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Medicare and Michigan Auto Insurance

This information is for Michigan residents only. Obviously, feel free to read but it won’t impact you unless you are a resident of the State of Michigan. This information is subject to change as we understand from our fellow auto insurance partners. We all hope to have a very firm understanding of these changes by July 1, 2020.

Medicare and Michigan Auto Insurance Coverage

Michigan has long had the reputation of being a horrible state to purchase car insurance in. Horrible meaning “expensive”. And, that reputation has been well-earned as we have unique auto insurance laws that impact us all.

We’re going to limit our conversation here to essentially the “medical” portion of our auto coverage in Michigan (vs. liability). We’ll be doing that because, as you know, we’re here to help people with their transition to the Medicare “medical” system; thus the tie-in.

So, we have this system called “no-fault” in Michigan. What this means is that your coverage is a type of car insurance that helps pay for your and your passengers’ medical bills if you’re injured in a car accident, regardless of who caused the accident.

Long story short, when you are on Medicare and are injured in a car accident, Medicare is not your Primary Insurance. Your primary carrier is your auto insurance company. Thus, the higher rates that you pay for this increased exposure to the auto carrier. 

No-fault insurance is also called personal injury protection, or PIP insurance.

Your Choice Come July, 2020 and Beyond

As it stands today, our PIP coverage in Michigan is unlimitedAs in, unlimited. As in, that’s why it costs so much. That part of things is almost that simple. Get more in terms of coverage? You’ll pay more. Think about the legal definition of “insurance”. You exchange a premium (dollars) to get something back (coverage) should the event occur.

So, what you get in return for those premium dollars in the State of Michigan is unlimited medical care (including attendant care).

In our opinion, what people object to is their ability to CHOOSE getting this additional coverage.

We are posting this information as of February 2020. Come July 1, 2020 our coverage offerings will expand.

After July 1, 2020 when your auto policy renews, you will now have a choice of six options for your PIP coverage.

One option will be to retain your current coverage. You may retain unlimited medical coverage. You will continue to pay the higher premiums.

Another option will be that you may opt-out completely of PIP coverage if you are enrolled in both Medicare Parts A and B.

That means that should you be injured in a car accident; your medical bills will be handled through Medicare. If you are enrolled into a Medicare Advantage plan, that means that your medical bills will be handled through that insurance carriers plan.

Note and see chart:

If you are enrolled into a Medicare Advantage plan, are injured in an accident and then change plans the following year, the new carrier would begin to cover your care. This being said, we are being told that different carriers are interpreting the new law differently so be prepared for some unclear answers, for sure.  We hope to have firmer information in the coming months.

If you elect to waive the unlimited medical, you will receive a premium reduction for the loss of that coverage.  You will also lose all attendant care benefits.

What are Attendant Care Benefits?

Attendant care means services to assist an injured person with tasks they would normally do for themselves (e.g., eating, bathing, dressing, grooming, and medication administration). It may also involve supervision or other types of support. Source:  https://www.michigan.gov/autoinsurance/0,9555,7-405-96685—,00.html

Options In Between Unlimited and Opting Out

There are also other PIP options that you will have. You may choose $250,000 for example which is Option 4 – See the form here.

If you chose Option 4, for example, your medical limit would become $250,000 and you would also have the ability to purchase a rider for excess attendant care coverage. We’ve not seen the rates for any of the riders at this point but you would see a reduction of premium for your PIP coverage being reduced from unlimited to $250,000.

Notes the following information cited from the Michigan Department of Insurance & Financial Services website:

The “Benefits” of the Change.

The premium reductions are as follows: All PIP limits apply to PIP medical. The full PIP premium must be reduced by the amount required in MCL 500.2111f(2). Companies can only charge the portion of MCCA premium that is from a deficiency, if applicable.

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So, look at your current auto insurance bill, see the PIP premium related and note that the anticipated premium reductions will be on that portion of your bill. Review this part with your auto insurance agent to see what your ultimate premium AND coverage reduction will result in for you.

So, what does all of this really mean?

In our opinion, it means think hard and long about choosing to eliminate your PIP coverage because you are enrolled into Medicare. Balance what you will give up vs what you will gain.

Do any of us like paying extra premiums? Of course not. But, we do all want unlimited PIP coverage should we be involved in a car accident.

Do you know anyone that has been in an accident and now receives care from our current auto insurance laws? We do. Several of those people will be receiving attendant care for life. That would cost a family $5-10k a month, forever, if they did not have unlimited PIP.

If you have long term care coverage, review your documents to know your coverage. Remember that PIP’s attendant care is lifelong vs a coverage period of a 3-year benefit for example. Discuss this with your financial planner.

And, this is a great time to bring the long term care conversation to your financial planner. Unfortunately, this is something lacking in the conversation area we find.

Our Professional Recommendation as an Agency is:

Maintain your unlimited PIP coverage and don’t rely on Medicare to cover you in a car accident.

In terms of the best coverage you could have, unlimited is it.

And, obviously, this is just our professional opinion and all cases are unique. Again, please take this opportunity to talk to all of the advisors in your world as this is big news in Michigan.

Pros of Medigap

Freedom to choose your doctors // One of the key features of Medigap plans is that they are secondary insurance compared to original Medicare. If you have a Medigap plan, you can go to any doctor or hospital that accepts Medicare’s assignment. By law, if a provider accepts Medicare, they also must accept your Medigap plan (regardless of the insurance company that provides your coverage). Having nationwide coverage can be crucial if you plan to travel around the country or simply if you want access to the best care from top-rated facilities around the country.

Comprehensive medical coverage // Aside from your monthly premium, Medigap plans come with very little out of pocket costs when you receive medical care. The most popular Medigap plan (Plan G) covers all out of pocket costs after you pay the yearly deductible of $198 (provided your procedures are approved by Medicare). Another benefit to having lower out of pocket medical costs is that budgeting health care expenses can be much easier.

Medigap contracts are guaranteed renewable // “Any standardized Medigap policy is guaranteed renewable, even if you have health problems. This means the insurance company can’t cancel your Medigap policy as long as you pay the premium." - Medicare.gov.

Medigap plans require separate drug coverage // Now we know what you’re thinking, how is needing separate drug coverage a good thing? We will admit this is both a positive and negative when it comes to Medigap coverage. The reason this can be positive is that it allows you to customize your insurance options. This means that you can choose the Medigap plan that best fits your situation, while also choosing a drug plan that best fits your specific prescriptions. This also means that during the Annual Election Period (AEP) in the fall, you can change your prescription coverage without impacting the coverage of your Medigap plan.

Cons of Medigap

Higher monthly premiums // On average, Medigap plans come with higher monthly premiums than Medicare Advantage plans. For example, someone turning 65 in Michigan can expect to pay around $120/month. Compare this to Medicare Advantage plans that are commonly available for $0/month.

Medigap plans require separate drug coverage // We weren’t kidding when we said this a positive and a negative to having Medigap coverage. Having separate part D coverage comes with added premiums, as well as added complexity. The average premium for part D in 2020 is $32.75/month. This monthly cost is in addition to the roughly $120/month for a Medigap plan G. Prescription drug coverage (part D) is usually provided by a different insurance company than your Medigap plan. This means you will have more coverage to keep straight and we all know that Medicare can already be confusing enough.

No additional benefits // Medigap plans typically do not include prescription coverage, dental/vision/hearing coverage, or gym memberships. It is easy to buy separate insurance for dental/vision/hearing but it does come with added costs.

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Pros of Medicare Advantage

Lower monthly premiums // The national average premium for Medicare Advantage plans in 2020 is $23/month according to the Centers for Medicare & Medicaid Services (CMS). However, as we mentioned before, there are many Medicare Advantage plans across the country that are $0/month.

Single Insurance Plan // Medicare Advantage plans are often seen as a more convenient choice for Medicare coverage. The bundled approach of Medicare Advantage plans means that you can use the same insurance coverage/card at both the doctors and the pharmacy. Although this is often seen as a benefit to Medicare Advantage coverage, we highly recommend that you do not make this the reason you do, or do not choose one option over the other.

Additional Benefits // Unlike with Medigap plans, Medicare Advantage plans commonly include dental/vision/hearing coverage, gym memberships and prescription drug coverage at no added cost.

Limited discrimination for pre-existing conditions // The only medical disqualifier for enrolling in a new Medicare Advantage plan is if you have end-stage renal disease (ESRD). For individuals with many ailments, this means they can change Medicare Advantage plans during the proper enrollment periods as long as they do not have ESRD.

Cons of Medicare Advantage

Limited Networks // Medicare Advantage plans commonly come in the form of HMO’s and PPO’s (click here for a detailed description of the two). If you have a Medicare Advantage plan you will typically have to healthcare providers in the plans contracted network, or you will likely have much higher out of pocket costs. Restricted networks place an increased burden on individuals that enjoy frequent travel, or anyone that wants unrestricted access to premier medical facilities nationwide (or even state-wide).

Yearly contracts // Medicare Advantage plans are renewed on a year-to-year basis. Medicare Advantage plan benefits typically change every year, which can cause either negative or positive impacts for enrollees (created increased uncertainty in retirement). Perhaps the biggest con to having a yearly contract is that your doctors are not under the same contract constraints. Doctors and even entire health systems can cease their contract with a Medicare Advantage plan at any time of the year. Meanwhile, enrollees in the plan do not have the same luxuries. If your doctor or hospital stops accepting a plan mid-year, you will have to find alternatives or pay higher out of network costs until you can make a change during an enrollment period.

Managed Care // The best way to describe managed care is by quoting PBS Medicare contributor, Phillip Moeller, “One reason MA plans can offer more benefits and often charge less is that they can save money on medical expenses through their business agreements with members of their provider networks. The bigger source of savings, however, is that MA plans are managed care plans. Original Medicare is what’s called a fee-for-service program. If you want a procedure that Medicare approves, it will be covered by original Medicare. MA plans, by contrast, would look for low-cost providers of such procedures. They usually require enrollees to get pre-authorization from their plan before approving coverage and may require less-expensive treatment alternatives.”

Essentially, Medicare Advantage plans will take a more “active” role in your healthcare. Getting approval for certain higher-cost procedures can become a hassle at unfortunate times.

Higher out of pocket costs for medicare care // Medicare Advantage plans typically come with a lower monthly premium than Medigap plans, but in exchange, they also come with higher out of pocket costs when you seek medical care. Medicare Advantage plans can have a maximum out of pocket (MOOP) of up to $6,700 with most plans having a MOOP of about $5,000/year. Also, prescription drug costs do NOT count towards the maximum out of pocket. Overall, this makes budgeting with Medicare Advantage plans much more difficult than with Medigap plans.

Less flexibility with coverage options // The bundled “one size fits all” style of Medicare Advantage plans can make it difficult to find the plan that best fits your unique needs. It can become difficult to find a plan that covers all of your medications perfectly while having all of your doctors in the network. Typically, this becomes more of an issue for individuals with more healthcare needs and ailments.

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Summary

This is by far the most important part of this entire article, so hopefully, you have stayed with us until this point. Deciding between a Medicare Advantage plan or a Medigap plan is likely the most important decision you will make signing up for Medicare.

The reason the decision is so important is that when you first enroll in Medicare part B, you start your Open Enrollment Period (OEP). The OEP is specific to you! This has nothing to do with AEP in the fall, which is commonly incorrectly called “open enrollment”. Your Open Enrollment Period starts 6 months BEFORE you start part B and lasts for 6 months AFTER you start part B. Again, this is when you first enroll in part B of Medicare (even if you wait until age 80 to do so) and not when you turn 65.

During your Open Enrollment Period, you can purchase ANY Medigap plan on the market and NOT have to answer health questions. You could have a terminal disease and still be automatically accepted by a Medigap plan during this period. After your Open Enrollment Period, if you want to change Medigap coverage, you will have to answer health questions (go through underwriting) to qualify for the Medigap plan. If you do not answer “no” to all the health questions there is a very good chance you will be DENIED from getting new Medigap coverage. This also applies to anyone changing from a Medicare Advantage plan to a Medigap plan.

Medigap Open Enrollment is a very important topic, so click Here to learn more. The moral of the story is that when you first start part B of Medicare, please make sure to look at every option and choose a plan style that you are comfortable with for potentially decades to come.

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