The Death of Plan F Medicare Supplements

Plan F is about to be killed by the Feds and you need to know that. For many years a Medicare Supplement Plan F has been considered the “gold standard” for supplements. There are two main reasons for this.

First, while most supplements pay the Medicare Part A (Hospitalization) Deductible, not all pay the Part B (Outpatient) Deductible. Plan F does this. Second, depending on the state you live in, doctors are allowed to charge up to 15% above the Medicare Allowable Charge for services. That means that Medicare pays 80% of the Allowable Charge, some supplements will then pay 20% of the Allowable Charge, but if the doctor charged 115% of the Allowable Charge then you are still on the hook for what is called the Excess Billing. Plan F covers that Excess Billing so you end with nothing out of pocket. Naturally, Plan F has carried a higher premium than other supplements but many people felt that the additional monthly cost was well worth the confidence of knowing that their doctor bills would be covered 100%.

Unfortunately, in 2015 Congress passed the Medicare Access and Chip Reauthorization Act (MACRA) which takes aim at Plan F as well as the less popular Plan C. In their “wisdom”, Congress decided that people who faced no out of pocket cost when visiting the doctor would simply be running to the doctor for every little sneeze or splinter and running up the costs to Medicare. Now, I don’t know about you, but going to the doctor’s office is not high on my list of social options regardless of the cost. Nevertheless, from the protective bubble that exists around Washington, DC, that’s how our elected representatives see it. So, within MACRA is a new rule that forbids the sale of any Medicare Supplement plan from paying the Part B Deductible after January 1, 2020.

No need to panic if you happen to have a Plan F because the new law allows anyone who has such a plan prior to the cutoff date to keep their plan. However, that option may have its own problems as well. In the insurance business, history has shown us that any time a health insurance plan stops accepting new (healthy!) enrollees, then the claims tend to rise above normal expectations as the remaining enrollees get older and sicker. When that happens, premiums tend to rise more than would be typical based simply upon the increasing cost of medical care overall. While no company representatives I have talked to expect the increases to be immediate, within four to five years they all anticipate Plan F renewal premiums to increase faster than other plans.

For new Medicare enrollees, and for those already on Medicare looking to switch plans, there is a very good alternative. Plan G pays those Excess Charges just like Plan F, but it does not pay the Plan B Deductible so it is not affected by the MACRA rule. As a bonus, some of my clients are finding that the premium savings for Plan G versus Plan F are more than enough to cover the Part B Deductible. Let’s look at the numbers.

The Part B Deductible for 2017 is $183, so the math is pretty simple. If, for instance, a Plan G will save you $20 per month over a Plan F ($240 per year) then you are saving more than the deductible and are money ahead. The only caveat is that the Part B Deductible usually increases each year. In 2016 it was $166, so it increased about 10% for the current year. It is conceivable that the deductible could reach $240 in another three years if that increase is stable. Personally, I would want to see no less than $100 per year in savings to give me at least a few years’ cushion if that was my sole reason for selecting a Plan G today. However, as noted above, the premium savings today might not be the sole reason if you also consider what will probably happen to Plan F premiums after 2020.

The death of Plan F is certainly not the end of the world with regard to Medicare Supplements, but it is important to be aware of the upcoming change so that you won’t be taken by surprise. You can find more information about Medicare Supplements for Idaho Seniors by clicking here to visit our page devoted to that topic.


Author: Mike Mahoney

After over 30 years of helping North Idaho individuals and businesses select all types of insurance coverage, I am now focusing primarily on the Over 65 population. My specialty areas include Medicare Supplements, Medicare Advantage Plans, Part D Drug Plans, Final Expense, Dental and Travel insurance. If you also need coverage for your home, autos or business, I have associates on the North Idaho Insurance team that can quickly assist you.

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