A Guide to Buying the Right Medicare Policy

The pre-Medicare zone

When people are getting close to age 65 (and I’m going to use turning 65 as our example in this article even though they could be enrolling into Medicare at an earlier age due to disability or certain illnesses or past age 65 as they retire later), a lot goes into the Medicare education process.

When a person first interacts with our firm, we need to assess “does this person need to enroll into Medicare at age 65?” That right there is a very big decision. Be sure that you are finding an agent who helps make that decision with you and that they can explain to you “why you need to enroll.” Don’t just enroll “because you heard you were supposed to enroll into Medicare at age 65,” or because “my friends said that I had to,” or even “my financial planner said that everyone has to.” (All are untrue statements). That’s not a good reason to do so. Know exactly why you are or are not enrolling into Medicare at age 65.

Once it’s determined that you should, indeed, enroll into Medicare, the journey to get your Medicare “activated” with the government comes into play.

How do you do that? Well, it depends. Be sure that your agent is guiding you through exactly how that process should play out. “Mr. Jones, since you have been getting Social Security benefits since last year and now you’re turning 65, you’ll be automatically enrolled into both parts of Medicare. Since you do indeed need to be enrolled, this will be rather simple for you. Your Medicare card will arrive, and you’ll be all set”.

Or, “Mr. Jones, since you are contributing to your health savings account but have a marketplace plan. You’ll need to stop that contribution when you turn 65, and you’ll need to go online and enroll for Medicare Part A and B using the Social Security Administration portal. It’s not too difficult and I’ll send you our tutorial that walks you through exactly what to do”.

What if you are starting Medicare at age 68? There’s a different approach that you need to take. You need to get a CMS form L-564 signed by your employer to verify that you’ve had coverage since you were 65 to avoid a late-enrollment penalty. Does your agent walk you through the process and give you the link to the Social Security website where the completed form needs to be uploaded to? Or, do they just tell you, “Go sign up and when you’re done come back to me and I’ll sell you a product….” (Ok, so they don’t verbalize the last part but when you tell a person “go sign up and call me back” – what does that mean to the confused consumer?

Does your agent give you all the tools to accomplish what you need? Does your agent know how to get you all enrolled into Medicare according to your situation? Ask the tough questions. “How will you help me move over to Medicare?” Or, will the agent just be there to sell you a policy or plan after you are enrolled?

Costs are a big deal

After a person is enrolled into Medicare, has your agent discussed with you how much premium will be charged by the government for your new coverage? I always ask, “Has anyone discussed with you or explained to you how much your Medicare coverage with the government will cost?” For 99.9% of the people who we work with, the answer is ”no.”

Medicare looks back to your modified adjusted gross income (MAGI) from your tax return from two years prior to your filing for coverage. Does your agent provide you with the information for IRMAA calculations? IRMAA is the “income-related monthly adjustment amount.” If you earn more, you shall pay more. Does your agent know that? We know many agents that know very little about IRMAA.

Are you retiring as you venture into Medicare? Many, many of the clients I work with are doing just that. Does your agent know how to provide you with the form SS-44 to help you request a redetermination of the IRMAA amount? Logically, if you are retiring, your income is reducing most likely so why would you pay the higher IRMAA amount if the “income” is no longer arriving via your paycheck? We work with hundreds of people annually to successfully reduce their Medicare premiums. Is your agent doing that work for you?

Now we get into the agent’s role

All the items that I’ve addressed thus far have absolutely zero to do with our job as agents. We don’t get paid a dime to help people enroll properly into Medicare. We don’t get paid to help them reduce their Medicare premiums. People often assume that we work for Medicare or the Social Security Administration since there is a lot of cross over.

Doing a good job for our clients entails teaching all of the above. We know many agents that don't believe the same and that’s completely as that’s how they have chosen to run their business.

After a consumer enrolls into Medicare, they have their red, white and blue Medicare card with their new number and their Part A and Part B start date stamped on it. They’re ready to go buy a plan.

Products and compensation

There are two basic paths to Medicare products that involve agents, i.e., the sale of a product from an agent to a consumer.

One path is the consumer purchasing a Medicare supplement (a.k.a., Medigap) along with a Part D plan (prescriptions) or, second, purchasing/enrolling into a Medicare Advantage plan.

Agents are paid for each of those three items. Generally, we are paid more for Medicare Advantage plan enrollments than we are for Medigap sales. Part D plans offer the least compensation and provide us with the biggest headache.

I’ll use Michigan’s (my home state) pricing as an example for Medigap compensation. On average, we will receive $400 for a new Medigap plan and will receive $81.00 for a Part D plan for a person new to the Medicare system. Upon renewal of those plans, we will get $400 for the Medigap and $39 for the Part D.

All carriers will differ in length of years they will pay for Medigap contracts. They average six years.

If we enroll a person in a Medicare Advantage plan, we are paid $539 if a person is new to Medicare and then $270 per year thereafter as long as they remain enrolled.

The unique aspect of our business that is not similar to much of the financial industry. In our world, every consumer is the same. In terms of compensation. If a person has two million dollars and buys a Medigap plan with us, we get $400. If a person has $200,000 in net worth and buys a Medigap plan with us, we get $400.

We sometimes will have advisors “suggest” to us that we should give extra attention to their high-net worth clients. We don’t. We give plenty of attention to every one of our clients; they’re all the same to us, in a good way.

We provide a year's worth of service for approximately $450. And let me tell you, a 68-year-old with only four medications can ask for a lot of service.

Agent of record

The other unique aspect of our business is that there is very little, if any, ability to “AOR” a policy. AOR means having the consumer sign a paper that allows a new agent to take over as the agent of record on their account.

In much of the financial world, if I move my AUM account from one place to another or one advisor to another, the new advisor gets paid when I move my account over to them.

Not in our world. If an agent sells a policy and then leaves the business or just doesn’t contact the person who bought the plan, a new agent cannot take that business over with an agent of record form and be compensated for future servicing. We can certainly become the servicing agent, but the original agent is being paid for multiple years in most cases. So, in essence, we can work for zero compensation each year for some clients if we choose to.

We have an agency policy that we will not service those accounts. A few advisors have been “shocked” that we won’t help these potential new clients. But, at the end of the day, we are not “SHIP” counselors (free Medicare counselors provided by the government). We know it’s not fair that the agent can ditch you and you’re stuck. But in the Medicare world, there are gobs of people who have been stranded by bad situations. Maybe they called Medicare directly to buy a plan. Maybe their agent quit the business. Maybe their agents just sell a few policies a year and don't understand Medicare.

The point of this article is why a person should take the time to find a good agent. Don’t just go to someone that “can sell Medicare.” If I have a health insurance license, I can technically “sell” a policy. But if I sell one policy a year, do you think I know Medicare?

If we took on all of that orphaned business, we may as well close up shop and become full-time SHIP counselors.

We pose this question back to advisors: “The person you are helping has $500,000 with Ameriprise and you work at Edward Jones. Annually, that person asks you for reallocation help and a quick review since they don’t really trust what their advisor says. Would you truly help them each year? Or would you require that they move the money to you so you can get paid to do what you do?”

Of course, you would.

We are no different. But we can’t just move the policy, so we have to say “no.”

Specialties

Medicare agents may offer only Medigap plans, or they may focus on Medicare Advantage plans. Find an agent who talks you through both products, the good, the bad and the ugly.

With Medicare, if you do not understand the system long term, you can be hurt.

A person I talked with recently had contacted Medicare and purchased a Medicare Advantage plan. They were not told, nor did they know to ask, “Can I change this plan down the road?” The answer is always “maybe.” This person didn’t know that and thought that you can change your plan every year during the enrollment season. They had planned to upgrade this year since they felt better having stronger coverage now as they got a bit older.

But the person had a health condition that precludes them from getting a Medigap plan now. They were shocked.

I see it day in/day out. Find a good agent who will discuss the pros and cons of both products and let you choose what you think fits. It’s not fair to the consumer to make choices without knowing all the facts.

Location

Where does that agent operate?

This is important. Our agency offers both Medigap plans and Medicare Advantage plans in our home state of Michigan. We will sell Medigap plans only in 12 other states.

Why do we do that?

Because we know Michigan like the back of our hand (no pun intended for our Michigan “Mitten” peeps).

We know the hospital systems here, we are contracted with all of the local carriers, and we know the “big three” automotive retirement plan details. We know everything inside and out.

When it comes to writing a Medicare Advantage plan, we know that Priority Health will be a perfect fit for certain clients.

A call center in Florida won’t have any idea who Priority Health is, which eliminates a good plan from the offering. Not intentionally, call centers will typically offer the national carriers, not the locals.

It makes sense to us to be the best in Michigan.

We take that approach in North Carolina, for example. We will write a Medigap contract in that state (they are far more universal/standardized in nature), but generally will not write a Medicare Advantage plan since we don’t know the local carriers or hospital systems and we’re not doing you any favors in trying to write that product for you.

So we don’t try.

It has been a challenge in terms of growing. All agents/agencies want to be the end-all, be-all to everybody. Even though we want to help everyone, we realize that we do a far better job by defining who we can help and where we do our best work.

We’re not for everybody.

But there is a good agent for everybody. There are a lot of committed players in the space of Medicare. Do your homework to find someone who will help you enroll into Medicare and be there with you during your years in the system.

You’ll need the help and you’ll be thrilled to have a great agent by your side. Choose wisely!

P.S. – Michigan and our 12 states are: AZ, CA, FL, IA, IL, IN, MI, MD, NC, OH, PA, SC, TX

P.P.S. – I woke up this morning after writing this to the news that a call center employing hundreds of agents shut down overnight. Wiped the computers and closed down. That leaves hundreds of agents unemployed in the middle of our busiest season and leaves thousands upon thousands of clients without an agent. That is exactly what we do not want to be.

Joanne Giardini-Russell is a Medicare Nerd & the owner of Giardini Medicare, helping people throughout Michigan and AZ, CA, FL, IA, IL, IN, MI, MD, NC, OH, PA, SC, TX transition to Medicare successfully. Contact the team at [email protected] or by calling 248-871-7756.

Read more articles by Joanne Giardini-Russell