Buying Medigap, Medicare’s Supplement Insurance

Chris Hawkins Written by Chris Hawkins
SeniorLiving.Org Expert on Senior Care & Assisted Living

For many seniors, Medicare’s out-of-pocket expenses in the form of copayments, coinsurance and deductibles are financially smothering. Enter Medigap.

Medigap, or Medicare supplement insurance, is coverage sold by private insurance companies and designed to fill in gaps—the copayments, coinsurance, and deductibles—left by Medicare Parts A and B. About 9 million seniors are covered by Medigap policies.

We’ll look at the different kinds of Medigap policies, how they’re priced, and how you can shop for the policy that is right for you.

MEDICARE AT A GLANCE

Medicare is health insurance primarily for those 65 and older. It’s the largest health insurance program in the country, covering over 40 million people. It’s made up of four parts: A, B, C, and D.

Part A is hospital insurance and covers inpatient hospital care along with skilled nursing, hospice and home health care.

Part B is medical insurance and covers services from health care providers such as doctors, outpatient care, medical equipment and home health care. It also covers preventative services.

Most people pay a $140 annual deductible before for services and supplies before Medicare B begins to pay. In most cases, you pay 20% of the Medicare-approved amount.

Part C, also called Medicare Advantage, are Medicare-approved private health plans that cover the items in Parts A and B, along with prescription drug coverage and offer other benefits (e.g. dental, hearing and vision) for an extra cost.

Medicare Advantage plans and their benefits vary by insurance carrier.

Part D or Medicare Prescription Drug Coverage, helps cover the cost of prescription drugs.

Medicare does not cover everything. Among those items are:

  • Long-term care such as assisted living
  • Dental and eye care
  • Dentures
  • Hearing aids and exams
  • Cosmetic surgery
  • Acupuncture
  • Routine foot care

And even for services and products it does cover, you still need to pay deductibles, coinsurance, and copayments. The usual coinsurance rate for doctor’s services and medical equipment is 20%--meaning Medicare pays 80% and you pay 20%.

To help fill in the gaps left by Medicare, seniors can buy Medigap coverage.

MEDIGAP BASICS

Medigap is a supplement to your existing Medicare (A and B) policy. There are 12 Medigap plans: Plan A through Plan L (see the chart below). These private health policies are strictly run by the state and federal government to insure that insurance carriers offer the same “standardized” coverage levels. Monthly premiums and customer service will vary by insurance carrier.

You must have both Medicare Parts A and B to qualify for Medigap. You’ll pay one premium(s) for Medicare (Part B) and one premium to the private Medigap company. A Medigap policy only covers one person.

All standardized Medigap policies are “guaranteed renewable even if you have health problems. This means the insurance company can't cancel your Medigap policy as long as you pay the premium,” according to Medicare’s “Choosing a Medigap Policy.”

DO I NEED MEDIGAP?

Let’s look at the paths you can take with Medicare to see what coverage you may need.

Here are the two options under Medicare:

1) Original Medicare ----> Part A (hospital insurance) and Part B (medical insurance).

2) Medicare Advantage Plan (think PPO or HMO)----> Combines Parts A, B, and usually Part D for prescription drugs.

Do you need prescription drug coverage?

1) Purchase Part D Prescription Drug Coverage.

2) With Medicare Advantage, you’ll likely not need prescription drug coverage because it’s already included. However, if you do, you can purchase Part D.

Do you need supplemental coverage?

1) Purchase a Medigap policy through a private insurance carrier.

2) If you have Medicare Advantage, you cannot, by law, be sold a Medigap policy.

WHAT MEDIGAP COVERS

In this chart, the percentage indicates how much the plan covers. An empty box indicates the policy doesn’t cover the benefit. Coinsurance is only covered after you have paid the deductible.
 

Medigap Benefits

A

B

C

D

F*

G

K**

L**

M

N

Medicare Part A Coinsurance and hospital costs up to an additional 365 days after Medicare benefits are used up

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Medicare Part B Coinsurance or Copayment

100%

100%

100%

100%

100%

100%

50%

75%

100%

100%

***

Blood (First 3 Pints)

100%

100%

100%

100%

100%

100%

50%

75%

100%

100%

Part A Hospice Care Coinsurance or Copayment

100%

100%

100%

100%

100%

100%

50%

75%

100%

100%

Skilled Nursing Facility Care Coinsurance

   

100%

100%

100%

100%

50%

75%

100%

100%

Medicare Part A Deductible

 

100%

100%

100%

100%

100%

50%

75%

50%

100%

Medicare Part B Deductible

   

100%

 

100%

         

Medicare Part B Excess Charges

       

100%

100%

       

Foreign Travel Emergency (Up to Plan Limits)

   

100%

100%

100%

100%

   

100%

100%

Plans E, H, I, and J are no longer for sale, but you can keep these plans if you already have one.

*Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,110 in 2013 before your Medigap plan pays anything.

**For Plans K and L, after you meet your out-of-pocket yearly limit ($4,800 for K and $2,400 for L) and your yearly Part B deductible ($147 in 2013), the Medigap plan pays 100% of covered services for the rest of the calendar year.

***Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don’t result in an inpatient admission.

(Chart and information courtesy of the “2013 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.”)

HOW MEDIGAP POLICIES ARE PRICED

The cost of your Medigap policy (the average monthly premium in 2010 was $178) depends on a number of factors such as where you live, your gender and whether the company offers discounts. Examples of discounts include being a non-smoker, buying a joint policy with your spouse, paying the premium yearly and paying electronically (EFT).

In addition, Medigap policies are rated to determine price. These are the three ratings:

1) Community-rated (or no-age-rated) plans are the same no matter how old you are. Example: Mr. Jones is 65. Mr. Copeland is 73. Both pay the same premium amount regardless of age.

2) Issue-age-rated plans are priced based on your age at the time of purchase—so younger buyers will likely pay lower premiums. Example: Mrs. Rico is 65 and buys a policy for $140 a month. Mr. Green is 71 and buys a policy for $181 a month.

3) Attained-age-rated plans cost less to begin with but will increase automatically with age. Example: Mr. Newlin, who is 67, buys a policy for $126 a month. At age 69, his premium goes up to $137. At age 70, his premium goes up to $145. Mrs. Price, who is 72, buys a policy for $143 a month. At age 73, her policy goes up to $151. At age 75, her policy goes up to $162.

Keep in mind that all three of these plans can be affected by inflation. And there can be huge differences in premiums for the same plan between different insurance carriers.

A high-deductible plan is another factor that will affect your premium. These are sold under Plan F and require you to pay the first $2,070 before Medicare pays anything. The deductible amount can change every change.

The advantage of a high-deductible plan is that your premium will be significantly lower.

MEDICARE SELECT

As you begin searching for a Medigap policy, you may run into a Medicare Select policy. This is a type of policy sold in some states that requires you to use hospitals and doctors that are within a network. These are generally cheaper than other Medigap policies. But if you choose to use doctors out of the network, you may pay some or all what Medicare doesn’t pay.

KNOW YOUR “GUARANTEED ISSUE RIGHTS”

Guaranteed issue rights are when “insurance companies must offer you certain Medigap policies” even if you have pre-existing conditions. In these circumstances, an insurance company must:


  • Sell you a Medigap policy

  • Cover all your pre-existing conditions

  • Not charge you more for a Medigap policy regardless of current or past health issues

According to Medicare, “in many cases, you have a guaranteed issue right when you have other health coverage that changes in some way, such as when you lose or drop the other health care coverage. In other cases you have a ‘trial right’ to try a Medicare Advantage Plan and still buy a Medigap policy if you change your mind.”

To find out more about guaranteed issue rights and to see example situations, go to medicare.gov.

EXAMPLES OF COMPANIES THAT SELL MEDIGAP

The insurance carriers will vary depending on your location and the plan you choose. These are some examples I found for my zip code in the state of Colorado.


  • Aetna Life Insurance

  • Humana Insurance Company

  • Liberty National Life Insurance

  • AARP Healthcare Options

  • Anthem Blue Cross Blue Shield

  • Colonial Penn Life Insurance

  • Mutual of Omaha

DOES MEDIGAP COVER PRESCRIPTION DRUGS?

Some Medigap polices sold in the past covered prescription drugs, but as of January 1, 2006, Medigap can no longer include prescription drug coverage.

MEDIGAP AND TRAVEL INSURANCE

One feature of Medigap Plans C, D, E, F, G, H, I, J, M, and N is travel insurance. These plans pay 80% of billed charges for emergency care outside the U.S. after a $250 yearly deductible is met. The lifetime coverage limit is $50,000.

WHAT DOESN’T MEDIGAP COVER?

Long-term care such as nursing homes and assisted living, dental care, vision, hearing aids, glasses or private duty nursing.

WHEN CAN I BUY MEDIGAP?

The open enrollment period begins the first day of the month in which you are 65 or older AND enrolled in Medicare Part B. You also should buy coverage during this period because insurance companies can’t use medical underwriters to evaluate your health. This means that even if you have a pre-existing condition, the insurer can’t refuse to sell you coverage or charge you more than someone with no health problems.*

*Note that a pre-existing condition, as defined by Medicare, “is a health problem you have before the date a new insurance policy starts.” Some Medigap policies can refuse to cover your out-of-pocket costs for these pre-existing health problems for up to 6 months.

This is called a “pre-existing condition waiting period.” After 6 months, the Medigap policy will cover the pre-existing condition.”

If you are already covered through you or your spouse’s employer, you may decide to wait to enroll in Part B.

However, don’t miss the open enrollment period or don’t drop Part B and decide to get it later. It will hurt financially. The late enrollment penalty is an extra 10% for each 12-month period.

GET HELP WITH MEDICARE AND MEDIGAP

Trying to understand all the health insurance options with Medicare, Medicare Advantage, and Medigap can leave your head spinning. Fortunately, there are people who can help.

The State Health Insurance Assistance Program (SHIP) was set up to offer counseling—on the phone or in person—to those who need assistance with all aspects of Medicare. Find a SHIP counselor in your area.

You can also call 1-800-MEDICARE.

SOME QUESTIONS TO ASK WHEN SHOPPING FOR MEDIGAP


  • Are you licensed in my state to sell Medigap?

  • Do you sell Medigap Plan (whichever plan letter you’re interested in)?

  • Do you use a medical underwriter for this particular policy?

  • Do you have a waiting period for pre-existing conditions? If yes, how long?

  • How do you price this policy? Community rating? Issue-age rating? Attained-age rating?

  • What would my premium be for my age?

  • Has the premium increased over the last five years? If so, by how much?

  • Do you offer any discounts? (e.g. non-smoker, paying for the entire year)

SHOP FOR MEDIGAP

To find Medigap policies in your area, go to Medicare’s Medigap Policy Search.

 


Updated: Jun 14, 2013

Comments

[11] Comments... Read them below.
fred swanson On Dec 3, 2014
I am in will county IL. Who's rates will raise more bcbs or aetna's. Is aetna rated higher in ill than Bcbs

Linda Puckett On Nov 13, 2014
I need only and prescription drug plan but am told that since I did not take out one in 2008 when I got on Medicare that I would have to pay a penalty now. Would have been nice if they would have told me that when I took out the Medicare A & B. Is there any way I can avoid this penalty and take out a prescription drug plan?

Mary Ranc On Nov 10, 2014
I am 74 with pre-exixting surgery failure, now carrying a huge hernia that I cannot find a doctor in Fl to operate. I had Medicare A & B, Medicaid, QMB, food stamps, was doing o.k. THEN ex dies & SS# jumps. I tried to deny it and SS said NO. Now in my search for Medical Supplement, I have been denied by Humana, cause I exceed their weight limit of 224. The Hernia, when removed will bring me back down, and they will not except that. I guess we old sick fat people are to go out into the woods and lay down and die like the animals. CAN ANYONE HELP ME? I DON'T WANT TO DIE! THANKS

Nancy Beguiristain On Nov 3, 2014
My husband is in late stage Alzheimer'ss. He is now in hospice care and very ill. he currently has medicare supplemental plan F through AARP and a RX plan. I don't think I should renew this coverage?... Am I correct?...

Joann On Oct 6, 2014
Hi Ed, I just happened to see yourment as I was doing some research on this site. I'm an independent agent specializing in Medicare Supplement insurance. If you still need some assistance, please feel free to leave anotherment and I'll be happy to help you sort through the different Medigap plans. Joy...Unfortunately, Mutual of Omaha has had some pretty steep rate increases on Plan N in many states. Your recent health conditions would not increase your premium. The insurancepany is raising rates for everyone on your plan. You can always look into switching insurancepanies and lowering your premium.

ed On Sep 25, 2014
I a trying to determine what coverages I need. I am 67 and need to get part D and perhaps Medigap. Sorting thru all of the ridiculous and inane types of coverage is absurd. This exemplifies the reason we need A SINGLE PAYER system!!!!!!!

Ron Harris On Aug 22, 2014
To Joy, I don't know what state you live in, but in NC they can only increase 1 time per year and everybody does because the Medicare co-pays keep going up, and in NC you cannot be charged extra because you have had bills. I have MOO also and it has been great. Talk to your agent. Good Luck!

Joy Domstead On Aug 18, 2014
Mutual of Omaha has increased my Plan N supplement payment nearly every six months until I am getting close to having to pay $300. monthly. I did have a long stay in the hospital and time in a Rehab Center before being allowed to return home. I don't see this as being something other a plan dropping tactic which it will be for me if something isn't done soon.

Carm On Jul 25, 2014
My husband was diagnosed with a bone marrow disorder and needs transfusions about every 3 wks to 4 and also undergoing these special shots to help his red blood cells to develop. We became aware of this diagnosis in Mar 14. We now are now enrolled in bluecross/blue shield HMO 65 advantage plan. Can we during the enrollment period can we change to a medigap program with this pre-existing condition without being socked with a high premium or even be refused coverage? We have been on Medicare A and B for the past 5 yrs. when we retired at the age of 73. Is there also a possibility to get a decent coverage for the prescription plan D with medigap along with a vision and hearing coverage. Can Blue Cross Blue Shield since we have been members with them for the past 4 yrs. charge us extra premiums with the problem my husband has now. Please, please help me with some answers. I am very distraught and frustrated along with my head spinning. I have been on the inter, made calls and it appears no one can answer my questions or can help us. We are now paying $400/transfusion everytime he receives his transfusion, this adds up to about 2 transfusions/mo.

Barbara Moon On Jul 3, 2014
About how much would it cost for a medicap policy?

Ann McErlean On Apr 27, 2014
Whatpanies are licensed to cover RI Medigap policies? I want to reduce my premium costs, and under 65 on disability. Thank you. Ann