Understand Your Medicare ANOC & Avoid Getting Caught Off Guard
The dreaded ANOC Shock letter from your insurance company.
You’re probably thinking, “Huh? A-knock-who? What?”
ANOC stands for Annual Notice of Change and is the letter you receive in the mail from your insurance company each year in September, if you’re enrolled in a Medicare Advantage plan or a Medicare Part D prescription drug plan. The ANOC letter will come from your insurance carrier, not from Medicare or the government. It lists the changes to your health insurance and/or prescription drug plan(s) that will be effective in the following year.
Why is it called “ANOC Shock?” you may be wondering. Unfortunately, most years, ANOC letters warn of increasing premiums and higher out of pocket costs. It’s very uncommon that an ANOC letter will announce savings for the beneficiary!
Sometimes also called the Medicare Part D notice, the Medicare Annual Notice Of Change letters are sent to each person enrolled in a Part D prescription drug plan or a Part C Medicare Advantage plan. Medicare Supplement beneficiaries will receive a separate letter from their insurance company outlining changes in the plan’s premium, if there are any. People enrolled in Original Medicare only do not receive an ANOC letter.
Pro Tip: When choosing a Medicare Supplement plan, it’s a good idea to review the plan’s history of rate increases. Plans with frequent or large increases may be ones to avoid! A licensed Medicare Agent can provide you with a plan’s rate history as well as their financial rating.
If you are enrolled in a Medicare Advantage (also known as MA or MAPD, for Medicare Advantage with Prescription Drug) or Medicare Part D plan (also known as a prescription drug plan, or PDP), your ANOC letter will list your plan’s current details right next to the changes for the following coverage year. You can easily assess and predict your next year’s out of pocket spending, helping you to decide if it’s time to shop for a new Medicare solution.
This Medicare notice is very important: your plan’s details and costs could drastically change, and you have limited time to select a new plan if you desire (yes, there are deadlines to change your MA and Part D plans). Some plans may increase the out of pocket costs you’re responsible for….hence the colloquial term “ANOC Shock,” which is the unpleasant big surprise some seniors experience in early October of each year. The Medicare Part D notice is oftentimes the most shocking, as drug plans can change drastically from year to year.
Please note that another important document often arrives at the same time as your Medicare ANOC. Your Medicare Evidence of Coverage (EOC) outlines how to access the benefits covered by your plan in the following year, as well as your rights and responsibilities. While the ANOC and EOC are two similar, but different, documents, it’s important to review both so you can have a clear understanding of the proposed changes in your coverage.
In this blog post, we’ll cover what changes may occur and the options you have. If you’d like to review basic Medicare terminology, you can find definitions here. Or just contact My Medicare Partners at 1-844-305-6169 and we’ll walk you through everything over the phone! No hassle, no obligation.
There are five key things to look for in your ANOC letter that could cause your out of pocket costs to fluctuate. It’s very important to review each of these five elements, then total up all of the changes, to see a clear forecast of your health care expenses for the following plan year.
Element #1: PREMIUM
This is the monthly price you pay to be enrolled in the plan. Think of the premium like a membership fee to be a part of the Club; if you don’t pay your premium, you are not covered and do not receive any of the benefits offered.
Many people only look at the plan’s premium to determine if the plan is affordable or not – but those folks may be making a huge mistake.
While reviewing your ANOC letter, calculate your annual total premium cost by multiplying the monthly premium by 12. This will give you the total annual costs for the premium, which you will later add to your other estimated costs to provide you with an estimate of annual healthcare costs – at least the ones you can predict.
For example, Mr. Glen Golden’s ANOC letter shows that his monthly premium is increasing from $150 per month to $175 per month. At first, he thinks this isn’t too bad…until he realizes that’s $300 more per year! He doesn’t want to dip into his bowling budget (it’s about time he wins the league’s trophy!), so Mr. Golden sets out to find a new plan.
He finds another plan that is $150 per month – the same as his prior plan – except this new plan’s deductible is $200 less than the current plan’s proposed change! So by switching his plan – and by checking out more than just the premium – Mr. Glen Golden will save $200 per year, even though his premium is exactly the same. Good thing Mr. Golden calculated all of his annual estimated out of pocket costs!
Element #2: DEDUCTIBLE
Often overlooked, the deductible can cause the biggest changes in a plan’s costs to the beneficiary from one year to the next. The deductible is the amount you, the insured person, must pay before the insurance plan covers most of your health care expenses.
Some expenses will be covered before the deductible, but most tests, procedures, and medications are only covered once the deductible is paid. The expenses which are covered before you have to pay the deductible are often called co-pays, and on the other hand, the expenses you pay (a portion of) after you’ve met your deductible are often called coinsurance.
Plan deductibles must be met each year – regardless of whether or not you met the plan’s deductible the prior year.
Many Medicare Supplement plans eliminate the Medicare Part B deductible altogether (in 2016, the Part B deductible is $166 annually) while other Supplements cover 50% or 75% of the deductible. Choosing a plan with a lower deductible can often mean savings for you – as long as the premiums are comparable (don’t forget the first element we told you to check: the monthly premium!).
For example, Mrs. Barbara Baby Boomer has a Part D prescription drug plan that covers her two medications, lisinopril (a generic drug, used to treat her high blood pressure) and NovoLog (a brand-name drug, used to treat her diabetes). Her plan has a $100 deductible, which applies to certain drugs only.
The lisinopril is a Tier 1 (more on drug Tiers later…), has a $5 co-pay, and is not subject to the plan’s deductible. She can pick up that medication from her in-network pharmacy and pay just $5.
Her other medication, the Novolog, is a Tier 4, has a $30 co-pay, but is subject to the deductible. This means in order to pick up her Novolog, Barbara must first pay her $100 deductible. After meeting her deductible, she can then pay the $30 co-pay every time she picks up her Novolog. She only has to pay the deductible once per year.
Pay special attention to the plan’s new deductible listed in the ANOC letter. While a plan’s premium may remain level, a $200 increase in the deductible could cause a higher annual out of pocket expense! Remember, you’ll want to total all expected out of pocket costs to get the most accurate prediction of which plan will be the most affordable for you.
Element #3: TIERS
These are the classifications, or groupings, of various medications covered by a Part D prescription drug plan. The insurance company determines the Tiers for each drug on each plan, and the tiering of a drug may vary from plan to plan (even with the same insurance company).
For example, Mrs. Stella Senior receives her ANOC letter and sees that her warfarin (her blood thinner medication) is changing from a Tier 1 drug to a Tier 2 drug for the following plan year. Next year, her Tier 2 medications will be covered at a $25 co-pay, which is a large difference from this year’s $5 co-pay for her Tier 1 drug.
She has decided to look at other plan options, since this new change will cause an extra $240 in costs next year! (A $20 increase from this year to next year x 12 months in the year = an additional $240 in costs to pay for her diabetes medications)
She considers two plan options for her coverage: Plan #1 covers her warfarin as a Tier 1 with a $10 co-pay, while Plan #2 covers the medication as a Tier 2 with a $25 co-pay. In this case, Mrs. Stella Senior is better off choosing the new Plan #1. Her drug is covered at a lower co-pay on Plan #1 than her current plan’s coverage and lower than the proposed Plan #2.
Pro Tip: If you’re taking more than one medication, be sure to look up each medication’s tier and co-pay separately, and multiply the monthly co-pay costs by 12 for each medication. This will give you an accurate estimate of your drug costs drug-by-drug. That way, you can check to see which plan will provide the best coverage overall for all of your medications.
See how plans can change the Tiering of drugs from one year to the next? It’s important to check the Tier and the Tiers’ co-pays for each of your medications to ensure you get the ultimate cost savings! Drug costs are often one of the largest expenses seniors face each month, so be sure to save money where you can!
Pro Tip: Did you know that you can search all of your drugs on the Medicare website? My Medicare Partners’ Agents can even show you a secret tip which allows you to save your drug search.
Element #4: FORMULARY
This is the list of medications covered by the plan. Some of you may remember the old-fashioned paper formularies the insurance companies would mail you along with a giant list of in-network providers. Like most everything nowadays, plan formularies are on-line.
Thanks to advances in medicine, insurance companies’ drug formularies have simply gotten too big to mail to each person. If you need to check if your drug is covered by a plan, simply call your insurance agent and they can look it up for you!
Each plan’s formulary lists the name of the drug, whether it is brand-name or generic, the dosage, what the tier of the drug is, and if there are any restrictions on the medication. Typically, in the first few pages of the Formulary, you can find a list of co-pays for each tier.
Pro Tip: Pay special attention to the drug name and dosage when researching your medications! There can be a huge cost savings by taking generic medicines, rather than brand name drugs. Also, while some dosages may be covered by a plan, other dosages may be excluded. There may even be special requirements or restrictions to continue to have a drug covered by a plan. All of this information can be located in the drug formulary!
If you cannot locate a particular drug in the formulary, chances are that drug is not covered by the plan. Before you worry that your drug is excluded, first make sure you’re looking at the Plan’s whole drug formulary. Many plans will provide you with an abbreviated formulary which only lists the most common drugs. If your medication really isn’t covered by a plan, you may need to look into alternative medications to treat the same condition. It’s important you speak with your healthcare provider before making changes to your medication routine to ensure alternative drugs are just as efficient as your originally-prescribed medication. Never change your medications without speaking to your Primary Care and Specialist doctors!
Pro Tip: Pay special attention to drugs listed with the “step therapy” requirement. To reduce both the insurance company’s and the enrollee’s costs, some insurance plans require you first try a less expensive, generic version of a drug before the plan will cover the more expensive, brand-name version of a drug. You may need to discuss the variances (or lack thereof) with your doctor between brand-name and generic versions of the drug. Again, the drug formulary, while easy to ignore, is essential to ensure your plan provides you with the coverage you need. Pay special attention to the co-pays for each tier as well as any special requirements, as those could help save money (or result in higher costs, if the requirements are not followed!) on your medications.
Element #5: YOUR HEALTHCARE NEEDS
One of the most overlooked pieces of the puzzle is your own, personal medical needs. And I mean your medical needs, not your spouse’s or your Bridge partner’s or your tennis teammate’s.
While it may seem obvious, it’s important to determine your Medicare plan on your individual needs. If I had a nickel for every time someone told me they chose a plan because their friend recommended it, only to regret their decision later….Well, let’s just say I’d be writing this blog post from the comfort of my back yard with a cold drink in my hand, rather than from my office! 🙂
Yes, word-of-mouth and referrals from trusted folks are important when choosing a new hairdresser, a mechanic, or even an insurance agent. But the exact plan you choose should reflect your needs, and it’s highly unlikely your needs are identical to your friend’s. Don’t make the costly mistake of taking advice from someone who is not a Medicare expert! While your friend’s heart may be in the right place, signing up for a particular Medicare plan because of a friend’s advice is probably not a good idea, unless your friend is a licensed insurance agent. And even if they are an agent, it can’t hurt to get a second opinion.
Keep in mind, some folks are lucky and require little medications or medical care. It’s possible your friend has fewer medical needs than you and therefore, their advice may not apply to your situation. Even when I consider the differences is health care I require when compared to my wife’s needs, there’s a clear discrepancy in which one of us requires more care! (Shhh…don’t tell my wife, but I’m the costlier one. I blame it on her good cooking! She blames it on my laziness. We’ll agree to disagree.)
Like I discussed earlier, it’s important to check that a plan covers the medications you’re on and the doctors you’re seeing. While no one can predict the future, enrolling in a health care plan is all about protecting you from life’s “what if’s”. It’s important to keep in mind that, even if you currently don’t require much medical care, that could all change quickly. And if you’re on a Medicare Advantage plan, you won’t be able to change your plan whenever you feel like it! (Yes, there are deadlines you must follow)
If a plan doesn’t cover the medications you’re prescribed, check with your agent to find a plan that covers them at an affordable rate. If your doctors aren’t in your Medicare Advantage plan’s network, ask your agent to research plans that your doctors do accept!
Pro tip: Medicare Supplement plans provide the ultimate freedom! They allow you to visit any of the thousands of doctors, providers, hospitals, and facilities that accept Medicare all over the United States! Medicare Supplement enrollees don’t have to worry about restrictive plan networks or ANOC Shock letters!
So now you know how to check to ensure your plan will cover your current health needs. However, let’s take it a step further; let’s talk about preparing for the unknown.
Life’s circumstances can change. I met someone this summer (let’s call her Mrs. Patricia Pennypincher) who told me she was not on any medications and therefore needed no prescription drug plan; she simply refused to enroll in one. (Remember, even if you’re not taking prescriptions, you can still be charged a penalty for not enrolling in creditable drug coverage! Avoid the penalty by enrolling in a Part D plan.) Unfortunately, a few months later, Mrs. Pennypincher began suffering from a sleep disorder that made it difficult for her to perform for daily tasks. Being that Mrs. Pennypincher cannot enroll in a Part D drug plan until the Annual Election Period in October, for coverage beginning January 1, she will have to pay out of pocket in the meantime for the medications her doctor prescribed to help with her newly diagnosed condition. (Since Mrs. Pennypincher didn’t sign up when she was first eligible for Medicare and Part D, she has to wait until the Annual Election Period and will pay a penalty for each month that she did not have coverage)
Luckily for her, the medication her doctor prescribed, Restoril, is also available in a generic, temazepam, at a “full pay” price she can afford until her new drug plan becomes effective. She will have to pay out of pocket each month until she can sign up for a new plan during the next Annual Election Period. But, had she being diagnosed with something far more serious, the financial implications could have been devastating. Don’t make the same mistake as Mrs. Pennypincher plan for the unexpected.
Whew! I know that’s a lot of information…but you’ll thank yourself later that you took the time to read about the ANOC Shock letter. Call My Medicare Partners at 1-844-305-6169 to review your ANOC letter and one of our friendly, licensed Medicare Agents like me will help you decipher the letter and check the top-rated plans to find the best plan for you. Remember, our help is always free of charge and there is never pressure to enroll.