPO always
much larger. And so I may be offered a zero premium plan, but it was an HMO and I don't
have all my providers in there. It'd be better to pay 29 dollars for a PPO and make
sure I can see the providers that I would like to see. So again, premium alone is not
the determination. It’s the network. Is that network going to meet the needs that
I have as far as the physicians and hospitals that I'd like to go to? Secondly, medical
copays are also going to vary. You could be on a zero premium plan and to see a specialist
may cost you 50 dollars. OK? You may be on a plan that costs maybe 19 dollars a month,
but you can see your specialist now for 25 dollars. And so you have to decide if it's
better for you to go and pay a little more premium and get a lower copay so you can see
those providers at less cost. All right? And then RX coverage definitely varies in the plans.
Many times some of these zero premium plans are going to have a good drug plan.
If I pay a little bit more of a premium, I could have a very, very good drug plan. For
instance, you could be an insulin dependent diabetic and there may be minimal coverage
for your insulin, your Novolog, Humalog, Lantus on the zero plan. But if I pay a little more,
I'm able to get my insulin and my other medications that I need for my diabetes treatment at a
very, very reasonable copay. So, again, you got to look not just at the premium, but also
at that prescription drug coverage embedded within the plan. And then lastly, max out
of pocket. Now, max out of pocket just simply means that's the most you'll spend in a year.
If the bill's $100,000 on an advantage plan, you're not going to pay that. The plan will set a
max out of pocket. And that usually ranges, anywhere from about $3,400 to probably $7,000
on the plan. And what that means, that's the most you would spend. And sometimes, again,
you may have a lower premium, but you may have a higher max out of pocket. If we have
a little bit of a premium then I may have a lower maximum of pocket. So, again, don't
just look at the premium alone, whether it's a supplemental plan, it's a drug plan, or
it's an advantage plan. Premium is certainly important, but there's other factors that
need to go into that decision.