When choosing a place to live in retirement, many seniors pay close attention to state taxes and housing costs. Often overlooked, however, is another key consideration: Medigap insurance.
Premiums for supplemental Medicare insurance, known as Medigap, vary widely by geography, according to a new industry pricing study by the American Association for Medicare Supplement Insurance.
Monthly costs for plan F supplemental policies, the most popular option, ranged from $118 in San Antonio to $444 in New York, according to the trade association that represents Medigap insurers.
There also was a wide range in costs within each region. Among the nation’s 10 largest metropolitan areas, there was an average range of 39 percent between the lowest and highest premiums within a market. In New York, the highest premium was 68 percent higher than the lowest premium. In Los Angeles, the gap was a smaller 14 percent.
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The association published the data to raise consumer awareness about the differences in cost, both compared to other geographic markets and to other plans within the same market, said Jesse Slome, the association’s director. Most consumers are unaware of these differences, he said.
That may be because traditional Medicare rates are set at the federal level, and consumers don’t pay different rates based on where they live, while state insurance departments regulate private Medigap providers. Those private firms have their own rate-setting policies.
“We always tell people to shop around because you can often find lower cost alternatives” within a geographic market, said Joe Baker, president of the Medicare Rights Center, an advocacy organization. “People are feeling Medigap premiums in some geographies are too expensive, which is why Medicare Advantage is becoming attractive.”
Offered as an alternative to traditional Medicare, Medicare Advantage plans are sold by private carriers as a one-stop shop replacing the various distinct parts of Medicare. They can be less expensive than coupling Medicare and Medigap plans, but they operate more like a managed care plan, with restrictions on which doctors consumers can choose, for example. And, once participants have been out of traditional Medicare for a year, it can be difficult to get back in.
“If we had a national risk pool, there wouldn’t be this disparity” among state Medigap policies, Baker said. “We do get calls from people wondering why their relatives in other parts of the country pay so much more.”
While Medicare standardizes rates to adjust for regional price differences for care, state Medigap plans do not, so price differences reflect variations in how much care consumers in a geographic region use, as well as differences in physician and other medical care costs.
But it isn’t entirely intuitive. Though costs were highest in New York – a city known for higher costs on most goods – medical care in other big cities isn’t necessarily more expensive than in other markets, all the more reason to scrutinize Medigap rates in a given market, experts said.
“There’s actually a bit of a trend toward people moving away from Medigap policies and into Medicare Advantage” because Advantage plans are often cheaper, said Brooke Thomas, director of Medicare sales at eHealth, Inc., a company that helps consumers choose insurance plans.
For those who do want a Medigap plan, be sure to pay attention to the timing of starting the plan, in addition to checking out pricing of the different options, Thomas said.
“A lot of people today are working past 65 and they’re on a group insurance plan but they make the mistake of signing up for Medicare Part B,” Thomas said. Then they continue working and don’t sign up for a Medigap plan, he said. After six months, the guaranteed right to buy a Medigap plan expires, he said.