Medicare Supplemental Insurance

Supplemental insurance is designed to cover you in areas where Medicare falls short. There are 13 federally standardized plans — Plans A through L. They provide increasingly more coverage as you work your way through the alphabet, with Plan F being the most popular because of its benefits and price range. In essence, Medigap is a commodity: You get the same benefits regardless of your state or insurer. Although the benefits are identical from carrier to carrier, there are dramatic differences in price and customer service. “If you’re selling a commodity product where price is a determining factor, you have to compete on other features,” says Susan Morisato, president of Ovations Insurance Solutions, the division of UnitedHealthcare that manages the AARP Medigap program.

Premiums for AARP/UnitedHealthcare’s Medigap policies, in some places, are among the lowest for the most popular type of Medigap plan. And AARP has staked out its turf in a few other important ways:

* Broad acceptance: Last year, AARP/UnitedHealthcare approved 99.94 percent of applicants. The only medical reason it denies coverage is chronic kidney disease. By contrast, many of AARP’s competitors base premiums on your age and your health, so you may be rejected or charged more if you have a pre-existing condition. “For many people with health issues, AARP is the insurer of last resort,” says Bonnie Burns, a policy specialist with California Health Advocates, a nonprofit advocacy organization for people covered by Medicare or who have family members in the system.

* Customer service: AARP operates a 24-hour toll-free line (888-543-5630) staffed with reps who can tell you about hospitals and caregivers in your area, and advise you on what to ask your doctor about potential procedures. AARP/UnitedHealthcare also says it pays 98 percent of claims in 10 days.

* Community rating: Unlike most Medigap insurers, who set premiums based on your current age (attained-age rating) or your age when you first buy the policy (issue-age), AARP/UnitedHealthcare uses community rating everywhere it’s sold. That means it charges the same premiums to all policyholders, regardless of age, gender or health. “A community-rated policy may cost you a little more when you’re younger,” says Burns, “but it often costs less when you get older.” You can learn which ratings system insurers use in your state by typing in your ZIP code on the Medicare site.

The bottom line, says Burns, is that the AARP/UnitedHealthcare Medigap plans “can be a good deal, and they’re more likely to be a good deal for older people who have health conditions.” In states where most insurers use attained-age rating, AARP becomes price competitive by offering a loyalty discount: Members who become policyholders between age 65 and 67 get a 30 percent discount that shrinks by 3 percent a year for 10 years.

For this price check, we compared AARP/UnitedHealthcare Plan F premiums with the highest and lowest insurers for nonsmokers in Maine (a state that requires community rating) and New Hampshire (one allowing attained-age rating).

In Maine, AARP/UnitedHealthcare cost $158 a month, a little pricier than the least expensive Globe Life ($147) but much less than high-priced United Teacher Associates ($277).

In New Hampshire, at age 65 there was a $69-a-month gap between low-cost United of Omaha ($118 a month), and AARP/UnitedHealthcare ($187). But AARP/Aetna was far from the most expensive; that was Combined Insurance Co. of America ($231). By age 70, the gap between United of Omaha and AARP/UnitedHealthcare had narrowed to $20 a month, and by age 85, AARP/UnitedHealthcare was the cheapest.

AARP health and long-term-care insurance can be bought online, through the mail, or by phone at 866-894-6032 (health and Medigap) or 866-660-4117 (long-term care). Call the number to see whether there’s a local agent who can meet with you.

Long-Term-Care Insurance

In a comparison of long-term-care policies, AARP comes up strong.

These policies are designed to cover, or at least reduce, the potentially devastating financial cost of a nursing home stay or assisted-living care. As MoneyWatch has written, the best time to buy this type of policy is when you’re in your 50s and healthy enough to get good rates.

Genworth, the No. 1 seller of long-term-care insurance, has a solid A- rating from Standard & Poor’s. In addition to being financially sound and having sold such policies since the mid 1970s, Genworth has a history of keeping rates stable for policyholders. The company asked state regulators for its first and only rate increase — about 8 percent — in 2008. Genworth says it has no plans for a rate increase in the future.

To compare long-term-care premiums, we put AARP/Genworth up against four insurers selling policies in California, where consumer protections are strong. The four have solid financial ratings and a history of stable rates and reliable payouts to customers. We priced policies for someone in his mid-50s looking for $100 in daily benefits for three years (the average nursing home stay), with inflation protection. AARP/Genworth was the second-least expensive and nearly $1,000 cheaper than the priciest, Northwestern Long Term Care. As a mutual insurer, Northwestern returns a portion of premiums to policyholders each year, however.

Burns, however, is a fan of New York Life, even if it may sometimes be more expensive than many competitors. “They are the strongest insurer in the market, they have never had a rate increase and they often pay a dividend back to their customers at the end of the year,” she says.

AARP/Genworth policies and premiums are almost identical to Genworth’s own products, so deciding to buy the AARP version depends partly on whether you want to support the organization. (If not, speak to a Genworth rep instead; 888-436-9678.) But AARP has two other advantages: It guarantees premiums won’t change for five years, and the AARP customer service line is excellent. When MoneyWatch called, the rep offered sound advice on the right amount of coverage to buy. She suggested deducting the amount of Social Security payments we’ll receive from the amount of coverage we purchase. “If you’re getting Social Security and going into a nursing home, you’re not going to have anything else to spend the money on. Why pay more for insurance?” she asked. Good question.