The #1 Danger When Choosing a Supplemental Plan

[Music] welcome to medicare school daily where we help you understand medicare save money avoid mistakes and above all else get the most out of your medicare benefits now today's topic is the number one danger when choosing a supplemental plan now some people may think the number one danger would be will the company that i'm going with be in business in five years or 10 years or 20 years down the road all the carriers that are national carriers have been in business for a minimum 50 years some of them 150 years and so really whether they be in business or not is really not the big issue the big issue and number one danger is this the stability of the rates what are my rates going to look like in the future in other words what my rates be in five years or 10 years or 15 years down the road that is the number one danger and so it is stability of rates that we're very concerned about when selecting a medicare supplemental plan now i want to remind you when you buy a supplemental plan it's always a letter and of course there's 10 letters i'm not going to get into those today but there's a lot of people today have f plans many that have g plans some that have in plans but when you buy something little plan whatever letter it is it is going to be standardized by medicare standardized and that means that medicare sets all the rules for the bills they're going to be paid the kind of coverage that you're going to have and so regardless of whatever letter you buy that particular letter regardless of the carrier that you buy it from whether it's abc insurance company or it's xyz insurance company that plan is standardized so that means the same the carriers are going to pay the same bills the same type of bills and the same amount of bills so when it comes to coverage folks there's no difference whatsoever but when it comes to stability there can be a great difference that's why we're saying it's a number one danger let me explain now any time that you buy something little planner you buy one of those letters what's happening is you're going into what we would call a block of business or group and these are policyholders that are buying a policy similar to yours around the same period of time so we're going into a group now what happens is we first of all have an initial rate now the initial rate for people in the group is going to be based upon three different possibilities or three different categories what we have are we have some groups that are rated based upon what we would call a community rating and this means that everybody that's in the block when they come initially is going to be given the same price regardless of their age or regardless of their gender that's community rated blocks now there are very few of those there are some but that's certainly not the norm throughout the country the second and most common one would be attained age policies that's attained age now i'll explain a little bit more about this in just a minute but there are plenty of blocks throughout the country today when you come in it's going to be based upon the attained age and then we have some that are issue age blocks all right so the most common would be attained and this would be second then community course would be last but our initial rate is going to be based upon these particular possibilities as i said most are not communities so let's deal with these two right here when we come into an attained age policy or an issue age what happens is the carrier is going to give us a variety of uh rates based upon age and so they'll give us rates from 65 up to 105. we will have female rates male rates non-tobacco and tobacco rates and so we come into the group on a teen ager issue age based upon our age when we start the policy our gender and our tobacco status okay so let's just suppose that we have a 65 year old female that's non-tobacco and again i'm just going to make this rate up for simplicity and she comes in and her rate is a hundred dollars a month on let's say a plant g all right but we have another person in there that's a 67 year old male and he happens to be a tobacco user his rates are probably going to come in here maybe around 120 a month so we're going to pay a little bit more because of gender because of age and also because of tobacco status so we all have this initial rate uh that we'll be paying when we come into the group now are those rates going to stay the same obviously not we're going to see price increases medical inflation is a reality things are certainly going to go up and so what i'm going to do is i'm going to show you how those rates are going to increase now those rates are going to increase differently because if i am in what we call the attained age block and again remember this is what most states are attained age we can expect that we're going to see annual increases as we age when we attain another age so i start a policy at 65 rest assured at 66 my rate is going to go up slightly when i'm 67 and i move to 68 rest assured my rate is going to increase slightly so every year as we attain another age as we're in uh this med sup group we should expect our rate to go up a little bit now again there's no hard and fast rate increase but on the average throughout the country we're going to see these annual increases in the neighborhood of about 40 to 50 a year so when you divide that by 12 that's going to be right around four dollars a month so that rate of the next year is going to go to 104 and the next year it's going to go 108 this is going to go to 124 and then 1 128 so it's going to go up a little bit every year because we're attained a a different age now one of the reasons that most insurance commissioners throughout the country like attained ages because of the reality of medical inflation and the whole concept behind attained age increases is by allowing the carrier the right to raise your rate up and everybody in the group up just a little bit every year it's going to offset some inflationary increases so that we have group increases those those are minimal all right so we expect an age-related increase whenever we have an attained age policy all right so we can expect that now the second way in which we can have rate increases on an attained age policy is when the whole group is going to go up all right now i said earlier there were three ways we come into a group community rating everybody has the same price regardless of gender and tobacco status attained age which means we have these increases based upon every year as we get older we're going to see them and then we said there's another type of policy that is called issue age issue age right now issue age is always based upon our original age at time of issue of the policy when we come into the group gender tobacco status but on an issue age policy what's going to happen is this initial rate is going to be a little bit higher it's probably going to be about 120 right out of the gate and over here is going to be maybe about 140 because what happens on an issue age policy is they cannot raise your rate uh every year as you get older they can only raise the whole group up so issue age policies the only way they can go up is if the whole group goes up attained age policies we expect a slight increase every year they start lower but then they inch their way up a little bit and then they also can have group increases all right and community aids that we talked about in the beginning that's the only way they also can go up is if the whole group goes up all right so let's talk about how group increases occur so let's go back to this example here we have a female who is uh in an issue age policy uh she's non-tobacco and what's happening is she is paying in her 120 dollars every month right 120 is going in so what's happening is she is paying in her premium into the group and just so you know most people pay their premium today through bank drafts but the money is going in by the policy holders whatever their initial price is and and uh wherever they're coming in uh into the group but their premiums going in and then we have money going out right well why is that well because you have transferred the risk of your health insurance claims to that carrier so you pay in premium they take the risk and they have to pay money out they're paying hospitals and doctor bills and mris and all kinds of different costs so money goes in and money goes out now what's going to happen in all of these groups whether it's community attained age or issue age doesn't matter eventually more money is going to go out than it's coming in that absolutely is going to happen but the question is when will it happen how much will it happen how often is that going to happen and that's the thing we don't know for sure but we what we do know is this there is one way to really mitigate this excessive claims versus premiums and that is by going into a larger group and so we find is a carrier is more stable whenever they have a larger group some carriers are going to be this size of a group other carriers are going to be this size of a group all right and so we have different sizes and again that's something as you work with your agent or you work with us as brokers we're very aware of the size of the groups the larger the group the better because there's the risk is spread out to more policyholders because as we look at this group increase this is based upon really health problems in the group how much cancer is in there how many knees and hips are going to be replaced and all those factors go into these group increases because the more cancer we have in the group the more hips and knees being replaced and other issues going on the more possibility we're going to have more money going on in claims and more frequently than premiums are coming in all right so the size of the group really does matter but what happens when claims exceed premiums it means that the group is losing money and what the carrier is going to do is they're going to calculate their losses claims versus premiums and whatever that loss is and let's say it's five percent so that means they have five percent claims exceeding premiums now that carrier is losing money they don't have to so they're going to take this five percent loss regardless of whatever state they're in the country and they're going to take this to the insurance commissioner in the state and whoever the insurance commissioner is their office they're going to actually petition for a rate increase for the group of five percent and so what their job to do their job is to audit the request because this group increase cannot occur until they approve it so they audit it making sure this is justifiable that all the paperwork is done properly and if they approve the rate increase of this five percent it means everybody in the group is going to go up five percent now one person can be in here and has never ever had a claim another person could be in here and they're in the midst of being treated for cancer maybe undergone radiation they've already been operated on and chemotherapy is next but they've had lots of claims but it doesn't matter the claims what matters whatever group you're in if the insurance commissioner approves that increase then everybody in the group is going to go up five percent and so that's why we're saying the larger the group the more uh people that are in that that to group the more the risk is going to be spread out for these health issues all right now it doesn't mean to say that small groups won't be stable because if it's primarily a group of healthy people even though it's small it'll be stable but you watch out if you're in a small group that has a tremendous amount of cancer or other health issues that are going on in there not going to be very stable okay so that's why we're saying the number one danger of a medsep plan is the stability of the rate so these are some ways that you can mitigate and really make sure that you're selecting a company that is very stable in the rates and this is by the way one of the reasons that we've decided to be brokers because if you go with the supplemental plan you're going to buy it from a captive agent which represents only one of these companies or you go with someone like us who are brokers we represent all the carriers and we look at the stability the rates in the last 10 years we know the size of the groups and so we do all we can to mitigate it so that you will have less price increases less amounts and less frequency to learn more watch the related video or check out our most recent video also be sure you click to subscribe for free and get notified every time we post a new video to watch our complete medicare workshop go to medicareschool.com and finally when you're ready to compare all your insurance options and get free enrollment help from one of our medicare school guides call the number on the screen see you next time

Channel: Medicare School

Views: 27,963

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Keywords: supplemental plan, choosing a supplemental plan, medicare supplemental plans explained, best medicare supplement plans, the truth about medicare supplemental insurance policies, how to find the best medicare plan, medicare supplemental plan, supplemental health plans, how to choose the best medicare plan, choosing a medicare supplemental plan, medicare school daily, medicareschool.com

Id: i9yX2ngWM_k

Length: 11min 39sec (699 seconds)

Published: Thu Oct 15 2020