Where do your clients go for advice about Medicare enrollment?
It’s one of the more complex insurance chores that they will face in retirement and one of the most important for controlling costs and assuring access to needed care. Some especially important decisions occur at the point of initial enrollment.
But nearly half (45%) of seniors enrolled in traditional Medicare are do-it-yourselfers, and so are 37% of those enrolled in Medicare Advantage, the commercially offered managed care alternative to the traditional program, according to research by The Commonwealth Fund.
How about the other half of enrollees? Commonwealth’s data for Medicare Advantage shows that enrollees turned to:
- Insurance brokers (31%);
- Friends and family (20%);
- The Medicare hotline (9%);
- State Health Insurance Assistance Programs (4%); and
- TV ads (7%).
This is a troubling picture in light of a recent U.S. Senate Finance Committee report that documents a range of fraudulent and misleading marketing practices used to sell Medicare Advantage plans. Much of the concern centers on third-party brokers who sell plans on behalf of insurance companies. That report followed the release of data by the Centers for Medicare and Medicaid Services (CMS), which runs Medicare, that the number of complaints it received about deceptive marketing surged 155% in 2021 compared with 2020.
Certainly, it’s not the case that brokers employ the deceptive tactics identified in the Senate report, and some are very knowledgeable about Medicare. But the Commonwealth figures show that far too many seniors are flying blind when it comes to Medicare enrollment choices.
The process has many potential pitfalls.
Traditional or Advantage?
At the point of initial Part B enrollment, the first major choice is whether to enroll in traditional Medicare or Advantage. But if your client selects Advantage, the decision may be effectively irrevocable due to the rules governing Medigap supplemental insurance and preexisting conditions. The best time to buy Medigap policies is at the point of initial enrollment, because a guaranteed issue period is provided. After that, Medigap plans in most states can reject applications or charge higher premiums due to preexisting conditions.
Increasing numbers of seniors are picking Medicare Advantage for its all-in-one simplicity and lower upfront costs, many plans come with no additional premiums for prescription drug coverage, and Medigap plans are not used alongside Advantage, since Advantage comes with its own built-in (albeit high) out-of-pocket caps. Such plans also may come with some level of dental, vision and hearing coverage.
But traditional Medicare is preferable over the course of retirement for those who can afford the higher upfront premiums. Medigap makes out-of-pocket costs more predictable, and your clients will be able to see nearly any health care provider in the U.S., since traditional Medicare does not utilize managed care networks or frustrating prior authorization paperwork that can delay or bog down access to care. That’s a critical difference as we age and inevitably develop more serious conditions. And it’s a factor that can be considered more thoroughly when your client gets good advice at the point of initial enrollment.
Late-Enrollment Penalties
Medicare requires seniors to sign up during a seven-month Initial Enrollment Period that includes the three months before, the month of and the three months after the 65th birthday. Missing that window triggers late-enrollment penalties levied in the form of higher premiums that continue for life. There really is only one important exception to these rules: People still working beyond age 65 who have insurance through their employers may delay. So can people who receive insurance through a spouse’s employer (even if the spouse is not working).
The late enrollment premium penalties for Part B really can add up. They are equal to 10% of the standard Part B premium for each 12 months of delay. This is a lifetime penalty, and it escalates along with the cost of Medicare since it is levied as a percentage of the standard Part B premium.
Annual Shopping
After navigating the complexity of initial enrollment choices, some parts of your clients’ coverage should be reevaluated annually.
Medicare has an annual fall enrollment season that runs from Oct. 15 through Dec. 7. This window is the time of year when you can switch between Original Medicare and Advantage or make changes to your current Part D or Advantage plan coverage to make sure you’re getting the best deal financially—and the best match of health care providers and drug coverage.
There’s no need to review Part B or Medigap enrollment. But the design of prescription drug plan coverage can change annually, and Advantage plans can make changes to their networks of health care providers at any time.
At minimum, clients should review the Annual Notice of Change that insurers are required to send each fall before the enrollment period begins. If significant changes are afoot, coverage should be reevaluated.
Where to Get Advice
The federally funded State Health Insurance Assistance Program provides free help with Medicare. SHIPS are staffed by knowledgeable volunteer counselors. Each state has a SHIP, but the network is underfunded.
The Medicare Rights Center is a national nonprofit advocacy organization that can provide assistance with a range of Medicare problems (800-333-4114). It also publishes Medicare Interactive, a very useful website that provides detailed information on a range of Medicare topics.
Mark Miller is a journalist and author who writes about trends in retirement and aging. He is a columnist for Reuters and also contributes to Morningstar and the AARP magazine.