Medigap shoppers need to learn the complexities


I CAN TELL you how to find the cheapest possible Medigap insurance policy. But I have to pass on a warning first:

The policies that are low-priced when you're 65 will be hugely expensive when you're 85. You might have to drop them because they cost too much. That's something you need to consider at the very start.

Medigap insurance is private coverage that picks up some of the bills that Medicare doesn't pay. By law, there are only 10 standard policies for most states (three states have different policies: Massachusetts, Minnesota and Wisconsin).

The federal list begins with Policy A -- basic, bare-bones coverage.

It picks up the cost of super-long hospital stays and the 20 percent you owe toward every Medicare-approved doctor bill.

Policy J offers all the bells and whistles. Besides the basic benefits above, it picks up Medicare deductibles, your share of the cost of a post-hospital stay in a skilled nursing home, some emergency care abroad, some home care, some preventive care, part of what your doctor might charge in excess of the Medicare-approved fee and part of your prescription drug costs.

At any insurance company, Policy A will cost the least and Policy J, the most. The other eight policies provide different mixes of these benefits, at varying prices in between.

Because each class of policy covers the same things, you might think that all the insurers charge about the same. Not so. One insurer might charge three times more than another.

That's mainly because insurers have three ways of calculating ,, prices:

* Attained age -- Your premium is always based on your current age. It's cheap at 65. "But 10 or 20 years down the line, your policy may become unaffordable," Diane Archer, executive director of the Medicare Rights Center in New York City, told my associate, Kate O'Brien Ahlers.

* Issue age -- Your premium depends on your age when you buy. If you buy at 65, you'll always pay what 65-year-olds do, even when you're older. Initially, you'll pay more than you would for attained-age insurance. But your price won't rise nearly as fast or as much.

* Community rating -- Everyone pays the same in a geographic area, regardless of age or health. Policies are much more expensive at 65, but usually competitive at later ages. The American Association of Retired Persons uses community rating most parts of the country.

If you buy any Medigap policy within six months of turning 65, you get standard rates regardless of your health.

Ditto for people in several other circumstances -- for example, you lost an employee plan coverage or quit an HMO under specified circumstances.

Otherwise, if you put off buying Medigap and your health turns poor, you'll be charged more. In most states, you could be turned down entirely.

Potentially, you have three places to turn for Medigap price comparisons.

Some state insurance departments publish buyer's guides. Ask your state insurance department (the phone number is in your Medicare Handbook).

You can sometimes find price lists at senior-service counseling organizations.

Otherwise, you can buy the information from Weiss Ratings at 800-289-9222. For $49, Weiss will rank your state's Medigap insurers, plan by plan, according to the premium they charge someone your age. (Rankings aren't available for the three states without standard Medigap plans.)

A big warning about the Weiss ratings: The attained-age policies are always the cheapest when you're around 65 to 75 and you may not realize that premiums will soar.

Martin Weiss admits that his rankings are incomplete. He says he'll identify age-rated policies in the future, when he mails data to customers. He'll start by including a list of the age-related insurers, in about two weeks. Be sure to check for it.

If you're considering an age-rated policy, ask the agent what you'd pay if you were 10 and 20 years older. Future premiums will rise even higher than they are today.

One more warning: An age-rated insurer might not let you move from a bare-bones policy to something with more extensive benefits, if you're in poor health.

The AARP thinks community rating is the fairest way to go. Most of its plans accept you regardless of health.

Weiss argues for buying the cheapest policy. "In a few years, the structure of Medicare may change, so focus on the here and now," he says.

If an age-related policy grows too expensive, you could switch to the AARP. Community rating plus Medicare is the national safety net.

Pub Date: 7/13/98

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