It’s been big news this year that as of Jan. 1, 2020, Medigap plans C and F will be discontinued. This change came about as a part of the Medicare Access and CHIP Reauthorization legislation in 2015, which prohibits the sale of Medigap plans that cover Medicare’s Part B deductible. The goal of discontinuing these plans is to make all Medicare beneficiaries have some out-of-pocket spending when they use healthcare services.
Both Medigap Plans C and F cover Medicare’s Part B deductible, which in 2019 is $185. This makes these plans into something called “first dollar coverage.”
If a Medigap plan covers all your out-of-pocket spending from the beginning, the theory is that you will be more likely to run to the doctor over every little sniffle and sneeze. This costs Medicare, and thus the federal government, money. By discontinuing these two plans, Congress hopes beneficiaries will be a bit more choosy about seeking healthcare for minor ailments. So as of Jan. 1, 2020, these plans are being phased out for new enrollees.
What do many people believe?
There is a misconception out there that only people who already have Plan C or Plan F will be able to keep their coverage. This fails to capture the whole picture.
In fact, anyone who is eligible for Medicare before 2020 will always be able to buy Plans C or F, for as long as insurance companies continue to offer them. So even if today you are enrolled in another plan, such as Medigap Plan G or N, your future options will not change from the options you have today. This even applies to beneficiaries who delayed enrolling in Medicare Part B before now, usually because they were still working and had access to employer group health coverage.
Who won’t be able to buy plans C or F?
Individuals who are eligible for Medicare beginning on or after Jan. 1, 2020, won’t be able to buy Plans C or F, but they will still have plenty of Medicare supplement options. These options will vary by carrier, as each carrier decides which plans it will offer to the public (within state rules).
The two most comprehensive plans will be Medigap Plans D and G. Neither of these plans covers the Part B deductible, but they cover most of the other cost-sharing. This means new beneficiaries will need to prepare to satisfy their own Part B deductible upon their first outpatient service of the year.
After that though, both Plans D and G will offer robust coverage of other Medicare cost-sharing, such as the Part A deductible, the Part B coinsurance, skilled nursing facility coinsurance and so on. Because you will pay your own Part B deductible, though, you may find that premiums for these two plans are more competitive than premiums for Plans C or F are today. Fewer benefits covered usually translates to lower monthly rates for the insured individual.
Will rates for Medigap Plan F skyrocket?
Medigap Plan F has been the most popular plan for decades, because it covers all of the gaps in Medicare. When new enrollees are no longer able to buy the plans that are being phased, beneficiaries insured on those plans could see higher rate increases in the future, because there are no younger and sometimes healthier 65-year-olds able to purchase Plan F.
Years ago, when Medicare phased out Medigap Plans H, I and J, many beneficiaries who remained on those plans saw higher annual rate increases over time. Something similar could happen to beneficiaries who stick with their current Plan F. However, that remains to be seen.
Some insurance carriers could also introduce new Plan F policies, looking to attract healthy beneficiaries who were eligible for Medicare before 2020. Changing from one Medigap Plan F policy to another policy offered by a different carrier generally involves health questions.
If carriers offer new Plan F policies for sale at competitively low rates, many currently insured individuals might apply to change plans so they can take advantage of lower rates. All those individuals would answer health questions on their applications, and the underwriters would approve those individuals healthy enough to qualify.
While it will be interesting to see what happens, the important message is that it’s not just people already on these plans who get to keep them. As always, you should consult with your Medicare insurance broker annually to see if any plan options exist for you that might help you reduce premiums.