Choosing Between Traditional Medicare and the ExxonMobil Medicare Primary Option (MPO)
04 Oct 2021Doug Garrison
You’re an ExxonMobil retiree and about to turn 65. You need to make a decision about health insurance. You can move seamlessly from the ExxonMobil Retiree Medical Plan option to the ExxonMobil Medicare Primary Option (MPO), also known as a Medicare Advantage plan, or you can opt-out of the MPO and go into traditional Medicare.
How should you make the decision? What are the differences or key variables you should consider?
Every decision has consequences. And health care matters are perhaps among the most personal of decisions we have to make.
A host of variables can influence your choice:
Affordability of the options—premiums as well as potential exposure
Ability to choose providers
Comfort level with current providers and whether they’ll take your insurance
Your health status
Anticipated healthcare needs as you age
Perceived “cost” of making a wrong decision
Ability to make changes in the future
As you consider your choices, think through what’s important to you today and whether those factors will change as you age.
Medicare can be complicated. The experience of friends or family may be of interest, but we generally recommend clients contact an insurance agent who specializes in Medicare to help assess on an individual basis which alternative might be more suitable for your needs and preferences.
That said, take what follows as foundational material for you to consider as you think about the alternatives you have.
At a high level, Medicare hospital and outpatient benefits are provided through one of two main approaches. Traditional Medicare is roughly akin to traditional health insurance—where you choose your providers, and pay your premiums, your deductibles and your coinsurance. You can limit your financial exposure under traditional Medicare by purchasing supplemental insurance called Medigap or Medicare Supplemental coverage. Several different standardized Medigap plans are available, with different costs and coverages, identified by letters (e.g., Plan G or Plan N).
The alternative for most to traditional Medicare is a Medicare Advantage plan, roughly akin to HMOs (or Health Maintenance Organizations), where you’re encouraged (or in some cases, restricted) to use a network of providers.
The first alternative emphasizes choice; the second alternative is often less expensive, especially if you stay healthy. Traditional Medicare is a government program, administered by the Centers for Medicare and Medicaid Services (CMS). Medicare Advantage plans are private programs under contract to CMS, and receive fees from the government for providing the Medicare services to their members that participants in traditional Medicare get from that program.
Another aspect of Medicare is prescription drug coverage. Those in traditional Medicare will need a Part D prescription drug plan, purchased from an insurance company. Drug coverage for those in Medicare Advantage plans is generally included as part of the Medicare Advantage plan benefits.
Before going into more detail, note that the ExxonMobil MPO is a Medicare Advantage plan, with medical benefits administered by Aetna and drug benefits provided by Express Scripts. Members can see any provider eligible to receive Medicare payments who is willing to accept the benefits of the plan.
Highlights of the MPO can be found here (on ExxonMobilFamily.com) and here (on the Aetna website). Details of the prescription drug component of the MPO can be found here.
Details about Medicare, including additional comparisons between traditional Medicare and Medicare Advantage plans, can be found on the Medicare website. A particularly useful document is Medicare & You 2022.
Some key differences between Traditional Medicare and the ExxonMobil MPO are summarized below:
TOPIC / ISSUE
MPO – MEDICARE ADVANTAGE PLAN
Basic distinction from our perspective.
May cost you more in premiums than being in the MPO, but you have greater flexibility to choose providers. Your maximum out-of-pocket expenses may be lower than in the MPO if you incur serious medical conditions. You will need to select a Medigap plan and a Part D prescription drug plan in addition, so there is a level of complexity you could otherwise avoid by enrolling in the MPO.
Plan design and cost impacted by ExxonMobil. More services offered than traditional Medicare, but not all providers who accept Medicare patients will necessarily accept MPO members. If you stay healthy and are happy with providers who are in the Aetna network or agree to accept Aetna benefits, you may save money under the MPO. Having only one plan may be a desired convenience.
What plans do I need if I opt for one or the other?
Medicare Part A – hospital coverage & Medicare Part B – doctor and outpatient services (generally available to all) Medicare Part D – prescription drug coverage (optional, but highly recommended) Medigap plan – supplemental coverage to take care of additional non-reimbursed expenses (recommended)
You’ll need to pay your Part B premium, but you’ll get your benefits from one plan (in this case, the MPO). It provides all the coverage of Part A and Part B and Part D, includes other services, and a stop loss limit on your out-of-pocket expenses; if you’re in the MPO, you’re not eligible to purchase Medigap supplemental insurance.
Can I switch if I don’t like the plan(s) I’ve chosen?
You have a six-month window when you’re first eligible for Medicare to buy a Medigap plan without evidence of insurability; you may have difficulty later switching Medigap plans; you can switch from Traditional Medicare to Medicare Advantage plans at least once a year (but note that if you don’t enroll in the MPO when first eligible, you won’t be able to enroll in it later).
If you opt out of the MPO, you can never get back in; you can enroll in another Medicare Advantage plan if you opt out of Traditional Medicare or another MA plan, but it won’t be the MPO; you can switch from a Medicare Advantage plan to Traditional Medicare during certain times of the year, but enrolling in a Medigap plan outside of your “open enrollment period” (the six months from when you are first eligible for Part B) could prove difficult or impossible should certain pre-existing conditions arise.
What does it cost just to be covered?
Part B premium of at least $148.50/month/person in 2021—more depending on your income as Medicare does a two-year lookback to your Modified Adjusted Gross Income.
Have to meet an annual deductible for Part B services of $203 before Medicare Part B kicks in. Premiums for Part D prescription drug plans average around $30/month/person. Medigap plans vary widely in cost, based on the plan letter purchased, your zip code, age of the insurance and smoker or non-smoker status. Average premiums for one of the more popular Medigap plans are around $150/month/person at age 65.
Part B premium of at least $148.50/month/person—more depending on your income two years prior;
MPO premium for 2021 is $74/month/person; have to meet an annual medical deductible of $300 before plan pays its share of covered services, and thereafter, you have co-pays or co-insurance up to an annual out-of-pocket maximum of $3,000/person for medical/hospital services and $2,500 for prescription drugs.
What might my annual cost be in 2021 if I actually incur medical expenses?
Part B premium: $1,782
Part D Premium: $360
Medigap Plan premium: $1,800
Part B annual deductible: $203
Part D annual deductible: $445
Average annual cost: $4,687 plus Rx co-pays
Part B premium: $1,782
MPO premium: $880
MPO annual deductible: $300
Out-of-pocket Rx maximum: $2,500
Out-of-pocket medical maximum: $3,000
Average annual cost: $2,962 plus medical and Rx co-pays/co-insurance up to $5,500
What’s the bottom line?
If you value the ability to go to any provider who accepts Medicare and not have to worry about whether he or she is in the Aetna network or is willing to accept payment from Aetna, traditional Medicare may be a better option for you, especially if you’re willing to pay higher premiums than the basic cost for the ExxonMobil MPO.
If you trust ExxonMobil to look after its retirees and you like the convenience of using basically one plan that is administered by Aetna and Express Scripts, and your medical providers are in the Aetna network, the MPO may be the right plan for you.
Determining which alternative will ultimately cost less is very dependent on your health experience going forward and the choices you make for prescription drugs and Medigap coverage if you opt for traditional Medicare. Your best bet for keeping your health care budget low is to take care of your own health.
And with all the caveats about past experience not being predictive of future performance, we’d also suggest you talk with friends who have opted for either choice and ask them whether they’d make the same choice if they had it to do over again. Recognize that their health needs are likely different from yours, but as users of a plan, their experience can be helpful input for you.
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Meet the Author
Doug is a Partner based in the Houston office and a member of the firm’s Wealth Management practice. He is responsible for delivering investment and planning services to clients. His specialty is assisting clients who are approaching retirement to evaluate the options they have as they prepare for the next chapter in their lives.
Prior to joining Cerity Partners, Doug was a Senior Wealth Advisor at Investec Wealth Strategies. Previously, Doug was Manager, Global Benefits Design, at ExxonMobil. He was responsible for the design of corporate benefit programs including pension, 401(k) plan, medical, and insurance plans. He helped design and implement a corporate health strategies program (“Partners in Health”) and a financial literacy program (“Financial Fitness Program”).
Doug earned a BA in psychology from Yale University and received his MBA in industrial relations from the Wharton School of the University of Pennsylvania. He is a CERTIFIED FINANCIAL PLANNER™ professional.
Doug is an active volunteer at The Woodlands Methodist Church and Jubilee Prison Ministry. He and his wife are also members of the National Leadership Council of World Vision USA.