If you think my headline is a little dramatic, I promise it's not. The following information is critical to anyone considering a Plan F Medicare Supplement. Plan F has long been the most popular of the standardized plans, and it does have a purpose. However, you should explore all of your options and make yourself aware of the potential pitfalls before owning one.
I'd also like to preface the following information with a little background on myself. I have worked in the senior market for 27 years. For much of that time, I worked in Medigap Plan design and pricing. I am considered an expert in the industry.
New agents and lazy agents sell Plan F Medicare Supplements. It's true. Insurance agents love selling a Plan F. It pays a higher commission and most shoppers have usually heard about it from a friend. Because it is so popular, it is a much easier presentation.
Be wary of agents who immediately push you towards a Plan F. To make a blanket statement that Plan F is the best is wrong and irresponsible. If they say it's the "Cadillac Plan" because it covers everything, hang up the phone. Having the "Cadillac Plan" sounds great, but it comes at a cost.
Insurance companies love Plan F too. It has benefits you'll probably never use, and others that are very profitable to the company. That's why they always advertise the Plan F.
If the only difference between a Plan F and a Plan G is the Part B Deductible, why is the price difference so much higher? The Medicare Part B Deductible is currently $ 166 a year. However, when you are comparing plans, it is not uncommon to find Plan F rates between $ 300 – $ 600 higher than a Plan G. Insurance companies call this difference a "convenience charge." Why not keep the "convenience charge" in your wallet and pay the deductible yourself?
Excess charges are not that big of a deal. The reality is most doctors accept Medicare Assignment and it's easy to confirm if your doctor does or does not. Why would you pay for this benefit if you do not need it?
Even worse, in some states, it's illegal for doctors to charge above the Medicare Allowable, yet many agents continue to sell their clients a Plan F.
Historically Plan F has larger rate increases. That's a fact, just think about it, it's easy to understand why. Because a Plan F has first-dollar-coverage, it tends to be over utilized. Meaning, people will see the doctor more often when it costs them nothing out-of-pocket. More claims equal larger rate increases.
Also, unhealthy people who know they are going to have sizable medical bills are more likely to buy a Plan F because of its full coverage. Again, more claims equal larger rate increases.
On average, Plan F rate increases are 3 times higher when compared to a Plan G.
Do not get trapped in a Medigap Plan F! By far, this is the most compelling reason not to own a Plan F. Plan F is going to be phased out in 2020. Anyone who owns one prior will be able to keep their plan. Do not keep that plan! New sales will stop, there will not be any younger and healthier individuals entering the plan and offsetting the cost of the older insureds. Rates will have to increase. As rates increase, anyone who is healthy enough to pass underwriting requirements will move to a new plan. This will make the situation even worse.
If you are stuck in a Plan F after 2020, you could see ridiculous double-digit rate increases year after year. A similar situation happened with Plan J after it was removed from the market in 2010.
In summary, buying a Plan F could be a huge mistake. Consider all your options. Speak with an agent who is familiar with all the plans, and be sure to ask about the points mentioned in this post.