Interview: The Value of Plan N for Medicare Shoppers

It’s funny you ask because the answer is yes … [I saw] this when Medicare Advantage and prescription drugs plans first came into the market … when [they went] through that growing phase. I watched agents build up [a book] of business … Then, carriers pulled out and they lost that entire [book].

Now, it’s just a shift of product … It’s going to have huge impacts that were similar to what we saw back then, and a lot of agents weren’t around back then, so they don’t have anything to really associate with it. It’s going to be rather intense and great for those that are prepared.

We talk about disruption, and I totally agree that disruption is there. But I think that disruption is going to lead to opportunity, and hopefully, [that’s] how agents are looking at it.

Between 80 and 90 percent of our clients are going to get that negative ANOC notice … that they’re losing either some of their benefit or all of it.

You add on to that the pending prescription drug restructuring that we’re going through and that’s going to also cause chaos. The Inflation Reduction Act (IRA) transferred 30 percent of cost-sharing to the insurance carrier, but the insurance carrier really can’t take it, so those costs are going to be, basically, shifted to the consumer.

Medicare Supplement premiums have been rising on a year-to-year basis. This year, we’ve seen the highest [Medicare Supplement] rate increases that we’re going to see in some time. So, if you stack all that together, we are looking between 40 and 70 percent shoppers this year, and that’s at a lot of disruption … A typical year has 10 to 15 percent.

The good news is we know exactly what’s going on, on the Medicare Supplement side … The rates have not changed that much [over the years], specifically Plan G. You add on the fact we’ve got inflation everywhere else … If you look at what happened during COVID … spending went down, nobody was going to the doctor … then, spending went way up. The rates had not adjusted for that. And we’re seeing the highest loss ratios we’ve seen in 15 years because of that inflation, COVID catchup … leading to the market correction where we’ve seen double-digit rate increases on Medicare Supplements.

If they’re switching from a Medicare Advantage, either they’ve lost coverage, or they just want to make a switch.

Plan N is a cost-sharing plan. Our clients that are purchasing a Medicare Advantage plan have already shown us they’re willing to use a cost-sharing plan. So, Plan N really is the no-brainer as far as apples to apples go.

The fact that [Plan N] is a cost-sharing plan really gives them an opportunity to save [on] premiums. The premiums on Plan N, in most cases, are lower than F or G by a substantial margin.

[If clients] want to go to a Med Supp, then [Plan N] is the lower-premium option for them [and a] good starting point for anybody that’s coming off of Medicare Advantage.

So, this disruption that you’re seeing in the market right now is not something you see on the Medicare Supplement side.

I think everybody knows [what] guaranteed renewable means, but it basically means that [a carrier] can’t pull out of their county. The only reason it would go away on the Med Supp side is if that carrier went out of business. So, it offers that stability.

[Moreover], the overall benefits are federally regulated. There are a couple of things that do change, minorly premiums. The deductible changes slightly. But if you look back over the last 24 years, that deductible has [only] gone from around $100 to $240.

Clients will tell you, “I don’t want to change anything with my Medicare Supplement, because…” they’ll give you some kind of example where “it paid all of my bills” … it’s something they can rely on.

[Additionally,] most carriers will not allow you to switch from one plan to another [from Plan G to Plan N or Plan F to Plan N] … that again protects Plan N, which makes the rates more stable. If clients want to utilize that GI, guarantee issue, right, they cannot do it for Plan N … it protects that Plan N.

When you look at what Plan N offers and those lower premiums, those lower premiums are actually more stable long term. Look at the rate increases recently with Plan G, Plan F, and Plan N. In most cases, you’ll notice Plan N is lower. The reason that is happening is [that] there is less utilization of benefit.

Plan N has an up to $20 copay that shows up on some doctor visits, not preventative … Copays do not show up at all until that $240 deductible is met. [And] copays only show up for certain things.

Your client may pay two, three, or four times a year. That $20 is $20 less than what that insurance carrier pays out in claims.

It’s not a whole lot of money, but over many clients that adds up [and] goes into their loss ratio, which keeps rates more stable. So, that’s one of the things that makes Plan N more stable when it comes to rate increases.

[The] 15 percent [excess charge] is true, but that number is capped on the Medicare-approved amount. So, you’re not having 15 percent of some astronomical bill.

The more important piece is the excess charge comes up very rarely. The report from MedPAC was that 99.7 percent of all claims filed through Medicare that can charge an excess charge do not.

So, I wondered why that was. There’s a contract that doctors have to sign to participate in Medicare and participate in Medicare assignment. Digging into those contracts, there were two, what I would call “poison pills,” if they did not sign the Medicare assignment contract.

One of those was they lose five percent of Medicare reimbursement … That’s kind of a big deal if you look at that over the scope of everything else. The second piece of that … is there’s no timely reimbursement of those Medicare reimbursements. So, at that point in time, they don’t have a contract with Medicare, and they don’t have a contract [for] the Medicare Supplement. They have to actually bill the client.

The client then bills Medicare and gets reimbursed directly. So … not getting [timely] reimbursed from Medicare is probably a big deterrent. All of that combines into why we see 99.7 percent of all the claims actually not charging an excess charge.

There are [eight] states that do not charge excess charges. If you’re in those states, it’d be a no-brainer to just be offering Plan N.

Plan N is going to work there in almost every case. Really, the only case where Plan N probably would not be [suitable is for] somebody that goes to the doctor a lot, maybe has a lot of health conditions.

[First], they may not pass underwriting. It’s rare, but you do have those clients that have a lot of specialists. They have some conditions, and they go to the doctor on a regular basis. That’s probably not the best client for Plan N.

When my clients are reaching out to me on their rate increases, I’m educating them, [saying,] “Hey, I made a mistake when we talked last time on Plan G being the best plan for you. I really think that Plan N should be something that you look at and let me explain why.” I go through that whole process of why it’s going to save them money now, why it’s going to save them money long term, and what the actual premium savings [are].

I’m taking a group of frustrated clients that has typically seen five percent rate increases and [are] now seeing 10 percent [increases] on their Plan G and F and giving them a … more stable long-term outlook.

Overall, we want to do what’s right for our clients. I think that [agents] should take a hard look at [Plan N] … as a really strong, viable option… for [the majority of] their Medicare Supplement clients.
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