Medigap plans (also called Medicare Supplements) are one of the two main ways to protect yourself financially from the things not covered by original Medicare. In our ABCs of Medicare we talked about the things that Medicare does not pay for, and how, as the consumer, the remainder of the bill is sent to you to pay out of pocket.
As per CMS, Medigap plans are a type of health insurance sold by private companies to fill the gals in Original Medicare. When you purchase a Medigap plan you remain on Parts A & B of Medicare and your Medigap Plan because your secondary insurance (you can read more about primary and secondary insurance here). These plans are standardized, so no matter what company you purchase your plan from, the coverage is the exact same (the additional benefits and cost change between companies, but not what is and isn’t covered).
This is important, because with Medicare as your primary insurance still, you are only need to ensure that a doctor or hospital accepts Medicare. Your Medigap plan has no say in where, when, or how you seek medical treatment. Instead you have the freedom and flexibility to receive Medicare-approved care at any provider or facility around the whole country that accepts Original Medicare.
If the facility or provider accepts Medicare, they must accept your Medigap plan, regardless of the company you bought it from. So instead of asking ‘Do you accept XYZ insurance company?” you only need to ask “Do you accept Medicare?”
What does a Medigap plan cover?
Generally speaking, Original Medicare only covers 80% of the cost of medical procedures and requires coinsurance when you need to use a hospital. A Medigap plan, depending on which plan you choose, picks up a remaining 20% and the hospital coinsurance.
However, like Original Medicare, Medigap plans DO NOT offer any coverage for prescription drugs. A stand-alone Part-D drug plan will need to be purchased separately (read more about Part-D here). These plans are also sold by private insurance companies and the premiums are can be very minimal.
What are the Types of Medigap Plans?
Because all of the Medigap plans are standardized , you will often hear the plans referred to by a letter (plans G, Plan N, Plan F, etc). There is no difference between the base benefits of a Plan G from company 1 compared to a Plan G from company 2.
Below is a chart showing the different Medigap plans currently offered.
Cost of Medigap Plans
Like all health insurance, the cost of Medigap coverage needs to be placed into two categories: Fixed Monthly Cost and Variable Out of Pocket Cost
Medigap coverage generally has a higher fixed monthly cost compared to Medicare Advantage plans (in the form of monthly premiums), but lower variable out of pocket cost should you need medical care. Both monthly premiums and out of pocket cost for Medigap plans depend on which plan you select.
Below are two breakdowns of the yearly out of pocket cost for a 65-year-old male (living in Indianapolis) that chooses a Medigap Plan G along with an example for the cost of a Plan N.
The other consideration about the cost of Medigap plans is that the premiums do not stay the same. You can almost always expect your plan’s monthly premiums to increase by a few percentage points every year due to various factors. Medigap plans undergo rate increases depending on how your plan is ‘rated.’ The three main types of Medigap premium ‘ratings’ include Attained Age Rated (your age currently), Issue Age Rated (your age when you purchased the plan), and Community Rated (where you live). Depending on how your plan is rated, your premiums may increase differently.
The final thought on monthly premiums is when you buy your Medigap plan. Unless you are in your Medigap open enrollment period (learn more about that here), insurance companies do not have to let you join a Medigap plan. When you apply for the coverage they will ask you health questions, and depending on the answer to those questions, they can charge you more each month. Because of this, if you choose to go with a Medigap plan, it is advantageous to join during your Medigap open enrollment. After your Medigap open enrollment period, any health issues you have had in the past may be used to either charge you more each month or even deny you coverage.
Medigap Open Enrollment
Medigap Open Enrollment is your one chance to join a Medigap plan without any health questions. During this six month window companies must accept your application and cannot charge you more due to your health. This open enrollment is NOT the same as the Open Enrollment Period which is from January 1 through March 31 each year.
Your Medigap Open Enrollment Period begins the first day of the month that you are both 65 AND enrolled in Medicare Part B.
For example, if you turn 65 June 17 and enroll in Medicare Part-B at 65, your Medigap Open Enrollment Period will be from June 1 through November 30. State law and companies vary as to how far ahead of your Medigap Open Enrollment Period you can apply and purchase a plan, but it is recommended that you apply 1-3 months before your 65th birthday. This will ensure that you do not have any gaps in coverage.
In most states, if you wish to enroll in a Medigap plan outside of your one-time six-month open enrollment, you will need to go through medical underwriting. You may be denied the ability to purchase a Medigap plan if you have certain pre-existing conditions at the time of your new Medigap application. Every Medigap company has different health underwriting criteria, so give us a call, and we can help you decide which company may be right for you.
All of this is not to say that once your Medigap Open Enrollment Period has passed you will never be able to purchase a Medigap plan in the future. Unlike Medicare Advantage plans, you can switch your Medigap coverage as often as you want, if you can pass underwriting.
Pros of Medigap
Comprehensive Medical Coverage. The most popular plans (G, N, and F) leave very little out of pocket medical cost for people that choose to enroll in one of those plans. Plan G will cover all of the out of pocket medical cost for Medicare-approved procedures after you have satisfied your once per calendar year Part B deductible. For help determining what procedures Original Medicare cover, Medicare.gov has a look up tool here.
Nationwide Coverage. Medigap plans do not have networks. You can see any doctor and go to any facility that accepts Original Medicare. You will never be charged more for being ‘out of network’ or receive lower-cost treatment as you may with a Medicare Advantage plan.
Budgeting. Because the most popular Medigap plans cover most of the cost remaining after Original Medicare has paid their portion, keeping a monthly budget is much easier. You do not have fluctuating out-of-pocket expenses when you seek treatment. In retirement, having a fixed monthly premium for medical care can help with budgeting and help ease the burden of unexpected medical bills.
Guaranteed Renewable. Even if you have health problems, the insurance company cannot cancel your Medigap plan as long as you stay enrolled in Medicare and pay your premiums.
Separate Drug Coverage. Having separate drug coverage from your medical coverage means that you can choose a Part D plan that best fits your unique needs. Additionally, you can change your drug coverage during the Annual Election Period without impacting your Medigap coverage.
Cons of Medigap
Higher Monthly Premiums. With comprehensive medical cover comes higher monthly premiums. As shown above, a 65 year old Male can purchase a Plan G for $103 a month. The same person could likely find a Medicare Advantage plan in their area for $0/month.
Few ‘Extras.’ Medigap plans don’t come with a lot of frills. They are designed to cover the out of pocket cost not picked up by Original Medicare. Coverage for dental, vision, and hearing, over the counter benefits, yearly physicals, and fitness memberships are often included with Medicare Advantage plans. One exception to this is that some of the more popular Medigap plans do include some coverage for foreign emergency care.
Rate Increases. Like we mentioned above, premiums do go up every year.
More Cares to Keep Track of. Because Medigap plan are more of an a la carte style, you will likely have your red/white/blue Medicare card, Medigap insurance card, Part D card, and dental, vision, & hearing cards. With an Advantage plan, you usually only have one card because everything is bundled together.
Summary
Medigap plans come in a variety of standardized packages, and it is important to understand which plan fits your needs when you are first beginning Medicare Part B. Outside of your Medigap Open Enrollment Period, it may be difficult to enroll into a new Medigap plan for the first time. Medigap coverage and Medicare Advantage plans are not the same with it comes to coverage, so make sure you take the time to compare both options.
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