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Strong Plan N Sales Could Signal Dramatic Shift in Medigap Market

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What You Need to Know

  • The richest available Medigap plans account for 72% of total Medigap 2021 enrollment.
  • Medigap Plan N and a similar plan, Plan M, accounted for just 9.9% of enrollment.
  • This year, Plan N may be gaining.

Consumers are changing how they buy Medicare supplement, or “Medigap,” insurance coverage.

In the first half of this year, only 51% of the 65-year-olds who bought Medigap coverage chose rich Plan G coverage, according to new survey data gathered by MedicareFAQ.com for the American Association of Medicare Supplement Insurance.

About 38% chose Plan N coverage, which tends to cost less but offers leaner benefits, AAMSI says.

That means the Medigap market could undergo a dramatic shift in the next few years.

Today, about  72% of the 14 million Medigap insureds have the richest available policies. Only about 10% have the leaner Plan N coverage. If current sales trends continue, the share of Medigap users with lean Plan N coverage could soon triple.

What It Means

People pay lower premiums for Medigap Plan N coverage than for Plan G coverage, but Plan N coverage requires patients to pay more out of their own pockets for care.

If more of your older clients have Plan N coverage, they will have to set enough cash aside to pay higher medical bills.

Medigap Basics

The “original Medicare” program was created in 1965 and has many complicated gaps in coverage.

A Medigap policy is one type of arrangement a client can use to fill the gaps. Federal law requires sellers of new Medigap coverage to base the policies on a limited set of benefits templates, or “letter plans.”

Today, the richest Plan G policies cover all acute care expenses other than a $233 deductible for physician and outpatient services.

Plan N policies are almost as rich, but they require copayments for some types of care. Plan N users must also be prepared to pay “excess charges” from providers who see Medicare patients but who do not “accept Medicare assignment”.

Some consumers who become eligible for Medicare before the age of 65 — because they are disabled or suffer from severe kidney disease, for example — may have limited ability to buy Medigap coverage.

Consumers over age 65 can change Medigap policies without going through medical underwriting in some situations, and after passing through a medical underwriting process in others.

But the rules for people over 65 who change Medigap policies are complicated.

AAMSI and MedicareFAQ.com looked only at plan choices made by people who turned 65 in the first half of this year and aged into becoming eligible for Medigap coverage under the ordinary, age-based eligibility rules.

The Future

Jesse Slome, the AAMSI director, predicted in a comment on the results that the shift toward Plan N coverage, and away from Plan G coverage, will probably continue.

“Save money is always a winner,” Slome said.

In Chicago, Slome noted, Plan G coverage from one popular insurer will cost a 65-year-old woman $117 per month, and Plan N coverage from the same insurer will cost $86 per month. That means a 65-year-old woman can save $386 per year by accepting the risk of having to pay some copayments and by avoiding seeing doctors who refuse to take Medicare assignment.

(Image: CMS)