So you want to understand Medigap plans?
Each year, Medicare publishes their official guide to Medicare Supplements: Choosing a Medigap Policy.
The 50 page resource is fantastic, (and SUPER detailed), but keep reading for an even faster, and easier way to understand Medicare Supplements, in 15 minutes or less!
In this simple guide, you’ll find out:
1.) What exactly is a Medigap Policy (and how do they work)?
2.) What are the 3 most popular plans? (And why Plan G is the best).
3.) What no one talks about: Provider freedom, enrollment rules, restrictions, and more.
The Medicare Maze
Medicare and all the options that come with it have a reputation for being a maze of confusion.
It really doesn’t have to be that complicated, once you realize there’s only two paths you can go down when you sign up.
You can sign over your Orginal Medicare benefits to a private insurance company by enrolling in a Medicare Advantage Plan.
Simply keep your Original Medicare benefits, but purchase an add-on insurance plan called a “Medigap Policy.”
This flow chart gives you an easy, visual explanation, in one fell swoop.
Taken from Choosing A Medigap Policy.
Step #1: What is Medigap?
It’s important to clarify that Medigap plans, also known as Medicare Supplements, are NOT the same as Medicare Advantage Plans.
They are as different as night and day.
The terms “Medicare Supplements” and “Supplemental Plans” get used often.
But neither of these are referring to Medicare Advantage Plans, (which aren’t Medicare Supplements at all), but a completely different way to receive your Medicare.
With a Medigap Policy, you are keeping your Original Medicare “as-is,” which means that Medicare still pays your medical claims.
The Medigap Policy picks up your out-of-pocket portion of the cost.
Here’s an example:
Medicare covers 80% of an office visit. Your portion is 20%.
Therefore, the Medigap policy pays the 20%.
Here’s a quick run-down on the differences between Medigap Policies and Medicare Advantage Plans:
- Freedom to use any provider that accepts Medicare
- Covers your out-of-pocket expenses on Original Medicare (only for services covered by Medicare)
- Predictable monthly expenses, but you pay a monthly premium in addition to Medicare Part B premium
- Plan benefits don’t change year to year
- Must purchase a stand-alone drug plan if you want prescription coverage
- You may only use providers contracted with the plan (known as a “network”).
- You receive your Medicare Benefits completely through a private insurance plan.
- The plans may change every year (including providers).
- Your expenses can be unpredictable, although many plans have $0 additional monthly premium.
- Often includes drug coverage
Medigap Chart: Plans A-N
Don’t let the fact that there’s 10 different Medigap Plans overwhelm you.
We’ll just focus on the three most popular plans, which are popular for a reason.
It also helps that the benefits of each plan letter are exactly the same (by law), regardless of which company you use.
So once you decide what plan you want, you’re just comparing the companies, along with price.
Step #2: The Three Most Popular Medigap Plans and How They Work
If you watched my workshop about Medicare Supplements, you learned all about the basic Medicare Benefits and why you need a Medicare Supplement (Medigap Plan).
The #1 reason you need a Medicare Supplement (aka Medigap) is that there’s no out-of-pocket maximum limit to your spending.
My webinar attendees also learned what some other major expenses are, such as skilled nursing.
You can check out that webinar to learn more and see the big picture (including how they compare with Medicare Advantage Plans); but to keep things simple here, we’re just looking at the basic benefits on the chart below.
I’m going to focus on plans F, G and N.
Plan F – The “Cadillac” Plan
Plan F has been the most popular plan for many years, but due to recent legislation, will be closed to new enrollments starting in 2020.
In a recent article, I explained why you may want to avoid Plan F from here on out. Check out “Plan F Discontinued: Why This Medigap Plan Favorite is Going Away for Good,” to get the full scoop.
Plan F is the easiest plan to understand, so I will begin by explaining how Plan F works before moving on to Plan G.
The list of benefits on the left hand side of the chart is the simplest way possible of summarizing what your out-of- pocket expenses might be on Medicare.
Plan F covers it all.
As long as it’s a Medicare covered service, plan F covers your copays (dental, vision, and hearing are NOT covered, so plan F won’t cover them either).
People love plan F because you don’t pay anything out of pocket unless it’s not covered by Medicare.
Easy enough to understand, right?
Plan G: The smarter choice?
Plan G has been gaining in popularity in the past couple years.
Agents are really catching on to the fact that Plan G has historically lower rate increases compared to plan F.
So what’s the difference between Plan F and Plan G?
You won’t believe how simple this is.
Look on the chart, and find the column for Plan G.
There’s only ONE empty box in that column.
Find that empty box, and look to the left.
The empty box is for the Part B Deductible, the only thing Medigap Plan G doesn’t cover.
Even if you’re still not sure what Part B is, and don’t even know what a deductible is, you can still understand this.
It’s THIS simple.
The Part B deductible is $166 (in 2016).
Without Plan F, you pay the first $166 in medical expenses each calendar year.
But, what if you compare the costs, as in, the monthly premiums, between the two plans?
The question you should ask yourself is, “How much MORE does Plan F cost me over the course of the year, just to cover $166?”
You might be surprised to find out that in most areas of the country, the difference in price is more than $166. Sometimes its A LOT more, as-in hundreds of dollars more.
This means there are people paying their insurance company $200, $300, or maybe $400 (or more) in additional premium for a Plan F compared to Plan G, just to cover the $166 which plan G doesn’t cover.
If Plan G is identical to Plan F in every other way, wouldn’t it make sense to save hundreds of dollars in premium, and just pay the small $166 deductible?
It just doesn’t make financial sense NOT to.
Add to that, the fact that Plan G has historically lower rate increases. Another win.
I understand that some just like the way Plan F makes them feel.
That is something of value that you sometimes can’t put a price tag on, so I do understand it from that standpoint.
So, in summary, Plan F covers all your out of pocket copays and co-insurance for Medicare covered services.
Plan G is identical to plan F except you must pay the Part B deductible.
Now lets look at Plan N
Plan N, like G, requires you to pay the Part B deductible each calendar year.
There are two more ways that plan N is different from plan F.
Plan N requires a small coinsurance amount for office visits after the deductible is met.
Doctor visits are 20% UP TO $20.
So you won’t pay more than $20 for an office visit (even for specialists).
ER (emergency room) visits are up to $50.
One more difference for Plan N – excess charges.
What are Excess Charges?
Medicare.gov explains excess charges so simply and easily on this page that talks about “assignment.”
If your doctor accepts “assignment,” he or she agrees to accept the amount Medicare will pay for certain services.
If your doctor doesn’t accept assignment, you could be charged “excess charges.”
Find out if your doctor accepts assignment with this handy search tool on Medicare.gov.
There is a limit to the excess charges allowed, up to 15% over the Medicare-approved amount.
This is called the “limiting charge.”
Summary of the 3 most popular plans
Just to recap, Plan F will cover all of your out of pocket expenses on Medicare.
For the most part, you’ll have virtually no copays when you see the doctor. (Prescription drugs are covered separately).
Plan G is identical to Plan F except it doesn’t cover the Medicare Part B annual deductible ($166 in 2016).
Plan N does not cover the Part B Deductible, and excess charges. (Excess charges are not very common).
Plan N requires a small copay for office visits and ER, after you’ve paid the $166 deductible for the year.
How much is a Medicare Supplement?
First the bad news – it’s not very simple to get fast and easy pricing for Medigap policies.
Most agent websites and insurance company sites will require you to enter information to be contacted.
If there’s a site that allows you to access all the prices and companies in your zip code for free, without entering personal information, let me know! Because I’m not aware of such a thing at this time.
Many State Department of Insurance websites give pricing for Medigap policies, although they are usually annual prices rather than monthly.
The prices vary by zip code, age, and sometimes gender and tobacco usage.
Here’s an example of the Medicare Supplement Insurance Shopper’s Guide for the State of Kansas, complete with a quoting tool.
I encourage you to check your own State’s Dept. of Insurance website. You can simply google whatever state plus “department of insurance” and the website will come up on the first page of google.
You may search all the companies in your area that offer Medigap plans on Medicare.gov, and call the companies direct to get accurate pricing.
If you have an agent that you trust, (or have asked friends for a referral), most medicare agents have access to a quoting tool that will give you all prices in your zip code.
I offer free quotes to anyone that requests it. If you’d like to get current Medigap pricing in your zip code, visit my contact page and submit a request to receive quotes via email.
Getting quotes from one independent agent will allow you to bypass the quoting websites that sell your information to agents as “leads.”
To get more in-depth information about Medicare Supplement (Medigap) pricing, see “How much does a Medicare Supplement Cost?
Next up, we’re going to bring it all together and discuss Medigap Plan facts that no one talks about.
Step #3: Medigap Policy Facts No One Really Talks About
By now you might be asking yourself, why would I want to pay a monthly premium for a plan when I could get one for free that includes prescriptions?
I go over this at great length in my online workshop about Medicare Supplements.
The #1 reason is the value you get from having the total freedom to see any provider that accepts Medicare.
I believe that it’s this freedom that is the single most valuable thing about Original Medicare.
I also think it may be the most overlooked quality in a plan when folks are new to Medicare.
It’s easy to overlook freedom, or to sacrifice this freedom, in favor of a low monthly cost.
Why the choices you make NOW are more important than you think.
Something you won’t hear talked about in the Medicare mailers, and the Medicare Advantage presentations is, when you’re new to Medicare, you have a limited enrollment opportunity to get into a Medigap policy.
What if you miss this enrollment period?
In the 6 months after you first enroll in Medicare Part B, you have guaranteed issue rights to a Medigap policy.
That means you can enroll in any plan letter, no health questions asked.
This is the only way to TRULY assure you’ll have a Medigap policy when you need it most, later in life.
If you wait, and decide later you want to enroll in one, it could be too late.
You can still a apply for a Medigap policy at any age, year round (unless you need to disenroll from a Medicare Advantage Plan), but you will have to answer the health questions beyond that initial 6 months.
More Facts About Medigap Policies
Switching Medigap Policies
Aside from the limited Guaranteed Issue period for Medigap plans, many don’t realize that if you already have one, you can submit an application for a different Medigap Policy any time during the year.
This is a Medigap to Medigap plan switch.
Why would you want to do that?
First, to lower your rate. It IS possible to lower your rate, and even though you will have to answer the health questionnaire, it is not as difficult to qualify as you might think.
Secondly, you may simply want a different Medigap plan letter. Some companies may let you switch to a different plan letter (within the same company) without applying. Or, maybe your company doesn’t offer a Plan G and you’d like to switch to a G to save money and experience lower rate increases down the road.
No Doctor Networks means every provider will accept your Medigap company.
One of the most misunderstood things about Medigap Policies, especially to those that have been on them for years, is that there are NO doctor networks (and no referrals required to see a specialist).
That means you absolutely, positively do NOT have to check with your doctor to find out if they will accept your new Medigap Plan company.
No matter what the office staff at your doctor’s office tells you, if they accept Medicare, they will accept your Medigap Policy.
I’ve seen this occur time and time again – especially in areas of the country where there are a high number of Medicare Advantage enrollees. Yes, there are still folks working in medical billing offices that do not understand how Medigap plans work.
My mom switched from a Medicare Advantage Plan to a Medigap Plan N, and she is STILL getting billed from one doctor as if she is on a Medicare Advantage Plan. I don’t even know how this is possible.
On a Medigap plan, the claims get submitted to Medicare first. Any doctor or hospital that accepts Medicare will accept your Medigap plan, no matter what company it is.
I have talked to countless folks on expensive plans (paying hundreds and hundreds of dollars more per year than they need to), unwilling to change to a different carrier, because they believe the new company won’t cover everything their existing plan covers.
They are paying hundreds more per year, out of FEAR.
But the truth is, every Medigap plan company MUST cover the exact same benefits by law, because the plans are standardized.
Medicare Advantage Plans change every year – Medigap Plans don’t.
Consider the fact that Medicare Advantage Plans change every year.
There’s no guarantee that the Medicare Advantage plan you choose now will cover the providers you want, at the price you want, down the road.
You may sign up for the plan with the zero premium because they offer everything you want now. But what if that changes?
I bring this up just to clarify to you the real issues at stake.
There’s much more to the equation than just dollar for dollar coverage.
A Medigap Policy is the ONLY way to get total provider freedom, and consistent, predictable coverage for years to come.
Just don’t forget to factor these into the price when you are making comparisons.
We looked at how Medigap policies are often misunderstood, and that they are completely different from Medicare Advantage Plans.
The easiest way to understand these plans is to look at the three most popular plans, and how they work.
We used the chart from Choosing a Medigap Policy to go over what Plan F, Plan G, and Plan N cover, and what the differences are between these plans.
Plan G is a significantly better value than Plan F in most zip codes.
Finally, there’s more to comparing plans than just price.
It’s important to understand what you value most. To some, that is the freedom to see any provider that accepts Medicare.
Provider freedom is a HUGE value that is hard to put a price tag on.
What do you value in a plan? Is provider freedom important to you?