Karima Williams (R) of DC Health Link assists barber Cornel Henry (L) with health insurance information during an event fo...

What to expect from the major changes coming to popular Medigap plans

Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.

After last week’s failure by Republicans on their American Health Care Act, it’s time to return to business — although the futures of Obamacare, Medicare and Medicaid are hardly easy to predict. Trump appointees, backed by GOP majorities in Congress, have before suggested administrative changes and cuts to these programs. For the time being, older Americans will retain their current health care choices.

One of these is the ability to buy a Medigap policy to supplement basic Medicare. There is plenty to update older Americans on the current trends in these policies.

For those of you less familiar with the ins and outs of Medicare and Medigap, here’s a quick refresher: Basic Medicare consists of Part A for hospital coverage and Part B for doctor, outpatient and durable equipment expenses. Basic Medicare also usually includes purchase of a stand-alone Part D plan to cover prescription drugs. But basic Medicare has major coverage gaps, most notably that Part B pays only 80 percent of covered expenses. The other 20 percent must be paid by individuals. They can close this gap by buying a state-regulated Medigap plan from a private insurer.

Medigap plans are growing in popularity, according to a recent report from staff at the Medicare Payment Advisory Commission, or MedPAC, which advises Congress on Medicare policies. In 2010, there were about 36 million people with basic Medicare, and 9.7 million of them, or 27 percent, had Medigap plans. By 2015, the report said, basic Medicare enrollment exceeded 38 million, with 31 percent — or 11.8 million — choosing to also buy Medigap policies.

READ MORE: Should we raise the retirement age for Social Security and Medicare?

There are 11 different types of Medigap plans, designated by the different letters of the alphabet. Under federal rules, all similarly named letter plans must offer identical coverage, meaning that all letter A plans, for example, must offer the same coverage. Insurers are free to charge different amounts for premiums, and there often are wide differences in the prices for identical Medigap plans.

Letter C and F plans pay all uncovered Medicare costs and are both the most expensive and most popular Medigap plans. They garnered 77 percent of the market in 2010 and 73 percent in 2014.

Between 2010 and 2014, sales of Medigap plans providing substantial but not complete protection dipped from 20 to 16 percent of the market. Letter plans available to new enrollees in this category include A, B, D, G and M plans.

Finally, there was a big jump in sales of Medigap plans that require buyers to shoulder a significant share of uncovered basic Medicare expenses. This group is comprised of letter K, L, N and high-deductible F plans. It represented only 3 percent of Medigap sales in 2010, but 10 percent in 2014. In this group, plan N policies have dominated and totaled nearly a million enrollees by 2015.

Details on what each letter plan covers may be found on page 11 of Medicare’s annual Medigap consumer guide. The MedPAC report provided these average annual premiums in 2015 for the three groups of plans:

  • Greatest payment protection (C and F): $2,400.
  • Substantial payment protection (A, B, D, G, and M): $2,000.
  • Limited payment protection (letter K, L, N and high-deductible F): $1,400.

For alphabet-conscious readers, the letter gaps in plan offerings represent older plans that have been discontinued or are no longer offered to new enrollees. For the statistics crowd, these numbers include only so-called “standard” Medigap policies and thus exclude about a million policies that were either non-standard and sold a long time ago or standard plans that no longer are sold to new enrollees, but may be renewed by people who already have the plans.

Starting in 2020, this last group — those plans that cannot be sold to new enrollees but can be renewed — will begin to include some of the popular C and F plans. Beginning that year, newly sold C and F plans will no longer repay policyholders’ annual Part B deductibles, which are $183 this year. Existing policyholders will still be able to renew these popular plans and thus retain what’s known as “first dollar” protection.

However, the loss of this feature in C and F plans offered to new enrollees is expected to make these plans less attractive. And the possible loss of younger Medicare beneficiaries enrolling in these plans has raised concerns that rates could rise as the pool of existing policy holders becomes older, sicker and more expensive to insure.

Marvin Musick, a Medigap insurance broker in the Midwest, reports that many of his letter F customers are shifting to letter G plans. They do not repay Part B deductibles, he noted, but otherwise provide protection comparable to letter F plans, are less expensive and have exhibited more stable premium levels in the recent past. Most of his Medigap sales are now letter G plans, he added.

Musick’s experience likely applies to Medigap plans elsewhere in the country. Thus, many of the more than 8 million Medicare enrollees who now have C and F plans will face an important decision in the next two years as rates are likely to rise. It’s not too early for these enrollees to begin thinking about their future Medigap coverage.

And now, on to your questions.

Nancy – Maine: Our son (at age 51) died about four months ago from ALS [Amyotrophic Lateral Sclerosis]. Knowing he probably had only a short time to live, I bought outright an eye-gaze computer for him rather than wait for the request to be approved by Medicare. I would do it again, but I am hoping I could be reimbursed for all or some of it. The doctor said she would give a document saying she would have prescribed it. Is there anything you can suggest? I am going to pursue this, no matter what, as it would have been inhumane not to get this for him as soon as I could. It made an immeasurable difference during the last 2 and a half months of his life.

Phil Moeller: I’m so sorry for your loss. A good friend of mine is dying of ALS. It’s a brutal disease and one that no parent should have to watch a child endure.

Have you reached out to the vendor who sold you the computer? Perhaps it has use for a used unit?

My next stop would be the Maine chapter of the ALS Association. There might be a need for your son’s computer and interest in providing you some money for it. Someone there might also be able to help you pursue this with Medicare.

My guess is that trying to get a refund by making a formal claim through Medicare would be arduous. It’s not clear to me that the agency has a formal responsibility to help you, although perhaps some sympathetic person might take up your cause. Noridian Healthcare is the Medicare administrative contractor for durable medical equipment claims in northeastern U.S., including Maine.

Again, I am so sorry. Best of luck to you in this effort. Please let me know how this turns out, so your experiences can help others.

Susan – Texas: I am a retired federal employee and am not allowed to receive any of my Social Security retirement benefits that I earned prior to my federal employment. However, this does not prevent me from continuing to be hit with higher Medicare premiums. First, I had a higher premium, because I did not (nor was I able to) have my Medicare premiums automatically deducted from my non-existent Social Security payments. Now, I am getting a second round of Medicare increases, because I still am not subject to these “hold harmless” rules. Am I understanding these rules correctly, and is there anything I can do about what seems to me to be really unfair treatment?

Phil Moeller: Social Security’s Windfall Elimination Provision does reduce Social Security benefits for people with government pensions, but it cannot completely eliminate them. If you are being told you are entitled to no Social Security, either something else is going on or someone at Social Security has made a mistake.

READ MORE: Is it worth keeping Medicare if I’m covered by my new employer?

As for your rising Medicare premiums, I agree with you on moral grounds that you should be as protected from these increases as are people who received Social Security and thus benefit from the hold harmless rule if their Medicare premiums are paid out of their Social Security benefits.

A Social Security spokeswoman said she was not aware of any comparable protection for someone in your position. She suggested you reach out to someone in the federal Office of Personnel Management to ask if there is anything they can do for you.

I’m sorry I don’t have better news.

Neil – California: My wife turns 65 in November this year. She is collecting Social Security already. We are covered by a good medical plan with an HSA [health savings account] at her work. Since she is already collecting Social Security, I want to be careful and not start Medicare until she is no longer working, so that we remain eligible for HSA contributions as long as possible. We are estimating she’ll work through age 67. What is the most certain way of opting out of Medicare until we need it — given that receiving Social Security makes enrollment in Medicare seem automatic?

Phil Moeller: If your wife is already collecting Social Security, she must by law also receive Part A of Medicare. And if she is receiving Part A of Medicare, she cannot continue to make tax-exempt contributions to an HSA. Perhaps her employer is not aware of this rule, but now, unfortunately, you are!

As for Medicare, so long as you have group health coverage from an employer plan and the primary member (in this case your wife) is still actively employed, you do not need to get Medicare just because you turn 65.

Tony – Texas: My wife and I have sole conservatorship of a 9-year-old grandson and have raised him 100 percent since he was 14 months’ old. My full retirement benefit at age 66 this July is $2,440. Normally, I would not claim benefits until age 70, but I have been looking at your analysis of the combined family maximum. I do not know the exact number of my wife’s earned benefits, but I would think it is at least $1,000. I would think this would permit us to get more than $3,000 in benefits for our grandson. Otherwise, he would qualify for only half of my $2,440. It would be great to put all of this into a college fund for him until he turns 18 and can no longer claim this benefit. Do you agree that we don’t have a limit on the benefits? Also, will the Social Security office give us a benefits letter that assures they would pay us these benefits before I give up my right to delayed Social Security benefits for myself?

Phil Moeller: The combined family maximum doesn’t really apply in your situation. It comes into play where multiple claimants are involved. In the case of your grandson, he can make a claim against either you or your wife’s earnings record, but cannot collect on both at the same time. Normally, the agency will award him the benefit linked to the person entitled to the highest benefit to maximize the child’s payment.

So, your grandson’s benefit would be half of your age-66 benefit, and claiming it would not exceed your individual family maximum.

The trade-off calculation is to figure out what would happen if you delayed your filing until age 70. Your $2,440 age-66 benefit would then become roughly $3,220 a month — an increase of 32 percent, or $780 a month.

You would lose four years of child benefits as well as four years of your own benefit. At age 70, your son’s benefit would still be only $2,440 a month. But you would have that extra $780 to spend on his education or your other needs for the rest of your life.

In practice, I’d probably file at 66 and sock away enough money to fund much if not all of his college expenses.

Helen: My husband is 71 and filed for benefits early at about 63. I just turned 65. Neither my husband nor I am in great health, so I decided to collect benefits at 65. My goal is to still find a job and suspend my benefits, so that I could grow them until at least reaching my full retirement age. Under the new Social Security rules, what are my options?

Phil Moeller: You can keep collecting your retirement benefits. If you found a job, you have the choice of withdrawing your benefits within 12 months of beginning them. If you did this, you’d have to repay all the benefits you’ve received to date. Doing so would wipe the slate clean for you, and Social Security would regard you as having never filed. In this way, you could retain your right to the highest-possible benefit when you turned 70.

If you did this, the new rules would allow you to file a restricted application when you turn 66 (your full retirement age) for just your spousal benefit. This right has been ended for anyone younger than 62 as of the beginning of 2016, but was grandfathered for older persons, and this group includes you.

READ MORE: Can I work and still collect my late husband’s Social Security benefits?

By filing a restricted application, you would be able to delay filing for your own retirement benefits until as late as age 70 and would thus earn four years’ worth of delayed retirement credits worth 8 percent each year you delayed.

Because you filed for your own retirement benefit before reaching your full retirement age, you were “deemed” under Social Security rules to be simultaneously filing for any other benefits for which you are eligible. This would include your spousal benefit. When this happens, Social Security will look at the two benefits and pay you an amount that is roughly equal to the greater of the two. In your case, I’m guessing that’s your retirement benefit.

Because you’ve already filed for both benefits, you cannot file a restricted application when you turn 66. The only way to regain this right is to withdraw your benefits, repay them and get what amounts to a do-over.

However, at your full retirement age, you can suspend your benefits until as late as age 70. Doing so would allow you to earn delayed retirement credits on your retirement benefits and thus increase them. Of course, you would forego all benefits during the period they were suspended.

I know this process can be confusing and daunting, but you do have options. Best of luck!