Page 3 - Cover letter and evaluation for Jerry Sicherman

Before you switch from Anthem to a different insurer, you should check with Anthem to see
what the extra benefits are, if there are any, in the Blue Cross Senior Classic Plan F that you
have. And if there are additional benefits that you are using, that may factor in to your decision
about whether to switch companies. I’ve assumed you can get Medigap standard Plan F from a
different insurer for about $3,400 a year, which is roughly $960 less than you now pay.

Option Two: Downgrade your current plan to a High-Deductible Plan F

As you mentioned, there’s a good chance you can save money by switching to the high-
deductible version of Plan F. In 2019 the deductible amount is $2,300, and so if you could lower
your current premiums by $2,300 or more, you would of course save money. But even you only
reduced your premiums by $1,500 or so, it’s likely that in most years you would save money.

Because Medicare pays 80% or more for most medical services, someone with high-deductible
Plan F will pay only 20% until the deductible is met. And so you’d have to incur more than
$10,000 in medical expenses before you reached the $2,300 deductible.

The single largest out-of-pocket risk is probably a hospital admission. If you had not yet reached
the $2,300 deductible amount when you were admitted, you would pay all or a portion of the
$1,364 Part A deductible. But if you can lower your annual premiums by $2,300 or more,
there’s no way you would lose by switching to high-deductible Plan F. And if you do switch to
high-deductible Plan F, you will not later be able to upgrade to a more comprehensive plan like
standard Plan F without having to answer questions about your health.

Catastrophic Coverage

You asked about Medigap policies’ catastrophic coverage. It is excellent, but because with most
Medigap plans there isn’t an out-of-pocket limit, there is a slight risk. One recent study found
that only 1% of people with supplemental coverage would benefit from an out-of-pocket limit.
For one thing, all Medigap policies cover an additional 365 days of hospitalization after
Medicare’s hospital benefits are exhausted.

Medigap Plan L does have an out-of-pocket limit which is $2,780 in 2019. As you probably
know, a plan’s OOP limit does not include premiums or services that the plan does not cover.
But Plan L’s OOP limit does cover hospital and skilled nursing care -- the two areas most likely to
result in large expenses. Plan L costs about $2,000 a year and has 5% co-payments for most
medical services until the OOP limit is reached.

Sincerely,

David Armes, CFP®

Appendices
WDA:12115

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