Innovative Medicare Supplement: Real deal or just hype?
Innovative Medicare Supplements
A few companies have a Medicare supplement that they call an Innovative Medicare Supplement. Depending on the state you are in, this can mean very different things. So today, we’ll focus on Physician’s Mutual.
Physician’s Mutual Innovative Medicare supplement starts off with 1 set of benefits but then transitions to a different set of benefits in the future.
STAGE 1 – First 3 calendar years
During Stage 1 of the plan, this Medicare supplement works like a high deductible Medicare supplement.
This means, you pay the Medicare Part B deductible which is $198 in 2020.
Then after that, your Medicare supplement has an additional deductible each year before your coverage kicks in. In 2020, that deductible is $2,340. After you reach this deductible, your Medicare supplement will pay 100%.
STAGE 2 – After 3 calendar years
At the beginning of your 4th calendar year on this policy, your plan will automatically convert from high deductible to a more traditional Medicare supplement.
This means, you pay the Medicare Part B deductible which is $198 in 2020.
And after that, your plan has no more deductible or copays.
Is an Innovative Medicare supplement a good deal?
If you are healthy and plan to never consider your Medicare supplement coverage again, then it could be a good option for you.
But that’s not what most people do for their Medicare coverage.
The average person keeps their Medicare supplement policy about 4 years before switching. Usually people switch because they can get the same great coverage for less money at this point.
4 years is convenient timing for when your innovative Medicare supplement converts to a more traditional style right?
PRICING
Pricing varies for many reasons including company, home zip code, tobacco use, gender, and more. But here’s an example we reviewed recently.
Innovative Medicare supplement – $111.74/month
This person pays $111/month and still has a risk of $2,538 ($198 + $2,340) if they have to use their plan. And they have this risk each year for the first 3 years.
So that’s a total of $7,614 risk over 3 years in addition to their monthly premium of $111.74/month.
Medicare Supplement Plan G – $98.02/month
In this case, this woman could have gotten a Medicare supplement Plan G for $98 per month.
Your out of pocket costs when you have to use the plan with Plan G is only the Medicare Part B deductible ($198 in 2020). So you save about $150 per year in premium and reduce your worst case scenario in costs by $2,340 at the same time.
I don’t know about you, but to me this makes a ton of financial sense.
So why do people buy an innovative Medicare supplement?
Most people who buy this plan tend to not go to the doctor very much. And they think that they might as well take some extra risk for the first 3 years if they can save some money.
But here’s the key detail they are missing. That other companies are often priced more competitively for a Plan G.
Otherwise, why would you pay more to get less?
Here’s an example
Let’s say you are a person that doesn’t go to the doctor that much and you don’t want to overpay for coverage that you don’t use much. But you do want to be protected in the future. That makes sense.
But here’s what you don’t know
Some companies have lower premiums for 70 year olds than 65 year olds
That’s right!
Some companies have a business strategy where their premiums are lower for 70 year olds compared with 65 year olds.
This is because when you start Medicare, there are no health questions asked. So insurance companies can’t manage their risk at all. And most people start Medicare at age 65.
So by having lower premiums for 70 year olds, they are focusing on healthier people that can pass an underwriting review. So they want the same great coverage they have now but to pay less for it.
Assuming you are that person who is considering an innovative supplement, you could buy a regular plan G for similar or less money. And…
- If you don’t use your coverage?
GREAT! That means you are still healthy. And you saved money by having a low cost Plan G. And since you are still healthy, we can switch plans at age 69 or whenever.
So you keep the coverage you love, from another top rated company, and you pay less for it.
- If you do use your coverage?
Unfortunately this means that you had some health issues. None of us can predict when this will happen. But if you did use your coverage then you had to pay some or all of your $2,340 deductible!
So maybe you can or maybe you can’t switch plans later on due to underwriting. But that means you just paid a higher premium to also pay more when you needed to use the coverage.
That’s a frustrating experience to me. And one I’d like to help you avoid.
Contact me for a FREE, no obligation review of your Medicare supplement options. 855-712-7316 or Mike@askMedicareMike.com