Medigap Costs Could Vary Drastically


WASHINGTON D.C. (TheStreet) – Changes to Medigap, the supplemental insurance plans that seniors can purchase to provide additional coverage in retirement, will bring additional focus to the costs of these plans in 2010.

If you take out a Medigap policy on or after June 1, 2010, coverage will include the amount of cost sharing for all Part A Medicare eligible hospice care and respite care expenses. Other changes are included that could affect your decisions about your choice of Medigap plan. Four plans will be discontinued, two plans will have changes made to the coverage and two new plans will be added.

Despite the changes, one thing is not expected to change, the large variation in prices for providing exactly the same services.

Choosing a Medigap plan that is appropriate is important, but it is just as important to choose a plan that offers the best price and a stable insurer. A story in Thursday’s New York Times highlighted the importance of making the right choice.

Rates can vary significantly for exactly the same coverage. For example if you are a female aged 65 and you decided to select Plan C, one of the more popular plans, you could obtain coverage for $2,263 per annum with Mutual of Omaha Insurance Co., rated B plus or “Good” for financial strength by Ratings if you lived in Boca Raton in Florida. The highest rate was Guarantee Trust Life Ins. Co., rated C plus or “Fair” at $3,996.

This price gap of nearly 77% is for exactly the same coverage and for a company rated less financially stable to be charging so much more is unconscionable.

This rate difference is not unusual. If you live in New York it is a community rated state, meaning that whatever your age or sex the price you pay will be the same. You can obtain coverage under Plan F with United Healthcare Ins. Co. of New York, rated B minus or “Good” for $2,802. State Farm Mutual Automobile Ins. Co., rated B plus or “Good,” charges $4,337 for exactly the same coverage.

This is a 55% difference, or $1,535. Who couldn’t use that money for something else? It is hard to imagine that you would be prepared to pay $3.88 for a gallon of gas if you could get it for $2.50, so why would you pay so much more for health coverage?

If you think these comparisons are concerning, imagine if you live in Newark, N.J., and you are a female aged 80. Coverage under Plan C can be obtained through United World Life Ins. Co., rated B plus and a Mutual of Omaha subsidiary, for $2,294. For the same coverage Humana charges $4,644. This is more than double the price and Humana is rated C, or “Fair,” compared with the stronger rating for United World Life Ins. Co.

Now in addition to the pricing and the financial strength rating you do also need to consider that you may be denied coverage for pre-existing conditions, so that can limit your choice of provider. This is one reason that it is a good idea to enroll within six months of signing up for Medicare Part B as y,ou will not have to wait before coverage will start.

Membership of AARP, or another affinity organization can also give you access to a policy through a sponsored insurer that can keep rates down.

Selecting the right plan for you or a family member is a very important decision. The plan you choose should fit with your lifestyle, anticipated health requirements and of course, your budget. What you do not need to do is to pay more than you have to in obtaining the coverage that you select. Insurers are counting on consumer ignorance and apathy to get away with significant price variations. Ratings offers a personalized service, highlighted in the New York Times story. A report can be provided based on age and sex with all of the plans, pricing and financial strength of all insurers covering your zip code.

If you would like a Medigap Shoppers Guide you should contact Ratings at available for a limited time for a discounted rate of $47 via e-mail (plus $4.95 if mailed). Alternatively call 1-800 289 9222 and we can send one to you.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at

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