Plan G vs. Plan F - Help Picking the Right Medigap Plan

Picking the right Medicare supplement policy can often be challenging for more seniors. There are lots of details to compare, and often the plans can get confused.



When the government took the advice of the National Association of Insurance Commissioners, they enacted the Medicare Modernization Act which went into effect June 1, 2010. This act made all of the Medicare supplement plans identical. They also modified several of the plans.



When the new plans were revealed, it became obvious that Plan G is now the best value plan. In times past, more than 85% of seniors chose Plan F for their Medigap plan. This is because Plan F covered everything that Medicare, itself, did not pay. The higher and higher rate increases at the end of their 12 month policies, though, have seniors looking for alternatives now, in order to save money.



Plan G is just like Plan F, except cheaper. Well, it's actually identical to Plan F now, since the modernization act took place, with one small exception. In the old Plan G, it only covered 80% of doctor excess charges - the amount doctors can charge above what Medicare allows. This meant that the senior could be exposed to 20% of those excess charges.



However, with the new Plan G, it pays 100% of excess charges, just like Plan F does. As a matter of fact, the only difference between the two plans now is that Plan G does not pay the annual deductible for Medicare Part B. This is $162 for the 2011 benefit year. Plan F does pay that deductible for you, but they really just pass it along to you in your monthly rate and also add a "convenience fee" to that deductible amount. So you're really not saving anything by having it, and the convenience fee, rolled into your premiums.



While the monthly value of that $162 deductible is only $13.50, plans are charging between $20 to $40 per month for Plan F over Plan G. This is NOT a good value. If the senior resolves themselves to breaking out the checkbook the first time they go to the doctor that year, in order to satisfy that $162 deductible, they will save way more money every month than if they relied on Plan F to take care of it for them.



But that's only half the story. Not only are the monthly costs much less for Plan G with the same freedom and benefits of Plan F, but the renewal increases are less, too. Plan F, known in some circles as the "Cadillac Plan", is the plan that heavy users of healthcare choose. They want everything covered and can go to the doctor an unlimited number of times in one week, for instance.



Those on Plan G must pay their deductible out of their pocket at the first time they visit a doctor during the year. Then, everything else is covered. Not everyone is willing to go this route to save money. Those that do, though, are seen by actuaries to be less inclined to go to the doctor for less-important and less-than-necessary office visits. This means their rate increases are traditionally much lower than Plan F rate increases. This is important.



Last year, our agency's internal survey showed an average rate increase for our Plan F clients to be 14%. Meanwhile, the average increase for Plan G clients was only 10%. That is a 40% difference, side-by-side.



So if you want to save money on your monthly premiums, while at the same time locking in lower rate increases year over year, you should strongly consider Plan G over Plan F.



One last note, it's never too late to change plans. With Medigap plans, you can change 365 days per year. So, as soon as you know there is a better option out there, call your independent broker and have them shop the rate. It is especially important to do so before your next birthday. This way, you can lock in a 12 month rate guarantee at your old age instead of taking a much larger increase when you wait for your policy anniversary.