“New Twist on an Old Product”

Selling Medicare Supplements has been the same old game for the past two decades. Not anymore, thanks to Plans M and N. Since the early 90’s when Medicare Supplements (also known as “Medi-Gap plans) became Standardized Plans A-J under the TEFRA legislation, the same exact plans have been available.

In 2003 Congress passed the Medicare Modernization Act. Under the MMA, several new Medicare benefits were introduced, the most notable being Part D, the prescription drug benefit plans. Americans were also introduced to new Medi-Gap Plans K and L. Another phase of the MMA begins June 1, 2010 when certain “standardized” plans are dropped (E, H, I and J) and two “modernized” plans roll out (Plans M and N).

Get the new terms memorized. “Standardized plans” refer to Plans A-J. “Modernized” plans refer to the new Medicare Supplement plan grid. Plan F has been the most popular plan, but the new Plan N could become the new “Medi-Gap Darling”. For the first time, Medicare Beneficiaries will have an office copay option with Plan N. The office copay could be up to $20, and the Emergency Room copay could be up to $50. The initial Plan N premiums appear to be as much as 30% less than the most popular Medi-Gap plan, Plan F.

While a respectable premium savings is attractive, note that Plan N does not cover the Part B deductible ($155 in 2010). This is easy to look past considering you will save far more than $155 in premium. However, the “excess charge” of 15% a Provider may add to the current Medicare reimbursement level is not covered (Plan F covers “excess charges”.) Assuming a person sees the doctor once a month, and the average office charges over a one year period are $2400, the “excess charges” will equal $360. If the doctor collects a $20 office copay, add another $240.

If the Medicare Beneficiary incurs a $100,000 Part B claim (say, for six weeks of chemotherapy and radiation for prostate cancer) and the outpatient facility adds 15% to the bill, losing the “excess charges” benefit begins to impact one’s financial statement with a new $15,000 out of pocket expense. Weigh the risk of premium savings vs. the new “excess charge” exposures carefully when comparing Medicare Supplement policies.

Plans H, I and J are eliminated May 31, 2010. These three plans carried the only prescription drug benefits, but due to Part D on January 1, 2006, the Plan’s Rx benefits were eliminated. Plan E is also being dropped due to benefits being mandated, making Plan E & F virtually the same.

With funding cuts coming to Part C of Medicare (The Medicare Advantage program), Medicare Advantage plans will be forced to cut benefits and raise premiums. Look for “Med Sups” to gain popularity.

Finally, the Provider community prefers patients have a Medi-Gap plan, making access to healthcare easier for the patients.

It has been a week since President Obama signed the sweeping health care bill into law. “Now what?!” That’s a question we’re all being asked multiple times per day…by our families, our staff, our clients, our friends, and anyone else who knows we are in the “insurance business.”

This might be risky, but here are a few of my predictions that I wanted to share with you. Remember, these are for you as professional agents and advisors:

•Don’t risk assuming that folks will figure it out on their own. Left to your own opinions, you could make mistakes with interpretations about impact. Don’t do that to yourself, and don’t let your clients make the same mistake….network, network, network for idea sharing.
•You can count on The Brokerage to continue to be a great “resource hub” of knowledge and input to you. We have the benefit of working with more then 1000 agents/advisors a year, so I feel comfortable saying we have a good pulse on how your fellow agents/advisors are seeking and distributing information.
•No one source of information will be the “tell all”….not the media, not any carrier, not buddies at the golf course or fellow patients in doctors’ waiting rooms.
•Expect EVERYONE to pitch it to best suit their perspective.
•Your clients will be confused and overwhelmed.
•YOU are best positioned to be a source of calm and reason.
•Smart advisors will “make hay” – crisis and confusion creates opportunity.
•Doing the business the same old way is a recipe for mediocrity, if not failure. Don’t wait for a group insurance renewal to talk to your clients.
•Employees will be even more confused than employers. Offer yourself as a resource.
•Most folks believe a compression of compensation is coming. Mandatory minimum loss ratios and tighter rules almost assure that. How will you adapt?
•Charging a fee sounds great, but is your advice worth paying for?
•Diversification of your income is probably a good strategy to pursue. In fact, hundreds of advisors have already accelerated how they work with our staff and resources to help them expand their practices.
•Don’t count on the carriers to deliver your message for you. They will do what they need to in order to keep who they believe is their client…..position yourself squarely between your client and the carrier as the reasoned voice of experience and expertise.
•Other product relationships you have with your clients (life insurance, annuities, LTC, DI, etc.) affirms their confidence in you. Assert yourself by reminding them how you have previously helped them and can help them in the future.

Call me at (800)442-4915 or if you want to talk or email me at mike@thebrokerageinc.com. We can help with access to our knowledgeable staff, top products and services. We are here to help you provide, prosper and succeed.

Good selling,
Mike Smith, President
The Brokerage, Inc.