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Let’s Approach It From A Different Angle


Happy Thanksgiving! You only have a few more weeks to make any changes to your Medicare Advantage plan during this Annual Enrollment Period. That’s probably the last thing on your mind with the holidays approaching. If you still need to look at any changes on your new 2015 Advantage plan or if you want to know about just one more way to save some money on your health insurance costs, read on.

Through these columns I’ve tried to emphasize the importance of looking for good quality companies with histories of moderate rate increases and rapid claims payments. However, most of the Medicare age people that I counsel still buy a policy based on the current monthly rates. Rates must be affordable, but not at the expense of double digit increases down who “low ball” entry rates to attract new customers, only to make up for those low rates over the life of the policy. Sometimes our health prevents us from changing policies and we’re stuck with paying much higher rates the rest of our lives. Look beyond entry level rates.

With that said, I want to show you another way to have a very comprehensive Medicare supplement and yet keep your premiums low. If you’ve been following this column for any length of time, you know that we talk a lot about plan F. When I’ve met with you, quite often you’ve already made up your mind that plan F would work best for your needs. Actually, all of the Medicare supplements are either a plan F or some modified version of plan F. To the best of my knowledge, all companies that sell Medicare supplements sell a plan F, but not all companies sell the all of the modified plans.

Quite frankly, companies are only going to sell policies that are profitable to them and some policies just don’t meet those criteria. That’s probably the reason that we don’t hear much about HDF. The HD in front of the F stands for High Deductible. A large number of people I talk to these days are leaving company group insurance plans with a high annual deductible. It’s not unusual for group insurance plans to have annual deductibles of $3000.00, $5000.00, or even $10,000.00. The first health insurance plan that I purchased back in the 1960’s had a $50.00 annual deductible and I complained about that. I’ve had a hard time coming to grips with these huge deductibles people are paying on their company group insurance policies now, but it does keep their monthly costs down.
Even Medicare Advantage plans, with their deductibles and co-pays, also have high annual caps. A cap is not a deductible but it represents the most that the insured might have to pay out of pocket in any given year. I’ve seen caps on advantage plans that exceed $6000.00 per year. Such a high annual cap on a policy indicates that there is a possibility that medical expenses could and sometimes do exceed the cap. That is quite a large sum to be responsible for paying and it too renews each year.
When I talk to people about Medicare supplements, often they are the ones who ask me if we offer a product with a high deductible or offer a health savings account supplement. Some of the modified F plans keep the rates lower if the client is willing to pay the Medicare Part A and/or the Part B deductible, but some of the other benefits may also be lost. The HDF plan provides the best of plan F and still includes the other extras. The best part is the “High Deductible” is that it’s only $2180.00 for 2015. Original Medicare still pays the same benefits. The deductible only applies to the supplemental coverage.
This is an example of HDF: If you see a doctor and Medicare approves $100.00 of the office visit, Medicare still pays their 80% or $80.00 and you pay the 20% or $20.00 which is applied toward your annual deductible. If you are hospitalized, most of the first 60 days hospital costs would continue to be covered by Medicare and you’d pay the Part A deductible. When your out of pocket costs equals the amount of your deductible ($2180.00), regular plan F kicks in for the rest of the calendar year.

The premium for a plan HDF may cost less than $60.00 a month, which is a huge savings over a regular plan F. I know of one company that allows the insured to put money into one of their annuity plans either as a lump sum or savings deposits monthly. That savings account will pay those out of pocket costs directly to the doctor or hospital, up to the savings balance or the deductible, whichever comes first.

Medical payments from the savings account (annuity) are tax deductible. The total amount of the savings account belongs solely to the insured and can be used for any purpose, not just for medical costs. These accounts are currently paying a base interest rate of 3% and the annuitant can deposit up to $40,000.00 into these accounts. It works a little like a HSA (Health Savings Account) which many people have paid into during their pre-retirement years on the job. If death should occur, the full balance of the savings account is paid to whoever is selected as a beneficiary, the same as it would on a life insurance policy.

I recently was talking to the wife of a client who has one of these accounts with his HDF plan. They had been saving $75.00 a month in the account. Even after medical payments had been made from the account, they had saved over $5000.00 through the years. An emergency of a different kind had arisen and they needed to make some home repairs. A check was mailed to them within 48 hours and the emergency was averted. She’s turning 65 next year and has already planned to purchase her own HDF plan with the savings feature. She said it was the most successful plan for regular savings that they had ever had.
This is just one more way to cover those medical costs and save some money. We’ll help you find the one that works best for you and your family.

Orion Steen is a licensed agent and specializes in Medicare supplemental plans. He has been advising his clients on life and health insurance matters in Arizona for over 45 years. He can be reached for related questions by E-mail at info@orionsteeninsurance.com, call toll-free 888-846-6891 or cell 623-846-6891.