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I’VE WRITTEN BEFORE about stumbling on an unexpected way to save on auto insurance. My education continues: I’ve also learned of a way to save on Medigap coverage.
When I became eligible five years ago for Medicare, I bought Medigap Plan G supplemental coverage from Mutual of Omaha (MOO). Last summer, as my wife was about to become eligible for Medicare, we took another look at Medigap coverage. I was generally happy with MOO’s claims procedures and customer service, as well as the fact that MOO would extend a 12% “household discount” if we also got my wife’s policy from MOO. But I didn’t like the fact that my own premiums had gone from an initial $97 a month to $148.02, an increase of almost 53%.
One day, I received a mailer from Omaha Supplemental Insurance Co., a MOO company, which quoted a $115.18 monthly premium for a 69-year-old male nonsmoker, my status at the time. Although my policy was with a different MOO company, United World Life Insurance, I couldn’t understand the significant price difference.
I contacted the insurance broker who had helped me with my original Medigap application, and asked if I could simply switch MOO subsidiaries and benefit from the lower rate. She replied that the lower quote was for “new business” and, since I was already a MOO customer, I didn’t qualify.
My broker was retiring, so I found a new broker who seemed very knowledgeable and I repeated my question to him. To my surprise, he said that I would indeed be considered “new business” if I applied to a different MOO subsidiary. I next contacted Mutual of Omaha directly and a representative confirmed the good news.
Since I was applying for a new Medigap policy outside the initial open enrollment period—the period when I first became eligible for Medicare at age 65—I’d have to pass medical underwriting. Fortunately, I’m in good health and, after answering a few questions on a form, I was accepted.
My wife’s quoted rates were the same at both my original MOO company and at the new one: $96.41 a month. And my new broker, since he was writing me a new policy, received a well-deserved commission. As for me, going from $148.02 to $115.18 a month is saving me $394.08 a year.
While I’ll be on the receiving end of premium increases going forward, starting from this new lower base means I should keep saving every year. After a few years, if my premiums again get uncomfortably high, I’ll start researching whether there’s yet another MOO subsidiary that would be happy to consider me “new business.”
You are indeed fortunate that you are in good health, in more ways than one. When I first enrolled in a gap plan at 67, I chose plan F (the most expensive plan) knowing that I had major health issues. A year ago I had surgery and was in the hospital for 2 weeks, the bill for which was $370K. I paid zero. My monthly gap premium has increased 18% over the past 7 years, which I am more than happy to pay. Cannot shop around, as underwriting would be necessary, but don’t care.
The only difference between F and G is that G does not cover the Part B deductible. While F is no longer available, except for those grandfathered, the premium difference between F and G can make F a bad deal.
I switched from F to G last year as the pool of insureds for F is both shrinking and aging. However, I was only (financially) able to do so because Humana had temporarily waived medical underwriting. I would have preferred to stay with UnitedHealth, but I failed the underwriting.
Switching Medigap programs can be tricky. As you mention, you can be subject to underwriting, you can be rejected, subject to entry age premiums or age adjusted premiums. Other than premiums – reflecting area costs – there is virtually no difference among insurers as claims are just linked to Medicare payments.
In 2021 my employer dropped our retiree coverage and we had to select Medigap or MA. The carriers could subject us to underwriting. In our case there were entry age premiums with age adjustments. My wife and I pay $240 and $225 a month in premiums for Plan G.
None of the retirees in the group I know of, even those living in low cost areas, came close to premiums of $115, the average was around $200 for Plan G.
You have a real bargain.
Mr. Quinn, Your statement that “premiums are linked to Medicare payments” shocked me. Assume I spend several months in a hospital and receive an invoice for $2 million. Also assume that my insurance company pays $1 million of the $2 million bill. Also assume my current Medigap premium is $200/month. Should I expect my premium to rise by some enormous amount, e.g. $10,000/month as the insurance company attempt to get back in premiums what it paid in bills?
No, that’s not what a meant. I said claims are linked to Medicare payments meaning whatever Medicare allows, but does not pay is electronically sent to your Medigap coverage. Your premiums are not based on your use of care.
Thanks very much for the clarification.