Why We No Longer Recommend Plan F

Ever since Congress standardized the Medicare supplement plans according to their letter name in 1990, Plan F has been the top-selling plan. The reason is quite simple. When you look down the Medicare chart of the plan coverage below, you see that Plan F covers every deductible and co-pay for every Medicare-approved service. With Plan F, you pay your premium for the plan, and Plan F picks up every deductible and co-pay. But we at Integrity Senior Solutions will no longer make a Plan F recommendation because of upcoming changes.

Here is the chart from the official Medicare and You book showing how each plan covers Medicare’s deductibles and co-pays:

Plan F Looks Great On Paper

Many people will get an advertisement through the mail from a Medicare supplement company. When you open the letter, many companies will include this chart to show how the plans work. Most of those people will see that there is “complete” coverage under Plan F and decide to go with that plan. They then call the insurance company and enroll. By doing so, those people have made the first mistake in shopping for coverage – trying to do it on their own without the free services of an independent agent.

One of the biggest reasons to use an independent agent is to avoid pitfalls like that. Even today (and for the last several years), the Plan F has not been the best bang for your buck. Plan G is the better option. I explain this in great detail in this blog post and video. And using an independent agent does not cost you one penny more than going directly to the company to enroll. That company will not tell you their competitor’s prices. Nor will they tell you of their upcoming premium increases as an independent agent will. Their only Plan F recommendation is that you buy from them. An agent who works for you and not the insurance company shops the entire market – not just one company.

Our Plan F Recommendation For 2019 and Beyond

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) calls for – among other things – discontinuing the sale of Medicare supplements that pay for the Part B deductible. This includes Plan F and Plan C. It only applies to people who are new to Medicare on or after January 1, 2020.

If you have a Plan F or Plan C after 2019, you can keep your current plan. You will even be able to buy a Plan F or Plan C from another company if you are currently enrolled in a Plan F or C at that time. But for people that are newly eligible for Medicare, Plan F and Plan C will not be an option. That is the main reason we are no longer recommending Plan F.

Lessons From Obamacare

There was one big issue with the Affordable Care Act, or Obamacare, that caused it to be doomed to fail from the start. There was little to no incentive for young, healthy people to take the coverage. The pool of beneficiaries was heavily weighted towards those with pre-existing conditions and major health problems. There were not enough young, healthy people enrolling in the plan to keep the premiums stable and leveled out.

Many experts feel this will also be the case starting in 2020 for Plan F Medicare supplements. As we get older, we tend to need more medical care and attention. That equates to higher claims being paid out by the insurance companies. Without those younger, healthier people coming into the plan, the loss ratios (amount of claims paid versus the amount of premium the company brings in) are going to go higher and higher. If that happens, we can expect the premiums to go higher and higher to pay for those higher claims.

History Says Plan F Rates Will Likely Go Up Substantially

There is a lot of chatter in the Medicare insurance world that the Plan F rates are going to go up significantly. Many folks point to 2010 when Medicare discontinued the Plans H, I, and J. Before the Prescription Drug Plans came along, Plan J was a very popular plan. The medical portion was structured exactly like the Plan F. But it also paid for a lot of prescription drugs.

Plan J was stripped of the drug coverage benefit when the Prescription Drug Plans hit the market. Yet, many people kept them. It is important to remember – when you are changing Medicare supplement plans, you have to go through underwriting to be approved. Many people found themselves unable to change because of pre-existing conditions. They were forced to stay in a Medigap plan that took up an increasing percentage of their monthly budget every year. When you are retired and on a fixed income, you cannot afford large rate increases year after year. Yet, people in that situation have little choice. You either pay whatever the company requires you to pay or find a plan that has much less coverage and higher our of pocket costs such as a Medicare Advantage plan.

The rates on existing Plan J policyholders went up substantially in the years following its discontinuation. In the summer of 2018, I received a call from a gentleman who had been on Plan J since 2007. When he first enrolled, he says he was paying about $135 a month for it. In 2018, that premium was over $340 a month! Fortunately, we were able to get him approved with a company on a Plan G. That move saved him right at $200 a month. That’s a lot.

What is the Best Medigap Plan Now?

Our recommendation going forward is the Plan N. For many years we have been touting the Plan G as the best alternative to Plan F. It has been a better value than Plan F since it first came into the market in 2010. The only difference between the Plan F and Plan G is the annual Part B deductible. Plan F pays that deductible which is $185 for 2019. Plan G does not cover that deductible. Yet, the difference in premiums is anywhere from $300-$450 a year depending on where you live.

One of the reasons that there was such a large difference up until 2020 between Plan F and Plan G premiums is the way Guaranteed Issue enrollees are handled by Medicare. These enrollees are generally people who are losing creditable coverage through an employer. It also includes certain people who are moving out of a Medicare Advantage plan’s coverage area or whose Medicare Advantage plan is being discontinued. These enrollees are eligible to enroll in certain Medigap plans with no underwriting. Until 2020, they could enroll in Medigap Plan A, B, C, F, K, or L. By far most people choose to enroll in Plan F who are in this situation. Starting in 2020, the available plans for Guaranteed Issue enrollees will be Plan D, Plan G, and High Deductible Plan G.

Now that the Plan G will be the new preferred plan for Guaranteed Issue enrollees, the Plan N will be the best coverage for long-term rate stability. People who are healthy enough to pass underwriting will be able to choose whichever lettered plan they want. But those with pre-existing conditions and health issues will have to choose Plan D, G or High Deductible G because those plans have to accept them without underwriting. Therefore, those three plans will have a higher percentage of people with pre-existing conditions. That will lead to higher claims paid under those plans, which in turn leads to higher premiums. This is why we will be recommending Plan N through our office.

To get more detailed information on Plan N, how it works, and why it is the recommended plan, click on this link.

To see how the rates for any plans compare in your area, call us at 1-888-228-6119 or use the form to send us a question.

Keith Murray is an independent agent and the founder of Integrity Senior Solutions Inc. He has over 22 years of experience working with Seniors to meet their insurance and financial needs.