EXTRA INSURANCE FOR SENIORS

By KRISTEN GERENCHER
CBS MARKETWATCH
ON ONE HAND, SENIORS shopping for extra insurance to plug holes in their Medicare coverage have it easy -- all they have to do is compare prices. Of course, prices are rarely what they seem.
The good news is that most states offer 10 Medigap policies labeled A through J whose benefits are standardized across all but Massachusetts, Minnesota and Wisconsin.
The policies increase in scope and cost along with the alphabet, with Plan A offering the most bare-bones coverage and J the most comprehensive, including prescription drugs.
This formula takes away some of the guesswork, says Melissa Gannon, vice president at Weiss Ratings in Palm Beach Gardens, Fla.
"You don't have to rely on the company that you're getting a quote from to necessarily sell you on the benefits offered in that plan because you know up front ... what the benefits are," Gannon says. "You just have to worry about price."
Such standardization has helped cut down on the illegal practice of selling seniors multiple Medigap policies, an abuse that was more of a problem a decade ago, says Bob Hunter, director of insurance for Consumer Federation of America. Now that plans are uniform, "you know you're comparing like coverages."
Still, even among plans with identical benefits, consumers' costs vary widely. Annual premium rates run from $352 to $6,659 for all types of Medigap coverage, according to a recent analysis by Weiss Ratings.
As a result, those in the market for supplemental insurance should compare rates among available carriers in their area, decide what benefits they need and which of three pricing methods works best for them, experts say.
WHO NEEDS MEDIGAP POLICIES
Not everyone who turns 65 needs to buy supplemental insurance, but many are wise to consider it given Medicare's cost-sharing, says Bonnie Burns, a training and policy specialist with California Health Advocates http://www.cahealthadvocates.org/, which counsels Golden State seniors on their insurance choices.
"Because seniors know there are a number of things Medicare doesn't even cover, they're not willing to have high out of pocket expenses for those things Medicare does cover," Burns says. "That's why they buy insurance to take care of those pieces and then they don't have to worry about it."
More than one in four seniors had a Medigap policy in 1999, says Gerry Smolka, senior policy advisor for AARP Public Policy Institute. A third of Medicare beneficiaries had employer-sponsored retiree support compared with 19 percent who opted for a Medicare managed-care plan, which is often cheaper than Medigap.
Eleven percent had Medicaid and less than 10 percent of the 40 million Medicare beneficiaries relied solely on the safety net by going "bare on Medicare," Smolka says.
Unlike the managed-care companies that offer Medicare+Choice, a supplemental HMO program, life and health insurers sell Medigap policies. One in five policyholders has AARP's Medigap plan, run through United Healthcare (UNH). Blue Cross/Blue Shield offers them as well, as do Physicians Mutual and Conseco's (CNCEQ) Bankers Life and Casualty.
The best time to buy a supplemental policy is also the only time insurers are forced to accept patients regardless of their pre-existing conditions, as long as there's been no break in coverage -- within the first six months of starting Medicare's medical coverage, known as Part B, Gannon says.
"The day you enroll in Medicare Part B, you have six months to purchase a Medigap policy guaranteed issue where you can't get turned away," she says.
Seniors on the fence about buying Medigap coverage may consider using open enrollment to test it and drop it later if they have to, because of the unparalleled access. "If you have health problems, that's when you have the best shot of getting what you want," Smolka says.
WHAT TO ASK
When shopping for a Medigap plan, experts advise taking the following six steps:
U Get a list of companies that sell supplemental policies in your area so you can compare prices and institutions' solvency ratings. States' Departments of Insurance often have consumer guides for a one-stop shop, as does Weiss Ratings, Gannon says. Texas, Oklahoma and Illinois have about 20 insurers each while Maine, New Jersey, Rhode Island, Alaska, New Hampshire and Vermont have among the fewest to offer, though having more competitors doesn't necessarily lead to better deals, she says. States with big senior populations such as Florida, New York and California tend to have the most expensive Medigap policies.
U Decide whether you want premiums to go up as you age. There are three kinds of pricing models: attained-age, which adjusts your premium higher with every birthday; issue or entry-age, which calibrates your rate to the age at which you began coverage; and community rating, which ignores individual age. "If you're on the older end, you're going to do much better with community rating because everyone pays the same no matter how old you are," says Gail Shearer, director of health policy for Consumers Union. While attained-age pricing is becoming more prevalent, those who choose it when it's attractive for them may not be able to get out once their rates climb, Smolka says. "Your ability to switch policies may not be as great then as you might like."
U Determine what benefits are essential to you and whether you can you afford them. For example, Medigap plans H, I and J cover prescription drugs at different levels, but more seniors buy plans C and F, which are cheaper and still cover coinsurance and deductibles, Smolka says. Some plans also include skilled nursing and foreign-travel emergencies, she says.
U Does the plan have a guaranteed-issue policy for pre-existing conditions? Many of the Blue plans do, Gannon says. "If you don't have pre-existing conditions, you want to be underwritten ... because you'll probably get a lower price."
U Find out if claims can be electronically transferred.
U When in doubt, contact the state program known as HICAP, the Health Insurance Counseling and Advocacy Program, or SHIP, State Health Insurance Program, to speak with an adviser free of charge. You can also look up more information on Medicare's Web site http://www.medicare.gov/.