This guide will look closer at Medigap plans (also referred to as Medicare Supplements), so you will know the most important facts to consider when making a decision to supplement your Medicare.
We already talked about the two main paths you can take once you have Medicare Parts A & B, in Part 2 of this series:
- Option 1: Keep Original Medicare and buy a Medigap policy
- Option 2: Receive your Medicare benefits through a Medicare Advantage Plan.
This is how I’m going to break down the explanation of Medigap Plans:
- What exactly is a Medigap Plan, and how does it work?
- How are the Medigap plans regulated?
- How does the pricing work?
- Make sure you know what a Medigap Plan is NOT.
- When can you enroll in a Medigap policy?
- Does it work with other types of insurance?
What is Medigap?
A Medigap plan (AKA Medicare Supplement or Supplemental) is an insurance policy you purchase from a private insurance company to cover your portion of expenses on Medicare.
For example, 80% of the cost of doctor visits are covered under Medicare Part B. Your cost is the remaining 20%. Many of the Medigap plans cover your 20% portion.
Medigap plans pay your costs for ALL medical expenses covered by Medicare The benefits don’t include anything beyond what Medicare covers, such as dental, vision, or hearing aids (except foreign travel emergency).
The biggest value Medigap plans offer is total freedom to use any provider or hospital in the U. S. that accepts Medicare. There’s no need for a referral from your primary doctor to see a specialist!
Another huge benefit is the predictability of out-of-pocket costs.
Medigap plans don’t include drug coverage, but you can easily add-on a drug plan when you are new to Medicare, or during the annual open enrollment.
Medigap Plan Letters A-N
You may have heard of Plan F.
Plan F is the most popular plan, but many agents argue that plan G is best. I agree.
Once you understand how one Medigap plan works, you can understand them all.
But it’s not even necessary to understand them all.
I’ve found that when you examine the benefits and costs, there’s really only three plans that are popular:
Plan F, Plan N, and Plan G.
I go even deeper into these three popular plans in Understand Medigap Plans in 3 Easy Steps, so if you’re leaning toward choosing a Medigap policy, be sure to check it out.
How Medigap Plans Work
If you choose to go the Medigap route, you are choosing to stay on Original Medicare, as opposed to receiving your Medicare Benefits through the Medicare Advantage program (officially known as Medicare Part C).
Choosing Medigap allows you to see most providers in the U.S. You will not be limited by small doctor networks.
When you visit the doctor, you will need to bring your red, white, and blue medicare card, and your Medigap card.
Medicare pays it’s portion of the cost, then the Medigap policy pays it’s portion.
Medigap policies will cost you a monthly premium in addition to what you already pay for Medicare Part B.
However, many Medigap plans cover most of your out of pocket expenses. This is where the predictability comes in.
Know the truth so you can be smart about your choices!
Medigap plans are regulated on the Federal and State levels, and these regulations are made to protect YOU!
Knowing about how they are regulated gives you an edge.
Why make decisions based on fear, as many do, when you can know the truth?
Why these regulations Matter
The Medigap plans are standardized, which means each plan’s benefits are identical when comparing the same plan letter offered by every other insurance company.
For example, the Plan F benefits with one insurance company are exactly the same as Plan F with another company.
The reason I’m mentioning this is that you don’t need to fear losing benefits if you switch to a company with a lower cost plan. As long as you stick with the same letter Medigap plan, you will have the same benefits.
Insurance companies are allowed to charge different prices for the exact same Medigap plans.
It’s important to shop around.
There will always be rate increases, so you should consider shopping for a lower rate each year. Thats one good reason to have an agent you trust.
Once you’re past your Medigap Open enrollment, to change plans you would be required to answer health questions.
As long as you are healthy, you may continue to shop for lower rates on your Medigap plan each year.
Community-Rated, Issue-Age, and Attained-Age
Community-rated, issue-age rated, and attained-age-rated are 3 rating methods by which insurance companies set the price.
Community-rated policies are not based on your age, but still go up over time due to inflation or other factors. Issue-age-rated policies are based on your age at the time you purchase the policy. Attained-age-rated policies are priced according to your age and go up as you age.
These methods often vary depending on your location. Some states will use one method more commonly over another.
This chart from Choosing a Medigap Policy gives some great examples of how this works.
What is Medicare Select?
Some states offer Medicare Select plans – a type of Medigap policy that requires you to use certain hospitals or providers designated for that plan.
The reason these are popular is that they offer many of the benefits and freedoms of Medigap policies, at a lower cost.
I personally am not a fan, and will not sell them. If you’re going to place limitations on a Medigap policy, you may as well enroll in a Medicare Advantage plan and save on premium.
Many people may not agree, but it’s just my opinion.
Medigap Plans are NOT Medicare Advantage Plans
You must recognize the difference between Medigap and Medicare Advantage.
I’ve heard people refer to Medigap Plans as PPOs (Preferred Provider Organization) because you have the freedom to see any provider or specialist that accepts Medicare.
Medigap Policies are NOT PPOs.
PPOs are still managed care plans, because there is a preferred network. While most Medicare Advantage Plans are HMOs, some areas of the country offer Medicare Advantage Plans that are PPOs. These Medicare Advantage PPOs also may have a monthly premium.
It’s important to know what you are enrolling in when you’re new to Medicare, because when you first enroll in Medicare Part B, you only have 6 months guaranteed acceptance into a Medigap Policy.
Once you’re beyond this 6 month Medigap Open Enrollment, you must answer health questions on the application.
The bottom line is that you could forever lose your ability to enroll in a Medigap plan if you don’t utilize your Medigap Open Enrollment!
All it takes is a little self reflection to realize what is most important to you.
When can you enroll in a Medigap Policy?
The best time to enroll is when you are new to Medicare. You must have Medicare Parts A & B (or you have enrolled in Medicare Parts A & B and the effective date is coming up in the next few months)
As I already mentioned above, when you first enroll in Medicare Part B, you have a special window of time to enroll in a Medigap policy with guaranteed acceptance (no health questions)!
This is called your Medigap Open Enrollment.
It lasts 6 months from your Part B effective date.
You can’t be denied, as long as you’re within this deadline. You may enroll before your Part B becomes effective, as long as you know when your Part B will begin.
If you have Medicare plus group health insurance through your employer, you will still be able to get a Medigap policy, guaranteed issue. But you’re usually only allowed 63 days beyond the termination of your group insurance, so be careful not to miss this window of opportunity!
There are also special circumstances, such as leaving a Medicare Advantage plan within your very first year on that plan type, or moving outside of a Medicare Advantage plan’s coverage area. These special circumstances typically allow you guaranteed acceptance into a Medigap plan.
Medigap insurance companies usually have their own guaranteed issue guide, so check with each company in your state that you are considering, or ask your agent, for more information.
Outside of these special enrollment periods, you may apply for a Medigap plan, but will likely be medically underwritten, and could be denied.
Be careful if you are currently enrolled in a Medicare Advantage plan and are looking to switch to a Medigap policy, because you may only disenroll from your Medicare Advantage plan during certain times of year.
Do Medigap Plans work with other Insurance?
If you have group health insurance, or a Medicare Advantage plan, a Medigap policy would be duplicate coverage.
While a Medigap policy could be cheaper and better coverage than your group health plan (that’s worth checking into!) it doesn’t work with your employer coverage. You just need one or the other.
It’s illegal for someone to sell you a Medigap policy if you are enrolled in a Medicare Advantage Plan (unless your plan is ending when the Medigap coverage begins).
Medigap policies work with Original Medicare (you MUST have Medicare Parts A & B to enroll in a Medigap policy), as well as Medicare Part D (prescription coverage), and other stand-alone plans such as dental, vision, or cancer plans.
What gives YOU peace of mind?
Do you value predictability, and freedom to see any provider, without the rules and regulations of an HMO?
Are you willing to pay a monthly premium for that, or will paying a monthly premium just stress you out?
Maybe it would give you greater peace of mind to save on your monthly premium, knowing you’ll have more cash flow month to month, even if an unexpected copay may come up later.
Only you can decide what will work for you.
Next up: Part 4 in this 5 part Medicare “mini-course” – All About Medicare Advantage.