Insurance is all about risk. Risk transference means paying someone else (an insurer) to bear the risk of property or monetary loss. The more risk you transfer to an insurer, the more they will charge you.
Take the Medicare Supplement F plan for example. Many consider this the “Cadillac” plan, the very best coverage you can get. In an F plan, you are transferring all of your out of pocket costs (deductibles, co-pays and co-insurance) for any Medicare covered benefit, to the insurer. The insurer now bears all the risk. So your premium will be the highest of all Medicare standardized plans. But is that a wise choice?
In a lesser plan, you retain some risk, but your premium is lower. On a G plan for example, you pay the annual Part B deductible. That deductible is $183 for 2019 but, it can change. The deductible amount is set by Medicare, not the insurer, and it tends to increase by only a few dollars each year. The premium however, tends to be significantly lower than the F plan premium which saves you money.
For example, if the G plan premium is $50 per month less, you would be saving far more annually than you would be spending in out of pocket costs. In this case, your retained risk of $183 is a smart move because it saves you $417 annually ($600 premium savings minus $183 out of pocket). The premium difference between F plan and G plan varies for many different factors, but generally, we see a significant savings.
Why do insurers offer this knowing you would be saving money? The G plan was designed by Medicare, not the insurers. An extensive study showed that many people were over utilizing their Medicare benefits of they had an F plan, since this meant they had absolutely no share of cost. On a G plan, since you would bear the cost of the first $183 out of pocket, the theory is you would utilize fewer benefits, you would go to the doctor less frequently. Whether that is the case in reality or not, most seniors save significantly after switching to the G plan.
It’s like having the Cadillac, plus money left over for gas!
Each individual’s health insurance needs are different. This is not meant to be insurance advice, simply general knowledge. For further information contact a licensed health insurance agent in your area. Randy Foulds of Foulds & Feldmann Health Insurance Agency is a licensed agent and a senior health specialist in la Quinta. license #0G69218. You can reach him at 760-346-6565.