Do you know how Medigap policies work?

Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

I will get to as many questions as I can here, but please accept my apologies that I am not able to answer everyone’s questions.

Sunny – Va.: My doctor accepts Medicare. Does this mean that he has to accept the Medigap plans that are offered from a variety of companies in my ZIP code?

Phil Moeller: Yes, although your doctor doesn’t really “accept” Medigap. Medigap, also called Medicare supplement insurance, covers things that basic Medicare (Parts A and B) does not fully cover or, in some cases, does not cover at all. If your doctor accepts Medicare, it means she has agreed that Medicare’s prices will be payment in full for the medical services you receive and that Medicare will pay her. When you receive a service from her, her office will file a claim with Medicare on your behalf. It is the primary payer of your claims. Your Medigap plan is the secondary payer. Either Medicare or your doctor will file a claim with your Medigap insurer for any additional payments that it covers. All payments generally go to your doctor or other health care provider depending on the medical treatment involved.

READ MORE: Which Medigap plan should you get?

Joe – Ariz.: I am 71 and on Medicare, but I never obtained Medigap insurance. I need it now. What do I need to be aware of, and will pre-existing conditions be a problem in obtaining supplemental coverage?

Phil Moeller: Pre-existing conditions could be a problem for you. During your initial enrollment period for Medicare, there are what are called “guaranteed issue rights” for Medigap policies that prevent insurers from either denying coverage or charging you higher rates due to pre-existing conditions. You no longer have these rights, so insurers are free to charge you higher prices or even decline to sell you a Medigap policy altogether if they choose. Most likely, however, your concern won’t be getting coverage but getting it at a decent price.

According to a useful 2015 Arizona Medigap shopping guide put out by the Arizona Department of Insurance, insurers in your state may not use a so-called “attained age” rating system to price Medigap policies. They must price policies using either “community” or “issue age” rating:

  • Community Rating – Policy premiums are priced the same to all persons within a given territory and may vary by age at issue.
  • Issue Age Premium – Policy premiums are based on the policyholder’s age at the time the policy is issued and premiums do not increase incrementally due to age.

Depending on the rating system used, today’s cheapest premium may not always be the cheapest premium in the future.

You also need to understand the different types of coverage offered by the different “letter” Medigap plans that insurers offer. There are 11 of these. Their coverage terms are contained in the state guide and also in a helpful federal guide to Medigap. Be aware that the coverage in each type of letter plan won’t vary among insurers. The major thing that does vary is the price of the policies, so shop carefully.

Katherine – Va.: My husband turns 70 in July and applied April 1 online for Social Security to begin in August and Medicare Part B to begin June 1, as he is retiring on May 31 and has group insurance until then. A Social Security representative told him he didn’t really need to wait until August to get the maximum benefit and was supposedly changing the effective date to June. When my husband finally managed to get a representative on the phone, he was informed they have 60 days from the date of application to process it (they consider it April 18 when additional information we sent by mail was received) and their records still show an effective date of Aug. 1. Is this “60 days” to process an application correct? I see nothing on the website about it. He can get COBRA for health insurance until then, but this seems to be horrible customer service on the part of Social Security and Medicare when the Medicare Part B clearly showed an effective date of June 1. They’re sort of taking the attitude of “so sad, too bad — you got your information into us too late.” We assume the fact that Social Security isn’t set up until August is messing up the earlier Medicare Part B date. Since I’m already getting Social Security, my Part B request went through in a few weeks and is in place June 1. So my main question is, is there really a 60-day window and couldn’t they have expedited this?

Phil Moeller: They clearly messed up, but don’t hold your breath waiting for an apology. I have not seen this “60-day” processing window either, but I fully admit that I will never live long enough to either read or understand all of the agency’s rules. What I do know is that your husband applied with plenty of time to have his desired claiming dates honored for both benefits. I also know that his Social Security application should not interfere with his Medicare application. Plenty of people apply for these benefits at different times, and the fact he applied for them at the same time should not have caused the timing of one benefit to delay the other.

As for Social Security telling him he didn’t need to wait until August to get his maximum benefit, I am hoping that this is just a difference in how the agency defines timing requirements. Social Security benefits are lagged a month. In your husband’s case, this means that his July benefit would be received in August. So the agency might have thought that he was waiting to actually apply in August, meaning his first monthly payment would not begin until September. However, setting the effective date to June worries me. There are lots of cases where the agency has started benefits early, and provided a retroactive cash payment for up to six months of earlier benefits. While this lump sum is nice to get, it may mean that the agency has also moved forward the claiming date by that amount of time. And someone who thought they were getting the maximum benefit at age 70 later learned that their claiming date actually was set at age 69 and a half. Their monthly payment at this claiming age thus was 4 percent less than at age 70 — each and every month for the rest of their life.

READ MORE: The Social Security pitfall we just learned about

To make sure you’re getting all of what’s yours, don’t take anything for granted when dealing with Social Security. The stakes simply are too high.

Carrie – Calif.: My mother-in-law wants to sell a property she owns, but is afraid to do so, because she thinks she will lose her Medicare benefits if she deposits a large sum of money in her bank account. Is this correct?

Phil Moeller: No. If your mother receives low-income assistance with her Medicare expenses, it’s possible she would lose these subsidies during the year when her reported income is higher. She would still be covered by Medicare, but her payments would rise. The other impact of a one-time spike in income would occur if the increase is large enough (a modified adjusted gross income of more than $85,000 for a single tax filer) to trigger Medicare’s income-related monthly adjustment amount, known as IRMAA. This would raise her monthly premiums for Parts B and D of Medicare. There is a two-year lag in IRMAA surcharges, meaning that an income surge reflected in her 2016 tax return could trigger IRMAA charges in 2018. Again, she wouldn’t lose her Medicare in this situation. It would just cost more, but only for the single year in which her income was above IRMAA thresholds.

READ MORE: How can selling your home raise your Medicare premiums?

Kathleen – Calif.: I turned 65 in April and have PPO (preferred provider organization) insurance through my employer. However, in 2017 my employer will only offer an HMO (health maintenance organization) plan, which I don’t want. Can I sign up for Medicare even though my employer offers insurance that I don’t want? I also have a health spending (not saving) plan through work. If I’m forced to sign up with the HMO, would I be able to simultaneously have Medicare and the workplace health spending account?

Phil Moeller: Kathleen, you are free to get Medicare when you turn 65, either in combination with your employer’s health plan or instead of it. However, unless you have some unbelievably sweet deal on how your employer pays for your health insurance, you will be out a fair amount of money. If you contribute a lot to your employer coverage, you probably should drop it and just have Medicare. On the other hand, if your employer contributes most of the cost of your current plan, it might be better to get both. Keeping your employer plan also may give you more future coverage options, as some employer plans won’t let you back in after you have turned 65 and dropped them.

I am guessing here that the main reason you don’t want the HMO is because the plan’s health provider network doesn’t include enough of your preferred health care providers. If that’s the case, basic Medicare is probably your best choice. It will set you back about $121 month, unless you make enough money to trigger Medicare’s high-income surcharges. I’d then look at whether your employer’s plan provides you sufficient drug coverage and whether you’d still want a Medigap plan or if your employer plan covers enough holes in basic Medicare to protect you from catastrophic health expenses should you require major medical care. Before doing anything, check with your employee benefits department and make sure you understand how your employer plan and Medicare would coordinate benefits. Which plan is primary and which is secondary?

READ MORE: Should you stay on your employer health insurance or get Medicare?

As for your health spending plan, this phrase does not appear in the Internal Revenue Service guide, “Health Savings Accounts and Other Tax-Favored Plans.” The phrase “health reimbursement accounts” does appear. Might this be the technical name of your account? If so, the publication says nothing about it being affected by signing up for Medicare. These accounts must be funded solely by employer contributions. They are frequently used in retiree health plans where, of course, members are also using Medicare. Again, your employee benefits folks may be able to provide additional clarity here.

Jennifer – Ky.: My husband and I pay $1,200 a year for our prescription drug coverage, but it hasn’t paid for our drugs all year. Can you suggest another coverage?

Phil Moeller: Lacking more details, I am not sure whether your problem is tied to the plan’s annual deductible, its lack of coverage for the specific drugs you take or some combination of both. Assuming you are eligible for Medicare, you can look for a better plan by going to Medicare’s Plan Finder and entering in the specifics for you and your husband (in separate sessions, as you each need a drug plan under Medicare). Good luck.

John – Ind.: Can I sign up for Medicare Part A without getting Part B? I paid Medicare taxes as a federal civil servant. I kept my Blue Cross insurance instead of signing up for Medicare when eligible. I am now 71, and with penalties, Part B would cost me $2,200 a year — only $300 less than my Blue Cross, which covers more than Part B anyway,

Phil Moeller: It sounds like you are covered under the Federal Employee Health Benefits Program. If so, you can keep your policy and don’t need to get Medicare. However, if you were to get Medicare, the rules say that it would become the primary payer and your FEHB plan would become the secondary payer. In that event, you would need Part B or might face big coverage gaps. You should be able to get Part A without Part B, and it might come in handy. Check with your benefits administrator.