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What Is Medigap Insurance?

Portrait of senior man happy with his Medigap Insurance
This article will explain why you should have supplemental insurance

Medigap Insurance – Medigap, or Medicare supplement insurance, is one way you can reduce your out-of-pocket expenses after you’re enrolled in the Medicare program. This article will explain why you should have supplemental insurance, how Medicare supplements work, and who can enroll in one of these policies.

Why You Need a Medigap Plan

When people find out that Medicare only pays about 80% of your medical expenses, they often think that they don’t need supplemental coverage. After all, that’s about what their group plan paid, and that worked fine. It doesn’t work quite like that.

There are many out-of-pocket costs under Original Medicare. We won’t get too far into the details, but let’s look at some of the major ones. First, Medicare Part A. If you are admitted to the hospital, you’ll have to pay a $1,556 (in 2022) deductible before your insurance coverage begins. That deductible applies to every time you’re admitted, as long as there has been 60 days since your last hospital discharge. In addition, you’ll have a coinsurance amount due for each day you spend as an inpatient.

Medicare Part B has a smaller deductible – $233 in 2022. Once you’ve met that deductible, 80% of your expenses are paid by Medicare. However, an important fact is that neither Part A nor Part B has any out-of-pocket limits. There is no maximum on what you could have to pay each year. As you can see, all of those costs will add up quickly, which is why Medicare beneficiaries choose to supplement their coverage with either a Medigap plan or a Medicare Advantage plan.

How Medigap Plans Work

A Medigap policy will act as your secondary coverage, with Original Medicare as your primary insurance. Any costs that remain after Original Medicare pays will be sent on to your Medigap plan. The amount of coverage you have will depend on which of the plans you choose.

All Medicare supplement insurance plans are standardized. What that means is that regardless of where you purchase a particular plan, its coverage will be the same as anywhere else. There are ten different Medigap plans to choose from, each named by a letter of the alphabet. They include Plans A, B, C, D, F, G, K, L, M, and N. In addition, there are high-deductible versions of Plans F and G. So, if you purchase Plan N from Company A in California and your friend purchases Plan N from Company B in Texas, you will both have the same coverage.

You can use your Medigap policy with any provider or facility that participates in Medicare. There are no provider networks to worry about. As long as your healthcare professional accepts Medicare assignment, they’ll also accept your Medigap plan. This gives enrollees a lot of freedom to choose their providers and know that even if they’re traveling, they’ll be covered wherever they go.

Pulling out empty pants pockets explains how Medigap Plans Work
Medicare supplement insurance, is one way you can reduce your out-of-pocket expenses

The Cost of Medicare Supplements

Medigap premiums vary among companies. The first determining factor is which of the ten plans you choose. Plans with more coverage, like Plans F and G, will cost more than plans that do not offer the same comprehensive coverage. Another significant factor in the price is where you live. If you live in a state or zip code that has a higher cost of living, you can expect to pay more for your Medigap premiums.

The insurance carrier will also use your age, gender, and tobacco status to set your rate. Men pay more than women, older individuals pay more than younger ones, and tobacco users pay more than non-users. Lastly, some companies tend to have higher rates than others. This is one reason it’s important to work with an independent broker – they can shop around at different carriers to make sure you get a competitive rate.

Medigap premiums do typically increase as you get older. You can expect an increase around the anniversary date of your plan. However, some plans increase at faster rates than others, and some insurance companies have a history of higher rate increases. Again, this is why it’s important to work with an independent agent who knows the history of insurance companies.

Medigap Enrollment

There are no specific enrollment periods when it comes to Medicare supplements. You can enroll or switch plans at any time of the year. However, some times are better than others.

For example, you’ll have guaranteed issue rights when you first become eligible for Medicare at 65. At that time, no insurance carrier can deny you coverage based on your health history. You will not have to pass medical underwriting, and your premiums will not be higher because of current or past health conditions.

In most states, you’ll need to go through underwriting outside of your Initial Enrollment Period. However, some states have special rules around guaranteed issue rights, so you may find it easier to switch plans if you live in one of those states.

If you’d like to learn more about Medigap policies and other Medicare options, contact us to speak with one of our Medicare advisors. We will answer any questions you have, help you select a plan, and complete the enrollment process for you. Call us today and schedule a complimentary consultation.

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