An important addition to the Medicare supplement market was the advent of the High Deductible F plan. As health insurance agents across all segments, Individual, Small Group, and Medicare supplement, we\’ve been big fans of high deductibles for many years now. It went along with our belief that health insurance was increasingly becoming a question of insuring the really big bill and self-insuring the smaller bills as rates continued to increase ad infinitum. We\’re a little more hesitant with the high deductible F Medigap plan and we\’ll explain further. If anything, it\’s important to understand what were gaining and losing in both situations. Let the comparing begin!

First, a quick look at the standard trade-off. The F plan is pretty much the bulwark of the Medicare supplement world. It\’s by far the most popular and generally stands as the most comprehensive Medigap plan with coverage for the core holes in Medicare such as deductibles, co-insurance, and maybe most importantly, excess. The high deductible option is an F plan with a high deductible built in. Medicare will still pay accordingly but you must meet the deductibles and 20% coinsurance until the deductible is met. Of course, the premium is much lower as a result of this high deductible. The pricing is affected by age and area of course but as an example, we\’ll consider a premium difference of $100/monthly versus a deductible of $2000. This is a pretty good baseline on the market. So essentially, we\’re talking $1200 annual savings versus $2000 deductible. It\’s gets a little better on the side of the deductible since you\’re realistically looking at roughly a $1200 hospital deductible and $150 for physician costs, after which you\’ll pay 20% of the charges. You won\’t really hit the $2K deductible unless you have really big bills in a calendar year. On the surface, this isn\’t a bad trade off. If you don\’t big health issues, you\’re going to save $1200 and maybe you\’ll incur under $600 annually in a good year. If you have a really bad year, you\’re out of pocket $800 versus the straight F plan. That\’s what we\’re looking at $1200 in savings in a perfect year versus spending an extra $800 in a really bad year. Sounds great, right?

Obviously, if you have more serious health issues (or history), the high deductible isn\’t a great option from the start. You\’ll be paying an extra $800 each year above what you would pay on the straight F Medigap plan. Here\’s the issue. At age 65, you are entering a period of life in which medical care usage and expense skyrockets. As it is, a person\’s health care costs double with every decade of their life on average. This really accelerates over age 65. Our hats go off to all the 65 year olds who eat healthfully and attend yoga and Pilates regularly but many expensive health care concerns are in spite of healthy living for the over 65 age band. If you\’ve lapse the gym membership or love donuts, then let\’s be honest, the costs will likely be much higher. If you were a betting person, putting your money on low health care costs over age 65 is not supported by statistics. You don\’t want to take short term gain (premium savings of $1200) versus long term pain (out of pocket of $800 annually). This bring us to another point, if your health changes significantly, it can be impossible to change plans to the traditional F medigap plan in the future. That\’s the skinny on the high deductible versus F plan. Of course, we\’re happy to walk through your particular situation but you\’re now armed with information that can directly affect your future health care expenditure.

Dennis Jarvis is a licensed insurance agent concentrating on medicare supplement insurance.