Another Concerned Call about Plan F

I just received another call, posing the same concerned question I have heard many times within the past few months. The question goes something like this: “I heard that Plan F is going away; what should I do?”

The panic is evident. After all, Plan F has been the favorite Medicare supplement for some time, only recently being supplanted by Plan G as the favored plan. Added to that is the fear that a person with Plan F may not be able to health-qualify to move to another plan.

So what to do?

2020 & the Plan F Medicare Supplement

The first step is to grasp a proper understanding of what is happening with the Plan F Medicare supplement. So, is Plan F going away? The answer to that question depends on what is meant by “going away.”

As of 2020, Medicare will not be offering Plan F to new Medicare recipients. However, the key to understanding that announcement is the term “new Medicare recipients.” This applies to people coming onto Part B Medicare as of 2020. It also applies to people trying to purchase Plan F in 2020. But it does NOT apply to people who already have Plan F prior to 2020.

Can I Keep My Plan F?

Anyone who has the Plan F Medicare supplement can keep it. (Though this is reminiscent of President Obama’s promise that, “if you like your plan, you can keep your plan,” that promise is not supposed to be applied in the same way, if you know what I mean.) If you have Plan F, and you like how it works for you (and don’t mind the higher premium), you can hang onto your plan—even beyond 2020. In fact, according to Medicare, you can keep your Plan F for the rest of your life.

Medicare Supplement Premium Increases

Of course, Medicare supplement premiums increase each year; that is just what they do. But supplements with some insurance companies increase more than supplements with other companies. There are some insurance companies that are better than others at holding down premium increases, meaning that some insurance companies handling Medicare supplement plans have lower rate increases than do other companies. However, there are two other factors that determine, to a large measure, premium increases. (Lest you think I have veered off into another subject, read on; you will see the convergence soon. In other words, what follows will help you understand what will eventually happen to the Plan F Medicare supplement.)

The first of those factors determining how high your rate increase could be is the amount of people who have the same plan you do in a particular area (which could be determined by county, state, or region). This amount of people on a particular plan in a given area is called a “pool” of insureds. The larger the pool (that is, the greater the number of people with that particular plan in a particular area of coverage), the less claims will affect the rates. So, for example, if an insurance company has 20,000 insureds in East Texas with the Plan F Medicare supplement, claims against that plan will not affect rates nearly as much as an insurance company with 2,000 insureds in East Texas with the Plan F Medicare supplement.

The second factor influencing premium increases is claims against a particular plan. However, assuming an equal amount and size of claims against companies with Plan F, the insurance company with the largest pool of insureds will normally have the lowest rate of premium increase. This leads us to what will eventually happen with Plan F.

What Will Happen to the Plan F Rates?

Because Medicare will no longer allow insurance companies to add to their Plan F pool of insureds as of 2020, the size of the pool will decrease. This will occur because some people with the Plan F Medicare supplement will move over to Plan G or even to a Medicare Advantage Plan, and some insureds will pass away. (It happens.) Thus, the pool will not remain stable; instead, it will decrease.

Now, to apply the lesson we just learned: What will happen to a decreasing pool with the same amount of claims coming against it? (Actually, as that same pool grows older, the chances are that claims will increase.) You’re right: Rates will increase.

So, eventually, rates will increase on Plan F more than they have increased in the past. Once that begins to occur, expect those rates to increase by a higher percentage each year, as that pool decreases even more each year. It will only be a matter of time. (We have seen this phenomenon occur with the Plan J Medicare supplement, which Medicare stopped offering several years ago.)

In the Meantime, . . . ?

But, for now, if you like your Plan F Medicare supplement, and if the premium is affordable for you, you can keep your plan; and there is no time frame in which you need to change it. Down the road, if the premium increases become too much, you may want to change from Plan F. Until then, enjoy your plan.

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