Give your clients’ Medicare plans a checkup this fall

What advisors need to know

• Healthcare expenses can erode your clients’ assets if their Medicare plans are not cost-effective for their needs.
• Plan options can change, and so can your clients’ health needs, so it’s important to give each client’s Medicare coverage a ‘checkup’ every year.
• Annual open enrollment is your chance to help clients minimize their healthcare spending, especially this year as health costs continue to rise and two major Medicare plan providers have announced significant changes for 2025.

Protect client assets from rising healthcare costs

Healthcare costs can erode a client’s retirement nest egg if their Medicare plans are not well-suited for them. High insurance premiums and out-of-pocket expenses can weigh on even the best laid financial plans, so it’s important to ensure your aging clients maintain comprehensive and cost-effective coverage.

Selecting Medicare plans is not a one-and-done decision. Premiums and benefits change from year to year, new plan options emerge, and your clients’ health needs may change, too. Just like people, your clients’ healthcare plans need annual ‘checkups,’ and the fall is a great time to do it. Your clients have an opportunity to make changes to their plans during Medicare open enrollment October 15 to December 7 of each year.

If reviewing clients’ Medicare coverage hasn’t been a part of the financial planning services you offer, now is the time to start. Healthcare costs continue to rise and two major Medicare Advantage providers, Humana and CVS, have announced downgrades to their plan benefits and geographic presence effective in 2025. Some of your clients could be losing coverage, others could see their plan change for the worse, and clients in either situation may need help choosing a different plan. 

Know the basics: Original Medicare vs. Medicare Advantage

Before you begin discussing Medicare with your clients, make sure you know the lay of the land. Individuals who are eligible for Medicare can choose their coverage using an a la carte approach with “Original Medicare” or an all-in-one approach with “Medicare Advantage.”

Original Medicare includes Medicare Part A, which provides hospital insurance, and Part B, which provides medical insurance. Individuals who enroll in Original Medicare may choose to also enroll in a Medicare Part D plan for prescription drug coverage and a Medigap plan for supplemental insurance. This a la carte approach to Medicare is customizable and often preferred by clients with ongoing health concerns who want to continue seeing their own doctors or using a particular pharmacy.

Medicare Advantage, also known as Medicare Part C, provides broad, all-in-one hospital and medical insurance, and most plans include prescription drug coverage. Individuals must be enrolled in Medicare Part A and Part B to be eligible for a Medicare Advantage plan. Medicare Advantage plans typically offer additional benefits that are not included in Original Medicare, which may include coverage for vision, dental and hearing. Because Medicare Advantage is not customizable, insured individuals must be willing to use care providers who participate in their plan. Individuals who benefit from Medicare Advantage tend to be in good health and do not anticipate significant health problems in the future.

Medicare health plans can be a la carte or all-in-one

Annual Medicare enrollment is an opportunity for plan changes.

Medicare-insured individuals can make certain changes to their health plans each year during the open enrollment period October 15 through December 7. Specifically:

• Your clients who are currently enrolled in Original Medicare will have the opportunity to add or switch to a different Part D prescription drug plan. They may also change from Original Medicare to an all-in-one Medicare Advantage plan during this period.
• Clients who are currently enrolled in a Medicare Advantage plan will be able to switch to a different plan provider, or they can change from Medicare Advantage to Original Medicare and add a la carte coverages.

Note that Medigap does not have an annual enrollment period. Your clients can submit an application for a new Medigap plan at any time, although issuance is not guaranteed and premiums may be higher outside of the initial enrollment period for Medigap.

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Medicare plan checkup in 3 steps

The plans that were most cost-effective for your clients at the time they initially enrolled in Medicare might not be the best choices for them now. It’s worth re-evaluating your clients’ plans against other options that are available today. Before you start, ask clients if there have been any changes to their ongoing or expected healthcare needs so you can be sure their plans provide the appropriate coverage.

1. Compare prescription drug plans.

Medicare Part D offers numerous prescription drug plans with different premiums, deductibles and copays. Plans also differ in which medications they cover and how they categorize their covered medications into pricing tiers. In other words, a client’s medication may not be covered by every plan; and among plans that do cover it, the co-payment can vary.

Part D plans can change from year to year, not only in terms of their pricing but also which medications they cover, so it is critical to review available plans annually to ensure clients continue to have the coverage they need at the lowest possible cost.

2. Assess the need to add or upgrade Medigap.

Although you don’t have to wait for an open enrollment period to add or change Medigap plans, it makes sense to consider a client’s health insurance coverage in its entirety during an annual plan checkup.

Medigap offers a variety of plans that reimburse out-of-pocket expenses for deductibles, co-insurance payments, and costs for services that are not covered by Original Medicare (Parts A and B) such as extended hospitalization and skilled nursing care. 

Your clients who chose Original Medicare likely already supplement their coverage with one of the 10 different Medigap plans (A-D, F, G, K-N). But if they don’t have a Medigap plan, or they are not happy with their current plan, you can help them explore their options. Plan G has been increasing in popularity (selected by 36% Medigap users in 2022 vs. 22% in 2019) while participation is declining in Plan F due to changes in Medicare law that made the plan unavailable to individuals who reach age 65 on or after January 1, 2020.

New enrollees prefer Plan G
Distribution of Medigap enrollment by plan type, 2022

Medigap plans are issued by private insurance companies and, although the level of coverage for each plan is standardized, the price tags can be wildly different for individuals seeking a plan after their initial enrollment period, so it’s worth shopping around for the best deal. Don’t assume that higher-priced plans will provide superior service relative to lower-priced plans. In fact, plans with higher premiums often have lower consumer satisfaction ratings.

Changing Medigap plans may be challenging and/or pricy in certain client situations. Outside of the initial Medicare enrollment period, an insurance company may deny coverage or upcharge your clients who have a history of health problems. Choose Medigap plans with a long-term mind set to avoid the need for changes in the future.

3. Shop for better deals on Medicare Advantage plans.

Similar to Medigap, Medicare Advantage plans are issued by private insurance companies and after the initial Medicare enrollment period, switching from one plan provider to another or making the leap from Original Medicare to Medicare Advantage may lead to higher costs, especially for clients with a history of health problems. However, given the industry’s discretionary pricing practices, it is also possible to lower a client’s costs by switching to a similar plan that is more competitively priced or a plan that is more suitable for the client’s current or potential health needs.

Tap into resources to guide your clients’ Medicare choices

Part D prescription drug plans, Medigap plans and Medicare Advantage plans all have many nuances, making it difficult to compare them and identify the most cost-effective options for your clients. Consider engaging a local Medicare advisor or using an online tool that can do the research for you.

Healthpilot* is a free Medicare plan comparison and enrollment platform that provides recommendations based on an individual’s health needs, geographic location and financial circumstances. You can use Healthpilot to generate tailored recommendations for your clients, or you can share the resource with clients to use on their own. Once a client enrolls in a plan through Healthpilot, they will automatically receive plan checkups and recommendations at the start of each annual open enrollment.

There are many ways you can help protect the assets your clients have built with you over time. Contact your BlackRock representative for more information or explore our online resources.

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