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What to know about Medicare Advantage disenrollment

Finance & Planning | Jan 31, 2017

From now through Feb. 14, anyone enrolled in a Medicare Advantage plan has the option of disenrolling from that coverage and switching to Original Medicare Part A and B with or without a Medigap plan. Those disenrolling from a Medicare Advantage plan have the option to enroll into a Part D prescription drug plan before Feb. 14.

Switching from Medicare Advantage to the traditional plan might be beneficial to some, but it's important to first weigh the benefits and costs of such a move before making the decision. Here are some basic tips for how to decide if you should take advantage of this disenrollment option.

Should I disenroll?

This disenrollment period only applies to anyone who is currently a beneficiary of a Medicare Advantage plan, also known as a Medicare private health plan. In general, disenrolling from an Advantage plan and switching back to traditional Medicare could expose you to higher out of pocket costs. This is especially true if something should happen that requires expensive treatment. For example, Medicare does not have any limits to the 20% Part B coinsurance that is the responsibility of the beneficiary. An expensive surgery, hospital stay, or frequent physician services could expose the patient to 20% of all of those costs with no cap or limit.

In contrast, all Medicare Advantage plans have a yearly limit on your out of pocket costs for medical services. Once you reach that limit, you'll pay nothing for covered services for the remainder of the year. Maximum out of pocket limits vary from plan to plan and can change each year.

For most, it's likely better to stay in your current Medicare Advantage plan for now unless they can enroll in a Medicare Supplement, or Medigap plan. All Medigap plans have a monthly premium which varies depending on the carrier, area of residence, and age of the beneficiary. The most comprehensive Medigap plans will cover all or most of the coinsurance and deductibles that traditional Medicare will not cover. Again, they do not include prescription drug coverage so you will need to have a separate Part D.

Who should take advantage of this disenrollment period?

There are some circumstances where acting now to disenroll from Medicare Advantage is a good idea:

  • If you are healthy enough to use a Medigap plan that will save money over a Medicare Advantage plan, it might be beneficial to switch. Just be certain you are eligible for the Medigap plan. You will have to pass medical underwriting unless you have a special "guarantee issue" right.
  • If your current Medicare Advantage plan network is preventing you from seeing certain physicians whom you would prefer, disenrolling may solve this problem.

There are some circumstances where waiting to disenroll would be a better idea:

  • If you recently had a health issue that required extensive treatment and reached your out-of-pocket maximum, switching plans now might not make sense financially. Once your out-of-pocket maximum is reached, your plan will pay all of your medical expenses for the remainder of the calendar year.
  • If you are in the middle of medical treatment it may be better to wait until that treatment is completed. Most of the time ongoing treatment will not pass underwriting.

If you decide to drop your Medicare Advantage plan in favor of Original Medicare with a Medigap policy, make sure you also enroll in an eligible Part D plan to cover any prescription drugs you may be taking. You can find Medigap plans by visiting the Medicare.gov website or by speaking with your state health insurance department.

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