What About Your Other Coverage?

(MONEY Magazine) – Medicare's new prescription drug benefit is not the only change ahead for seniors. Over the next few months, you'll also be faced with new choices in basic health insurance as employers alter their retiree benefits packages, managed-care plans proliferate and some Medigap policies are phased out. Here's what you need to know to make the best health-plan choices.

Hang On to Your Retiree Plan

CONTINUE TO ENJOY COVERAGE If you get health insurance from a former employer, those retiree benefits are still likely to be better than anything the new Medicare plans have to offer. Thanks largely to a generous government subsidy designed to entice employers to keep retiree benefits, the concern that companies would drop existing coverage as Medicare rolled out its new drug plans appears to have been overblown--for now, that is. "We think that roughly 80% of employers are going to keep offering retiree benefits, at least for 2006," says Dave Osterndorf, principal with benefits consultants Towers Perrin.

WATCH OUT FOR CHANGES As they have already done in recent years, many companies may scale back some benefits or raise premiums and, this year, may make additional changes as a result of the Medicare plans. Your employer has to notify you of any changes; that same communication will tell you if your retiree drug coverage is considered creditable--that is, deemed by the government to be at least as good as what's being offered by the new Medicare plans. Chances are it will be.

Your best move Stick with your employer plan for now. You'll probably get better benefits, and as long as the plan is deemed creditable, you can always switch to a Medicare drug plan without penalty later.

Unplug and Replug Medigap

SAY GOOD-BYE TO H, I AND J With the arrival of Medicare drug plans next year, Medigap policies with drug coverage (plans H, I and J) will be phased out. But while new plans won't be sold, existing policies will remain in force unless you elect to make a change.

YOU'VE GOT CHOICES Your options: You can keep your current Medigap policy with drug benefits, but the coverage probably won't be considered creditable, so you'll pay more for a Medicare drug plan if you sign up at a later date. Or you can enroll in a Medicare plan and either keep a stripped-down version of your current Medigap policy with a lower premium or switch to a different one. Or you can drop Medigap altogether and join a Medicare managed-care plan that offers drug coverage.

TIMING IS TRICKY If you join a Medicare drug plan and want to switch Medigap policies, do so within 63 days after your Medicare coverage starts. If you apply for a different policy or want to jump to a new insurer after 63 days, you may be subject to medical review and can be turned down.

Your best move Unless you opt for managed care, you will probably want to keep some Medigap insurance for non-drug medical costs that Medicare doesn't cover. Instead of just sticking with what you've got, review other Medigap policies to find the one that best suits your needs.

Wait and See on HMOs

MANAGED CARE LOOKS BETTER Medicare Advantage, the government's managed-care program, has undergone a major restructuring, which includes far more generous reimbursement rates for participating networks. As a result, many health maintenance organizations (HMOs) and preferred-provider organizations (PPOs) are rushing into the market, enticing seniors to join with extras such as coverage for alternative medicine and health-club dues, often at lower premiums than usual.

BUT WILL DOCTORS STAY? Medicare has raised reimbursement rates for managed care before, only to cut them again--a move that prompted HMOs to hike premiums and shrink benefits and that pushed many doctors to leave the plans. Experts worry that budget pressures could lead to a repeat. "If you're managing a chronic illness, it's a real concern if you join a network, only to see your doctors leave later in the year," says Robert Hayes of the Medicare Rights Center.

TALK TO YOUR CAREGIVERS Talk with your doctors to see whether they're part of any of the networks in your area and whether they believe your health-care needs would be well served by joining one. If you live in a different place for part of the year, look for plans that serve both locations.

Your best move With so many unknowns about how the plans will work, a wait-and-see approach seems best. If the managed-care plans turn out to be a great deal, you can always switch to one next year.

WHAT TO DO NOW Medicare Action Plan

CHECK YOUR MAIL Carefully review the notices you get from Medicare, former employers and your Medigap insurer about changes in coverage.

INVENTORY YOUR NEEDS List your prescriptions, pharmacist, doctors, hospitals and any special therapies you receive. This profile will help you make the best choice.

EVALUATE THE OPTIONS Contact Medicare (800-633-4227; medicare.gov) for the details on specific drug and managed-care plans in your area.

GET HELP You can get free, customized advice about picking a plan by calling Medicare or your local area agency on aging (for the nearest office: 800-677-1116; eldercare.gov).

DON'T PANIC You've got until May 2006 to decide.