8 minute read
Medicare Supplement Plans: The Ins and Outs
By David Ethington
For many agents who sell Medicare products, there’s a high likelihood Medicare Supplement products are available in their offerings to clients. But, for those who have not considered selling Medicare Supplement plans, we’ll provide an overview of the products. And, for those of you who do offer Medicare Supplements to your clients, we’ll also discuss some more detailed information you may not have thought about or considered.
Medicare Supplement Plans, also known as Medigap, are private insurance policies that help pay for out-of-pocket costs not covered by Original Medicare (Parts A and B), such as:
Copayments
Coinsurance
Deductibles
There are several standardized Medigap plans (labeled A through N), and each offers different levels of coverage. While Medigap policies are sold by private insurers, all plans with the same letter offer the same basic benefits, regardless of the company.
Key Features:
You must have Medicare Part A and Part B to buy a Medigap policy.
Medigap does not cover prescription drugs—you’ll need a separate Part D plan for that.
It only covers one person; spouses need separate policies.
Medigap doesn’t work with Medicare Advantage plans.
These plans can help reduce unexpected healthcare expenses and provide more predictable costs in retirement.
Why is it important for Medicare beneficiaries to consider these plans?
Typically, beneficiaries only have one opportunity to join this type of plan with Guaranteed Issuance and that is when they first become eligible for Medicare.
If that opportunity is missed, then they must go through Medical Underwriting. If they have any pre-existing health conditions, there is a chance their application will be denied.
This type of Medicare product allows beneficiaries to see any medical provider that accepts Medicare, with some exceptions.
Beneficiaries will avoid the pitfalls of Insurance providers and Medical Group providers coming to contract disagreements. These disagreements can lead to disruptions in care if they are covered under a Medicare Advantage plan.
Why is it important for Agents to offer these products?
The simple answer is that you become more appealing to Medicare beneficiaries when you can speak to ALL of their plan options.
The retention rate is high. According to the Kaiser Family Foundation, one in five Medicare enrollees choose a Medicare Supplement product. And of those that choose this product, 90 percent retain their policy.
This means that retaining your clients requires less time, which allows you to spend more time gaining new business.
Commissions: many of the carriers pay at least a 20 percent commission in the first year of the policy.
We’ll provide additional information on this later in the article.
For those of you who already market Medicare Supplement products, you might find some of the upcoming information very helpful for you when considering which carriers you’d like to offer to your clients. Please note that not all carriers are represented in this article. There are over 20 carriers in California. Please reach out to the carrier in question to verify the information as information frequently changes.
Rate locks are important to consider as this can protect your client from rate increases for six to 12 months depending on the insurance carrier. For example, Blue Shield and Humana have 12-month rate locks. This is important because when you are advising your client on the lowest rate option, you may not be thinking about the rate increase that’s lurking around the corner.
If you decide to enroll a new client into a Medicare Supplement prior to that carrier’s annual rate increase, it’s possible that your new client will get hit with an unexpected rate increase. But, if you put them with a plan like Blue Shield or Humana, your client will avoid this pitfall for the first 12 months they are on their policy. You can mention this to your new client to further show that you are the subject matter expert of these Medicare products all while strengthening the trust your client has with you.
United Healthcare, Anthem Blue Cross (Elevance), and Health Net all have rate locks built into their plans. Please speak to your carrier representative to get more information.
Plan changes often come up when your client wants to “shop” for alternative options due to rate increases or they want to change their benefit level. However, they are not always able to do this. If a client is healthy, they can facilitate this change through submitting an application that requires medical underwriting. If the member is unhealthy, they will need to wait until their birth month in order to use the “birthday rule” that allows them to make a plan change regardless of pre-existing health conditions. Alternatively, if your client is with United Healthcare/AARP’s Medicare Supplement plan, the member can move freely from plan to plan anytime throughout the year.
Commissions are always at the forefront of an Agent’s mind. Although we’re all going to do what’s right for the client, it is important to know the details of the insurance carriers we’re representing. Based on today’s information, below is a list of some of the carriers in California and how they pay.
Anthem Blue Cross (Elevance): will pay lifetime commissions for those members that are underwritten or enroll due to being new to Medicare. Alternatively, they will only pay up to 10 years if a member is written using a Guaranteed Issue, such as, the “birthday rule”
Blue Shield of CA: will pay lifetime commissions in all cases, unless the member is under 65 years of age. Commissions are reduced after Year 1 of the policy.
Health Net: will pay lifetime commission in all cases, unless the member is under 65 years of age. Commissions are reduced after Year 1 of the policy.
UnitedHealthcare/AARP: Beginning June 1, 2025 they will no longer pay lifetime commissions for new business written going forward. They will only pay up to year 10 of the policy.
Humana Achieve: pays lifetime commissions but commissions are reduced the longer the policyholder remains active. They will pay on members who are under 65 years of age.
There are many more carriers to consider. Please reach out to your contracted carriers to learn more about their commission structures.
Guaranteed Issuance (GI) Guidelines are important to know and understand so that you can better assist your clients. The purpose of knowing the “GIs” is so you can address certain situations that would allow your client to make a plan change without having to go through medical underwriting. Here are some of the more common “GIs”:
New to Medicare: the member is new to Medicare because they are either turning 65 or they are enrolling into Part B for the first time. In order to qualify, they must enroll within six months for the Part B start date
Birthday Rule: For members that are currently enrolled in a Medicare Supplement plan, they have 30 days prior to their birthday and 60 days after their birthday to make a change to their policy. They can make a change as long as the benefits offered are equal or lesser value to their current plan.
Loss of Employer Coverage: if a member loses their employer sponsored coverage, they can enroll in a Medicare Supplement plan. They must provide proof of notice of termination.
Some carriers may require that it be an involuntary termination.
A lesser known but very useful “GI” applies to those clients that are enrolled in a Medicare Advantage plan. If the Medicare Advantage reduces benefits or increases the amount of cost-sharing or premium or discontinued a contract with a provider currently furnishing services then the member has the opportunity to enroll in a Medicare Supplement.
If the member’s current Medicare Advantage plan offers a Medicare Supplement, they may have to enroll in that carrier’s Medicare Supplement. If the carrier does not offer a Medicare Supplement option, they may be able to shop other insurance carrier options. Please verify this information with each of the carriers as their definitions may be slightly different.
Household Discounts are an excellent tool for clients to take advantage of in order to save money. Typically, when more than one policyholder lives at the same address, they may be able to qualify for the household discount that reduces their monthly premium responsibility. Below are some of the carriers that offer household discounts:
Anthem Blue Cross (Elevance): five percent discount for each member
Blue Shield of CA: seven percent discount for each member, must be on the same plan
Blue Shield of CA: seven percent discount for each member, must be on the same plan
Humana Achieve: 12 percent discount for each member
Cigna: six percent discount for each member
Physicians Mutual: 10 percent discount for each member
United Healthcare/AARP: seven percent discount for each member
There is so much to know about Medicare Supplements. I encourage you to speak to your uplines, your carrier representatives, and your colleagues. Share your stories with one another as that is how we grow. If you’re looking for a group of agents, look no further than the California Agent and Health Insurance Professionals (CAHIP). Most counties have a local chapter that you can get involved with.
Check out https://cahip.com
Happy Selling!
David Ethington is VP of the Medicare Division and director of Broker Relations with Commission Solutions, part of Integrity Advisors. His work has excelled due to his commitment to providing the best service to both health clients and health brokers. David respects the hard work it takes to build a book of business and enjoys working with retiring brokers and their families. David has participated in the commission protection process for seven years. He’s also involved in acquisitions, especially in the broker relationship transfer of commissions. David lives in Orange County with his wife and their cats. He is an avid runner and completes several long-distance events annually.
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