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Does it matter where you buy a Medigap plan?

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. Send your questions to Phil.

John: I’m turning 65 soon. I am a resident of New Jersey and need to remain so for at least several months. Sometime in 2018, I can become a resident of Texas. However, I’m in Texas now and will be through the end of 2018. I’m caring for a grandchild here. Since I will be living in Texas do I get a Medigap plan for Texas, or must I get one for New Jersey? If I get one for New Jersey and have health issues in Texas, would my costs be out-of-network expenses? When I get on the phone and ask providers, I get dead air or no response at all.

Phil Moeller: Medigap plans provide supplemental coverage for people who have basic Medicare (Parts A and B). Basic Medicare will cover you anywhere in the U.S. for care by medical providers (doctors and hospitals) who accept Medicare. Your Medigap plan will then help pay those expenses that aren’t fully paid by basic Medicare. There should be no out-of-network charges.

So, it doesn’t matter where your Medigap plan is issued. Once you have one, you can keep it regardless of where you live, so long as you keep paying your premiums. It’s good all over the U.S. If you will be a New Jersey resident when you turn 65, you probably should get the Medigap plan from a New Jersey insurer. That’s because you are entitled to what are called “guaranteed issue rights” when you are first eligible for Medigap. You definitely want these rights, which are explained on page 21 of Medicare’s annual guide to Medigap.

Once you have established residence in Texas, you could try to switch to a Medigap insurer there, but you don’t have to. If you do try, and insurers there want to charge you more because you no longer have guaranteed issue rights, you can just keep your original New Jersey policy.

Asela – Fla.: After Hurricane Maria, my niece in Puerto Rico needs to come to Florida for health reasons. She has Medicare Parts A and B. Will she be able to use her Medicare card to obtain medical assistance while here?

Phil Moeller: Yes. If she has basic Medicare, her insurance will pay for her on the U.S. mainland and she can use any doctor or hospital that accepts Medicare.

As a reminder, Medicare has extended its annual open enrollment period through the end of the year for people affected by Hurricanes Harvey, Irma and Maria. For others, open enrollment will end Dec. 7.

Anonymous: I’m 50 years old and on disability. I recently became homeless and am very scared. I haven’t been getting my mail, I haven’t been able to watch TV, and I’m more or less clueless right now about what’s going on in the world. I just found out my disability check is going to be $134 dollars less each month. I don’t know why. Do you? How can I make it on $500 dollars a month. I’m so tired of living in my car. I have no family, no one, nothing.

Phil Moeller: I am sorry to hear about your problems, and hope things turn up for you. It sounds like Social Security has decided to begin charging you $134 a month for the monthly premium for Part B of Medicare.

I don’t know why this happened. Perhaps you just qualified for Medicare? It normally takes about two years since a person’s Social Security disability payments begin before this happens.

In any event, if your total income is only $500 a month, it seems to me that you should not be paying for Part B. You probably should be on Medicaid, and it should be paying these premiums.

You should contact the State Health Insurance Assistance Program (SHIP) where you live. It provides free Medicare counseling and should be able to work with you to get this charge removed.

Sue: My husband’s employer provides our heath care coverage. He turned 65 in 2016. We were told he did not have to notify Medicare because he was still on employer health coverage. So, we did not do anything for Part A or Part B. I am turning 65 in December. Should we do anything at this time? We do not take Social Security, and plan to continue working for some time.

Phil Moeller: You should be fine. Social Security should automatically enroll you in Part A of Medicare, which covers hospital costs and for which you pay no premium. This can come in handy as secondary health insurance. However, if you contribute to an HSA you should reject Part A, because having it makes it illegal for you to continue making tax-free contributions to an HSA.

Also, Social Security sometimes mistakenly enrolls people in Part B, for which there is a monthly premium. Check your mail to make sure this has not happened to you. If it does, you should quickly withdraw from Part B to avoid those premiums.

Tim – Miss.: I plan on starting my Social Security when I turn 62. My wife is one year younger than myself. If my retirement check from Social Security is about $1,400 a month, and she starts drawing off me with a spousal benefit, would her benefit go up sufficiently if she waited until her full retirement age of my 66 and 6 months? Drawing on her own and starting at 62, she would only draw something in the neighborhood of $300.

Phil Moeller: If you file at age 62, your wife’s spousal benefits will also be reduced, even if she waited until her full retirement age to file for this benefit.

You should be able to determine the impact on her benefits of different claiming dates by using this table from Social Security.

If you haven’t already done so, each of you should open online My Social Security accounts. They should give you benefit estimates of how much you would receive at different filing dates.

While I know you may need your Social Security benefits as soon as possible, I’d urge you to consider waiting as long as possible to file. Each year you delay, from age 62 to 70, benefits will rise by 7-8 percent a year.

To close out this week’s correspondence, here’s a long question and a long answer, offered to illustrate the kind of homework people can do on their own to solve their Medicare riddles. Kathy is this week’s Medicare self-help poster child. (Her compliments about Ask Phil have nothing to do with this!) Even with all her efforts, however, she still has outstanding questions.

Kathy: I have spent hours reading your great articles, but I do not see an answer that covers my circumstances. I have talked with Medicare “expert” agents, read the Medicare sites, and numerous other articles.

Here is my situation: I will turn 65 in Feb. 2017 and need to decide soon what to do regarding Medicare. My employer has fewer than 20 employees and I am in its group plan, which is a PPO plan [preferred provider organization] with prescription coverage. It is a high deductible plan, so I have an HSA [health savings account].

I know that if I sign up for Medicare (any parts), I lose my ability to contribute to my HSA. So, I am trying to decide whether to keep my employer plan or get Medicare, and if I get Medicare, which mix of policies should I get?

In 2017, I will have paid a total of $9,100 (premiums, copays, deductible and out-of-pocket expenses) for the year, including prescriptions.

My research, based on 2017 rates for Medicare for me, produces this breakdown for Medicare costs:

Part A: $0 premium.

Part B: $348 a month, or $4,176 a year (my income is high enough to trigger surcharges).

Plan D for drugs: About $4,300 a year for my total out-of-pocket expenses.

Medigap supplement insurance. Do you have a preference between Plan G, where I’d have to pay the annual Part B deductible of $183, or Plan F, which pays this deductible?

  • Plan G premiums: $123 to $142 a month ($1,476 to $1,704 a year)
  • Plan F premiums: $144 to $158 a month ($1,728 to $1,896 a year)

Here are my questions:

  • Can I keep my HSA and employer’s group insurance and decline any Medicare while I’m working, without getting penalized?
  • Since my employer has fewer than 20 employees, do I have to sign up for Medicare even if I keep my employer’s group insurance?
  • If yes, should I only sign up for Part A when I turn 65 and keep my employer’s group insurance and decline Parts B and D (assuming that the employer’s prescription coverage is “creditable” which I will check)?
  • Or, should I sign up for Part A and B and D (with Medigap insurance) and drop my employer’s insurance?
  • If no, I read a few articles that Medicare would be primary and my employer’s insurance is secondary, so if I do not sign up for even Part A, then my employer’s plan will not pay. This does not make sense to me. Is this correct?

I spoke with several insurance agents on Medigap supplement policies for Plans F and G. I know they get paid by the insurance company if I buy a policy for that insurance company from the agent. Therefore, I am curious if the agent pushes one company over another. Since the coverage is the same, I am concerned on the company’s stability, history of premium increases, how often the insurance company is allowed to increase premiums, the company’s track record of paying claims on time, and the quality of its service to sort out issues with claims and Medicare. Do you have any suggestions or insight on these companies?

My employer is very small, unsophisticated and its insurance agent is clueless. So, without a competent HR department, I have to figure this out on my own.

Phil Moeller: I wish all reader questions were as thoughtful and well-informed as yours. Of course, I would then quickly run out of time to answer them properly, which I fear is the case with your question. Maybe I should write a book! Oh, wait! I did!

I assume you are turning 65 in February of next year, not this one. If giving yourself an early birthday present of my book is not appealing, here are a few thoughts.

Medicare usually is primary in small-employer plans when the employee turns 65. So, the issue here is not whether to get Medicare but what kind, and whether it makes sense to even keep your employer plan. If you do keep it, it should provide secondary coverage and obviate the need for a Medigap plan. Given your experience with your health plan, this will mean some homework for you. I’d go straight to the plan’s health insurer and find out how it works with Medicare.

If Medicare does become primary for you at 65, the issue of the HSA becomes moot.

I recently wrote a piece about whether Medicare-eligible employees should keep their employer insurance. Perhaps it will be of some value.

I have searched in vain for useful records about past Medigap rates and insurer performance. Because Medigap is regulated at the state level, my lame suggestion is to check your state’s insurance department website and see if it contains any relevant Medigap information, including consumer complaints.

I accept the need for insurance agents and think they can be very helpful. Having said this, it would be naive not to think they often favor particular insurers. I would use Medicare’s Medigap Policy Search tool to see if what you’ve been told is accurate.

As for choosing between Medigap F and G plans, I favor G plans. F plans are far and away the most popular Medigap plans, in large measure because they offer the most complete coverage.
In 2020, F plans will no longer be able to pay Part B deductibles, thanks to a law passed in 2015. While people who buy these plans before then will be allowed to keep this feature, the absence of it in new plans could reduce the sale of new F plans and place upward pressure on rates. This is only a possibility, but why take the risk?

Without the Part B feature, F and G plans offer the same coverage. And, as Kathy’s premium analysis of these plans illustrates, the premium gap between the two types of plans is more than the Part B deductible! So, you can buy a G plan and come out ahead, even if you must pay the Part B deductible.