UHC ~39% discount trap?

[kimberlymh334958]

If someone can sanity check, please do.
AARP endorsed UHC offers an enticing introductory Medigap premium discount (~39%) but if you enroll at age 65 the incrementally reducing discount will have gone to 0 by age 80 leaving you to pay the full price which has been impacted by annual inflationary adjustments. I compared this over time to another plan that starts out a bit higher but over the long term has lower premiums than the no longer discounted UHC rate. It breaks even with the UHC annual cost around age 78 then starts saving significantly more annually in your oldest most needy years. Thoughts?

[GailL1 · Accepted solution]

Your analysis may have been skewed unless both plans rate the same way -

Medicare.gov - Cost of Medigap Policies 

I believe that most, maybe all, AARP UHC Medigap policies are community rated - which is the cheapest rating method over the long term.

Medigap policies can be priced or "rated" in 3 ways:

Community-rated (also called “no age-rated”)

Issue-age-rated (also called “entry age-rated”) Attained-age-rated

Add to this that you must be a member of AARP to buy the policy adding more cost.  I don't know if you have to actually maintain this AARP membership to keep the AARP UHC Medigap policy, but it is implied so I assume so - I wonder if they check?

If you are lucky enough to live in one of the (4) states that allow one to change or add a Medigap after the IEP without underwriting then you can change plans.  NY, MA, CT, ME - I think these are the states that allow this - Then there are a few others that specific times when you can change plans without underwriting - like the California "birthday rule".

[kimberlymh334958]

I was considering that AARP (UHC) was Community pricing and Humana was Attained age but while I increased each by a hypothetical annual inflation rate, I should have also added an average annual 3.3+ percent Attained Age increase to Humana. Doing this erased all of the difference I was concerned about and returned the more economical choice to the AARP UHC.
Thank you for highlighting this difference. I will mark your response as "Accept as Solution".
Hopefully someday congress will alleviate all of these unnecessary complications and simplify the process/risks.

[GailL1]

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@kimberlymh334958 wrote:

Hopefully someday congress will alleviate all of these unnecessary complications and simplify the process/risks.

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All they would have to do is set a REASONABLE Medicare Annual Maximum out of pocket, then Medigap coverage could just go away or at least be a much more reasonable price especially the older we get, perhaps with some sort of Catastrophic Medigap plan to just cover the bigger cost medical stuff.

What's the difference in paying the Medigap monthly premium, year in and year out, when we could just pay a REASONABLE Medicare Annual Maximum out of pocket when we need medical services?  

Medigap isn't really health insurance, it is a financial -type insurance - GAP coverage.