Senior’s Guide to Medicare Supplement (Medigap) Insurance
A Medicare Supplement (a.k.a Medigap) plan is an insurance policy that assists, or supplements the benefits in Original Medicare Part’s A and B. It doesn’t have anything to do with Medicare Advantage or your Part D prescription coverage — it only works with Original Medicare Part’s A and B.
As I mentioned in the article that compared Original Medicare and Medicare Advantage, there is some cost-sharing in Original Medicare in the form of deductibles, co-pays and coinsurance. The job of the Medigap plan is to eliminate some, or all of that cost-sharing.
It’s also important to understand what Medigap plans don’t cover. In general, they don’t cover dental, hearing, or vision, and they don’t cover prescription drugs either however in some cases Part B and your Medigap will cover drugs related to serious diseases like cancer and/or H.I.V..
Similar to Advantage plans, some (but not many) Medigap plans also offer a health club reimbursement feature.
Medigap plans revolve around Medicare Part B meaning that when you take Part B you should also enroll in the Medigap plan at that time (unless you have other coverage like group employer coverage, retiree coverage, TriCare, or Medicaid)
Because when you first take Part B, regardless of age, a 6-month enrollment period begins known as the Medigap Open Enrollment Period. During that 6 month period you can enroll in any Medigap plan you want without answering a single health question.
Important: If you want to change Medigap plans after that 6 month period expires, unless you qualify for guaranteed entry into the plan, you will have to answer the health questions on the application at which point you could either be up-rated or flat out declined if you’re not healthy enough to qualify.
I have folks call me every year during the Open Enrollment Period, asking what their rate will be the next year for their Medigap, and if they can change their Medigap plan. It’s important to understand that Medigap plans are not subject to the annual “lock in” period meaning you can change your plan any time you want– not just during the Open Enrollment Period. The caveat is that again, you must qualify based on your health if you want to switch after the first 6 months you’re enrolled in Part B.
Like Advantage plans and Part D drug plans, Medigap plans are offered by private insurance companies. One big difference between Advantage plans and Part D drug plans, is that Medigap plans are “standardized”. That means that regardless of the insurance company, the plan benefits are identical across the board.
Every Medigap policy must follow federal and state laws designed to protect you, and it must be clearly identified as “Medicare Supplement Insurance.” Insurance companies can sell you only a “standardized” policy identified in most states by letters.
This means, if you have Medigap Plan F with company “A”, it’s the exact same coverage as Plan F with company “B”. Keep in mind that each insurance company decides which Medigap policies it wants to sell, although state laws might affect which ones they offer. Insurance companies that sell Medigap policies:
Don’t have to offer every Medigap plan
Must offer Medigap Plan A if they offer any Medigap policy
Must also offer Plan C or Plan F if they offer any plan
Many people say, “If the benefits are the same, then I’m really just comparing price, right?”. Mostly yes, that’s correct, which brings up the pricing aspect of Medigap plans.
Medigap’s are priced 3 different ways: Community rated, Issue-Age rated, and Attained-Age rated.
So which is the most common? From my experience, most plans are Attained-Age rated, so if you have one of these plans, you can expect the premium to increase as you get older. Keep in mind though that even if you have a Community-Age or Issue-Age plan, you’re rate can and will go up with those plans too, so it’s tough to say which rating method is the best, because at the end of the day, the rates are going to go up anyway.
I’ve seen people really try and split hairs over the rating method, but again, at the end of the day, the rates are going to go up regardless so don’t spend a lot of time trying to break down the rating models.
Another thing that can separate a Medigap plan from another is the financial strength of the underlying insurance company. Ideally, you are going to want a company that is “A” rated or higher, however, you’ll probably never know the difference between an “A+” rated company and a “B+” rated company. Why? Because again, the benefits are standardized and much of the billing and claims are automated “behind the scenes” between Medicare and the Medigap company– not you.
What if my company goes belly-up?
This is a fair question and one that is asked in nearly every conversation I have with a client. If a Medigap carrier went out of business, you would be eligible for a Special Election Period (SEP), so you would be able to move to another company’s Medigap plan, no questions asked.
Some of the most popular plans available in my area aren’t rated at all, so I personally wouldn’t put a ton of stock in the financial strength of the company for this type of product.
So what’s the best plan for you?
It really depends on your budget and health. Plan F is the most comprehensive plan, and for that reason it’s also the most expensive. Plan G and Plan C are almost identical to Plan F, and they tend to be a little bit less expensive, and in some cases significantly less depending on what companies are available in your area. In my territory though, the price difference is marginal, so generally I recommend either Plan F, or if you’re trying to save some money, Plan N. It’s not worth buying Plan C or Plan G, because for a couple extra bucks, you could just buy Plan F.
Plan N is also a popular option for folks who may be in good health and want to save money on the monthly premiums in exchange for some minor cost-sharing.
Really, this decision can be made by you and only you based on your current health and financial situations.
One of the services that I provide to my clients is a side-by-side comparison of all the Medigap plans offered in their area, as well as the pricing, and financial strength of each company. This really gives them the confidence to make a confusing decision a lot easier.
If you have any questions about Medigap plans feel free to leave a question or comment below and of course you can always contact me here.