Because Original Medicare covers a significant portion of its recipients’ health care expenses, eligibility for Medicare is a welcome milestone. But for all that Medicare covers, its enrollees learn quickly that Original Medicare doesn’t pick up the tab for everything.Enrollees still find that they need help with many Medicare expenses – including copayments, coinsurance and deductibles, in addition to any medical expenses incurred during travel outside the United States and its territories.To cover those expenses, millions of people – more than a quarter of all Original Medicare beneficiaries – purchase Medicare supplement insurance, also known as Medigap. These plans are designed to fill in the gaps in Medicare and limit enrollees’ out-of-pocket exposure.Learn more about Medigap plans.
Where can you buy Medigap coverage?
Medigap policies are available in every state, from private health insurance carriers. At the end of 2014, more than 11 million people had coverage through Medigap plans – an increase of six percent from 2013.
All Medigap insurers must abide by strict state and federal laws. In most states, Medigap carriers must offer standardized policies that are identified by the letters “A” through “N.” There are a total of ten different plan designs: A, B, C, D, F, G, K, L, M, and N, and although the price varies from one carrier to another, the plan benefits are the same from one state to another and from one carrier to another, within each letter. All plan Fs offer the same benefits, regardless of where you live or what insurance carrier you use. (Medigap policies in Massachusetts, Minnesota, and Wisconsin are standardized in a slightly different way.)
In some states, not all types of Medigap coverage will be available. In other states, you may be able to purchase Medicare SELECT – a Medigap policy that requires plan holders to use specific hospitals and, in some cases, specific doctors. Any of the ten Medigap plan designs can be offered as a Medicare SELECT plan, and they tend to be less expensive than typical Medigap policies due to the restricted network. If you choose a Medicare SELECT plan and use a provider that’s not in the network, your Medigap plan won’t pick up your Medicare out-of-pocket costs unless it’s an emergency.
It’s important to note that insurance companies offering Medigap policies are not required to offer every Medigap policy. However, if a carrier offers any Medigap policy, it is required to also offer at least Medigap Plan A, Plan C or Plan F.
Are there gaps in Medigap coverage?
Yes. The list of expenses that Medigap policies don’t cover includes long-term care in a nursing home, vision and dental care, hearing aids, eyeglasses, private-duty nursing care, or prescription drugs. (Plans purchased prior to 2006 were allowed to cover prescriptions, and if you’ve still got one of those plans, you’re allowed to keep it. But Medigap plans sold since 2006 cannot include prescription coverage.)
Also, Medigap policies aren’t compatible with the following types of coverage: employer or union plans; veterans’ benefits; Indian health services; Medicare Advantage plans; Medicare prescription drug plans (you’ll need a prescription drug plan in addition to the Medigap policy, since they cover different things.); and Medicaid. Finally, Medigap policies are for individuals only – not for couples or families. So if you and your spouse are both eligible for Medicare, you’ll each need to select an individual Medigap plan (some carriers offer a discount if both spouses select the same plan).
There are currently two Medigap plan designs – Plan F and Plan C – that cover the Medicare Part B deductible. As a result of HR2, which was signed into law in 2015, these plans will no longer be for sale as of 2020, although enrollees who have Plan F or Plan C as of December 31, 2019 will be able to keep their coverage under a grandfathering provision. The idea was to eliminate first-dollar coverage under Medigap plans in an effort to prevent over-utilization of healthcare (ie, ensure that enrollees have some “skin in the game” rather than having all of their costs covered by Medicare and supplemental coverage).
How do Medigap insurers set their prices?
The cost of a Medigap policy can vary with each insurance company. There are three ways in which insurers set Medigap rates:
- With community-rated pricing, enrollees are charged the same premium regardless of age. So a 65 year-old enrollee will pay the same premium as an 85 year-old enrollee. Premium can change over time, but they change by the same amount for all enrollees.
- Issue-age-rated premiums are based on the age of the purchaser. So the older the person is at the time of purchase, the higher the premium, and that difference continues as long as they have the plan. For plans with this rating structure, it’s particularly important to enroll as soon as you’re eligible for Medicare coverage, because your premium will always be as low as possible that way.
- With attained-age-rated pricing, the premium goes up as the insured person ages. These plans might be the least expensive option when you’re first eligible for coverage, since you’ll be among the youngest enrollees. But as you get older, the price will increase based on your age as well as factors like inflation and overall medical cost trends.
Be aware that Medigap plans are only guaranteed issue during the six-month window that starts the month you turn 65 (or when you enroll in Medicare Part B, which might be after you turn 65 if you still had employer-sponsored coverage), and during limited special enrollment periods (there’s no annual open enrollment period like there is for Medicare Advantage, Medicare D, and Original Medicare). If you don’t enroll during your initial enrollment period, you may have to pay a higher premium (or be declined altogether) if you’re in poor health, as carriers are allowed to use medical underwriting after your initial enrollment period has passed.
How can I pay less for Medigap coverage?
Make sure you enroll as soon as you turn 65, in order to get coverage that’s guaranteed issue with no premium rate-ups based on your medical history.
Some Medigap carriers offer discounts that might apply to you. Some insurers offer discounts for women, non-smokers, married people, and for paying annually. Many states also offer a health insurance assistance program, providing up-to-date Medigap insurance information and a list of qualified private insurers. Check our state pages to find your state’s assistance program.
Is there a best time to purchase a Medigap policy?
The best window of time in which to buy a Medigap policy begins on the first day of the month in which you turn 65 and have enrolled in Medicare A and B (you have to be enrolled in both Medicare A and B in order to get a Medigap plan). The Medigap enrollment period lasts for six months.
If you’re eligible for Medicare because of a disability, there are currently 31 states that offer at least some sort of guaranteed issue enrollment periods for those under 65 (although in many cases the coverage is more expensive for those under 65), so it pays to research your state’s health care regulations.
If you wait to buy a policy until after your initial enrollment period, your carrier generally has the option of denying the application or charging a higher premium based on the company’s underwriting requirements, as there is no federal requirement that Medigap plans be guaranteed-issue outside of the initial enrollment window and very limited special enrollment periods. But states can set their own regulations for Medigap plans; in New York and Connecticut, Medigap plans are not medically underwritten, regardless of when an applicant enrolls. Check with your state SHIP or your state’s Division of Insurance for more information.
Will I have to wait for my Medigap policy to take effect?
An insurer can’t make you wait for your coverage to start, but it can make you wait for coverage of a pre-existing condition – and may also refuse to cover your out-of-pocket costs for that pre-existing condition for up to six months during a pre-existing condition waiting period. That said, if you recently had “credible coverage” – or if you have guaranteed issue “Medigap protection” – you may be able to shorten or avoid entirely the waiting period.
For more information about Medigap, read Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.