Before I start with the subject of this months column, I would like to provide you with an update to last months column. In that column I explained that I had written to 20+ government officials, both elected and appointed regarding my observations and opinions of the Medicare system. The letter was mailed on May 1st, and as I write this on June 26th I have had an underwhelming response from two recipients. For this I would like to publicly thank Sen. Patty Murray and Mr. Daniel Schreiner, the Medicare Beneficiary Ombudsman, for their responses. To those other recipients including President Obama, Rep. Norm Dicks and Kerry Weems, CMS Administrator I say “Shame on you for not having your staff have the courtesy to reply.”
Now for the real subject of this month’s article. Let me explain what the phrase “Private label” means for most people. When you are in the grocery store and you are looking for ketchup you have a choice between Heinz, Hunts or usually a store brand. I believe most people recognize that the store brand is probably made and packaged in the same factories that produce the brand name, and the ingredients will be virtually the same as well. Insurance plans are also something that can be made “private label”. The most recent version of “private label” insurance that I am aware of is very interesting. It is concerning Medicare Supplement insurance. Most readers are aware that since 1993 individual Medicare Supplement plans have been standardized where the benefit levels are identical from company to company. The main criteria for choosing a company are usually premium, service and reputation. Most people are willing to switch if the premium savings are substantial enough. In the State of Washington we are very fortunate that people can switch from one insurance company to another at any time regardless of their age or health. In addition there are no exclusions for any pre-existing health conditions. The insurance company that has released the “private label” plan is called Woodmen of the World. It enjoys an A+ rating from A.M. Best. How does this “private label” plan work. Woodmen of the World, while they have a very high rating they have little experience in the Medicare Supplement business. They have contracted all the administrative work out to another company that has far more experience and already has all the necessary systems in place. The administrative company will receive all the applications, issue all the policies, provide service and pay the claims for Woodmen of the World. So, the policy is Woodmen of the World in name only, as all other functions are handled by the administrative company. In this instance Woodmen have contracted with Mutual of Omaha to provide all the administrative work. The premium for the Plan F with Woodmen is a very low $ 154.17 per month. When this is compared to $186 for Mutual of Omaha, and well over $200 per month for Regence Blueshield, Premera Blue Cross, State Farm and Kitsap Physicians Service the savings per person can be quite dramatic, in many cases over $700 per year per person for identical coverage. The question I hear most frequently is “Why can their premium be so low?” It is really very simple, all the other carriers who have offered Plan F in the State for many years have a very large and rapidly aging clientele. The age of the clients translates into more claims and that translates into higher premiums. In my opinion, when a company is new to the marketplace and the state they offer a very competitively priced plan to build marketshare and name recognition. Like Humana did in the Medicare Part D arena a few years ago. What usually occurs is that over the next 5 to 7 years the premiums of the Woodmen Plan F will probably increase to be more in line with the other companies. However, if you can save hundreds of dollars for a number of years for exactly the same benefits why wouldn’t you? We are currently in the process of moving hundreds of clients to this plan to save them money. Why do we do this? We believe as a small town local agency it is imperative that we offer the best plans available to our valued clients. In today’s economy this is especially true. I hope you have enjoyed this behind the scenes glimpse into the industry.