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Medigap Plan F

Medigap Plan F – Zero Out-Of-Pocket Costs, But at What Price?

If you signed up for Plan F, you have the wrong plan.

Yes, I feel that strongly about it.

But let’s talk a little bit first about what Plan F is and how it works and why it’s so popular, then we’ll come back to why it’s not the best option...

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How it Works

Plan F is a Medigap Plan, also known as a Medicare Supplement. With any Medigap Plan, you have Original Medicare as your primary insurance. So as long as the healthcare provider you go to takes Medicare, they take whatever Medigap insurance you have, it doesn’t matter which insurance company provides it, or what plan you have.

You can see Plan F highlighted in the chart below:

Medigap Plan F

So, as long as you see a healthcare provider that accepts Medicare and whatever you have done is “medically necessary”, then Medicare along with your Plan F will pick up 100% of anything hospital or medical-related. You don’t have to pay a dime in out-of-pocket expenses.

​The only exception to this rule is if you’re treated outside of the U.S. Original Medicare does not cover you outside of the country (except in rare cases), so your Plan F is covering 80% of your expenses. However, before Plan F pays, you do need to meet a $250 deductible first. Also, any Medigap plan you have will have a lifetime benefit maximum of $50,000.

​Also, keep in mind, Medigap plans sold after 2005, like Plan F, don’t cover prescription drugs anymore.

​So you can see…

​Why it’s So Popular

​One reason is that Plan F is so darn easy to understand:

You: Hey there doc, do you take Medicare?

Doctor: Of course!

You: Are these tests and treatments medically necessary?

Doctor: You bet.

You: Great! Now I won’t have to pay any bills!

​Plan F is by far the most popular Medigap plan by enrollment. In a 2015 study by the AHIP Center for Policy and Research, 56% of folks enrolled in Medigap plans at the end of 2014 were enrolled in Plan F. The plan with the 2nd highest enrollment was Plan C, at 10%.

​Another reason it’s so popular is because of the way it’s sold. You see Medicare supplement agents, like me, are paid a commission based on the monthly premium of your plan we help you sign up for. If you look at the chart above again, Plan F covers the most so it’s naturally going to be the most expensive. Some agents are just going to focus on giving you Plan F as your one option so they can make the highest commission.

​So what about insurance companies? Wouldn’t they make the most money if you sign up for the most expensive policy? Well, I think you know the answer to that one. I won’t mention any names, but the largest Medigap provider in the U.S. by far, the company who spends billions each year marketing to seniors, dominates the Medigap market when it comes to the number of Plan F enrollees. They don’t even offer Plan G in order to keep their enrollment high in their flagship plan.

​So, you’re thinking? Well this doesn’t sound that bad? Folks who sell and provide insurance need to make a living, right? Sure, but let’s start peeling back a few more layers of this onion and see if it starts to stink…

​The Problem With Plan F

​The problem can be summed up in one statement: Medigap plans are priced based on the amount of claims they pay out. Let’s look at a few reasons why Plan F pays out more than it should:

  1. Plan F is a Guaranteed Issue (GI) plan – This means that when certain qualifying events happen to you (certain circumstances where you lose your employer plan, previous Medigap plan, or Medicare Advantage Plan, for example), you have a GI right to get any Plan F you want. It doesn’t matter how bad your health is at that point, your enrollment can’t be turned down.

    So, how does this affect things? This means that your average person with Plan F is going to have more health issues and file more claims than someone with a non-GI plan (like Plan G). This simply causes Plan F premiums to be more expensive and increase faster compared to non-GI plans.
  2. Plan F gives you “first dollar coverage” – This may sound wonderful, but it’s not when it comes to pricing your plan. Because you have no out-of-pocket expenses to pay when you see any healthcare provider, you’re much more likely to go see a doctor or go to urgent care for issues that are more of an inconvenience, rather than being medically necessary.

    This again causes more usage and more claims compared to other Medigap plans are not “first dollar coverage”. Higher claims, higher premiums.
  3. Plan F is being discontinued for those new to Medicare in 2020 – Folks who get Medicare Part B starting January 2020 or later will no longer have the option to get Plan F.

    If you’re already on Medicare or even have Plan F now, why should you care? This will cause the number of people that have Plan F to decline. Also the people who can’t get it will be younger 65 year-old folks, who will have lower claim amounts than older Medicare folks.

    This will slowly drive premiums higher and force those to jump ship from Plan F. But since switching Medigap plans requires passing health questions, only those healthy enough to leave will do so. This will cause rate increases to snowball as those remaining in Plan F pools file an increasingly higher average amount of claims.

​It’d be sort of mean if I just pointed out the problems with a certain Medigap plan without giving you a solution, so…

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​Plan F Alternatives

Plan G​

​Plan G is a far better choice than Plan F. Here’s the Medigap chart below again to see how they compare:

Medigap Plan F vs. Plan G

​You can see there’s only one difference between Plan G and Plan F, and that’s the Medicare Part B deductible. Plan F pays that deductible for you; with Plan G you have to pay it yourself. In 2017, that deductible is $183 dollars total for the year. You’ll likely pay hundreds less in premiums with Plan G compared to Plan F, and it doesn’t have any of the 3 problems mentioned above.

Plan N​

​Plan N is also another alternative to Plan F. It doesn’t have any of those 3 problems either. The only downside is that Plan N is the only Medigap Plan with office visit and emergency room copays. Also, it doesn’t cover Part B Excess Charges, which you’d be liable for if you went to a healthcare provider who didn’t accept assignment (Medicare’s billing amount).

Medigap Plan F vs. Plan N

Conclusion

So you can see, it pays to know your options when it comes to getting the right Medigap plan. If you just signed up, or are thinking about signing up, with Plan F because that’s what was recommended to you, or it was the only plan anyone told you about, it can save you hundreds of dollars per year to get equivalent coverage with a different letter plan.​