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Question: From reading your last column, I get the feeling you don’t like Advantage Plans. Why?
Answer: I can see how one could possibly interpret my last column that way, but that assumption isn’t true at all. Advantage Plans can be a great way for Medicare beneficiaries to insure themselves. My agency has over 2,000 active clients with HMO’s or PPO’s and we’ve enrolled thousands of others since I opened in 2008. My issues are they’re often not explained correctly and the risks they pose ignored by those who sell them due to lack of knowledge or negligence. The sheer volume of advertising and the content, the number of plan variations and benefit grids, book after book of literature, as well as the huge range of premiums is extremely confusing and overwhelming for seniors and can result in poor and costly decisions. We’re going to discuss the rewards, risks, trap doors of Advantage Plans in this column.
Advantage Plans can have tremendous value if low premiums plans are chosen wisely. The number one reason someone should choose an Advantage Plan instead of a Supplement and a Stand-alone Part D plan is the long-term savings they offer in terms of premiums, along with the dollar value of ancillary benefits they can provide. I estimate the average premium for my clients ages 65 to 75 who have a Supplement and Part D plan is around $135. The most popular Advantage Plans among our clients in 2021 are going to have an average premium of around $25, a difference of $1,320 per year. Multiply that by five years, and we’re looking at a $6,600 less upfront cost for an HMO or PPO.
The plans we’re recommending most for 2021 have the best ancillary benefits such as comprehensive dental, vision, and Over the Counter (OTC) allowances I’ve ever seen in my 13 years in the business. Those who use the Silver Sneakers gym benefit, get only their two no cost teeth cleanings and set of X-Rays, max out their vision benefit, and use all their OTC allowances, are going to receive around $1,000 of real dollar value in terms of goods and services, more if they had a root canal or crown. If these benefits continue to be as generous over the next four years, when adding this to possible premiums savings, we’re over $10,00! I’m 100% behind my clients going the Advantage Plan route using this line of thinking………As long as they understand the risks, which I always explain.
There are reasons why they cost less. First, the savings can be lost or given back in the form of out of pocket medical costs such as co-pays and coinsurance, which is a percentage of the bill one has to pay for certain medical services. Coinsurance and the enormity of what that could amount to is often ignored or glossed over when Advantage Plans are presented. For example, chemotherapy is billed at 20% on every plan available to the public in Western PA. At as much as $10,000 to $15,000 per treatment, the bills would reach one’s Maximum Out of Pocket Limit (MOOP), fast. With MOOP’s as much as $7,550, just hitting it once would negate more than 5 years of premium savings.
Other “Part B Drugs,” which are administered in an outpatient setting are also very expensive and subject to 20% coinsurance. They’re becoming more common too. We have many clients who get Remicade for Rheumatoid Arthritis or Crohn’s Disease every four to six weeks. Those on Advantage plans pay around $400 per infusion. We have other clients who get shots every month for Wet Macular Degeneration. Their share of the bill comes to as much as $500. On many Advantage Plans, hospital co-pays for a four to six-day stay are $1,000 to $1,800. That’s an entire year’s worth of Supplement premiums for one admission. Skilled nursing costs on average $175/day for any visit longer than 20 days. Do the math on a 45-day stay.
These costs aren’t the biggest risk Advantage Plans pose in my opinion. It’s that many people will never be able enroll in a Supplement the rest of their life due to current or previous health conditions.
I’ve met countless people who have COPD, Insulin Dependent Diabetes, Auto-Immune Disorders, Heart Disease, certain Cancers, and other medical issues who were never even given the option of choosing a Supplement or warned if they chose an Advantage Plan when they first went on Medicare Part B they would never have the opportunity to get one again. Any agent who fails to disclose this fact should not be able to hold a license to sell insurance. Unfortunately, there are agents who don’t know all the ins and outs of Medicare or act on behalf of their paychecks instead of clients’ best interests. Medicare Advantage companies pay agents twice as much commission for signing someone up who is new to Medicare. They also pay that money in a lump sum vs Supplement commissions that trickle in monthly.
There are other trap doors people need to be aware of. First, benefits can and will change with Advantage Plans, sometimes dramatically from year to year, resulting in higher out of pocket medical costs. The comprehensive dental that many popular plans now offer is a fantastic benefit, but one that could disappear in the next couple of years. It will be the first to go when companies don’t meet profit expectations or if Medicare cuts reimbursement to insurance companies.
One thing that makes me extremely upset is how expensive Advantage Plans can be. There’s almost no reason whatsoever to pay over $50 for one. Yet, companies offer them at costs of $100, $200, and $300 per month even though they don’t offer any additional value. The highest priced plan on the market still exposes those who have it to 20% coinsurance for chemo and other Part B drugs, up to $7,550. There’s a certain percentage of seniors who will not change plans out of fear, as well as those who’ve been raised on the phrase, “you get what you pay for.” These folks can’t decipher all the sales materials or grasp that less expensive plans offer better value. I’m convinced insurance companies prey on these emotions.
The licensed agents at The Health Insurance Store are appointed to sell plans from every competitive company on the market, ensuring unbiased advice. We and always make sure both the pros and cons of Supplements are clearly explained, while the risks and trap doors are fully understood. And, we never charge for consultations in person, over the phone, or via Zoom meeting. If you have questions or would like to set up an appointment, please call one of our offices or email me at email@example.com.
The column runs every Friday in the Post Gazette on page A2.
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