Insights Into Medigap
Many Americans who enroll in original Medicare also purchase a supplemental insurance policy, colloquially known as “Medigap.” Medigap covers some or all of the out-of-pocket costs associated with original Medicare — deductibles, copayments and coinsurance — helping to reduce financial risk. However, there is a wide array of Medigap plans with a variety of different benefits. To help simplify it for consumers, Medigap plans are labeled by letter (A, B, C, D, F, G, K, L, M and N).1
An important fact regarding Medigap to keep in mind is that an enrollee is guaranteed to qualify for coverage only during the first six months after initially enrolling in Medicare. After that, insurers are permitted to conduct medical underwriting, which means they can charge higher premiums based on your health history and any pre-existing medical conditions. However, once you purchase a Medigap policy, federal law guarantees renewability as long as you consistently pay your premiums.2
Currently, only Connecticut, Massachusetts, Maine and New York have laws that require insurers to issue Medigap policies regardless of health status.3
The Initial Enrollment Period, or IEP, for Medicare lasts seven months, beginning three months before you turn 65 years old, including the month you turn 65 and the following three months. If you have already started drawing Social Security benefits by then, you may be automatically enrolled in Original Medicare (Part A and Part B).4 Things can get complicated if you continue working past age 65 and have employer-sponsored health care coverage. If you need help deciphering all of the fine print and regulations, we may be able to suggest resources to help.
Each year, about 10 million people buy Medigap policies to accompany their Medicare plans. While exact benefits vary by policy, Medigap usually covers all or most expenses that are covered by Medicare but not paid in full by Parts A and B (Part B pays only 80 percent of covered expenses).5 The cost for Medigap policies varies based on a number of factors.
The most comprehensive Medigap policies are Plans C and F, which offer 100 percent coverage of Part A coinsurance charges and hospital costs up to a year after Medicare benefits are exhausted. They also pay 100 percent of Part B coinsurance or copayment amounts, hospice care coinsurance, skilled nursing facility coinsurance, and deductibles for Part A and B. Be aware that, starting in 2020, Medigap C and F plans will be phased out for new buyers; current policyholders will be able to retain their plans, but premiums could increase. At that time, Medigap D and G plans will offer the most comprehensive coverage.6
Here’s something to remember: If you’ve been paying for a Medicare Advantage plan and then decide to switch to original Medicare during open enrollment season, you may be declined Medigap coverage due to your medical history. Therefore, the older you get, the more important it is to consider sticking with one plan (Medicare Advantage) or the other (Medicare plus Medigap).
In 2017, 65-year-old policyholders bought more than a third of all new Medigap policies. Among them, Plan F was the most popular, representing slightly more than 46 percent of the total sales premium.7
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1 Darla Mercado. CNBC. July 31, 2018. “Why you may not be able to count on this additional Medicare coverage.” https://www.cnbc.com/2018/07/31/why-you-may-not-be-able-to-count-on-this-additional-medicare-coverage.html. Accessed Sept. 4, 2018.
3 Judith Graham. Kaiser Health News. July 26, 2018. “No Gaps In Understanding: Here’s Your Primer On Medigap Coverage.” https://khn.org/news/no-gaps-in-understanding-heres-your-primer-on-medigap-coverage/. Accessed Sep. 4, 2018.
4 Justin Adsit. Forbes. Aug. 15, 2018. “Medicare Enrollment Periods And Deadlines: When Should You Sign Up?” https://www.forbes.com/sites/forbesfinancecouncil/2018/08/15/medicare-enrollment-periods-and-deadlines-when-should-you-sign-up/#767e5787541d. Accessed Sept. 4, 2018.
5 Philip Moeller. PBS Newshour. July 18, 2018. “How do Medigap plans work? Here’s a tutorial.” https://www.pbs.org/newshour/economy/making-sense/how-do-medigap-plans-work-heres-a-tutorial. Accessed Sept. 4, 2018.
6 Mark Miller. Reuters. July 19, 2018. “U.S. Medigap plans fall short on protections for pre-existing conditions.” https://www.reuters.com/article/us-column-miller-medigap/u-s-medigap-plans-fall-short-on-protections-for-pre-existing-conditions-idUSKBN1K91IK. Accessed Sept. 4, 2018.
7 Genre.com. August 2018. “Medicare Supplement – Highlights of 2017 U.S. Market Survey.” http://www.genre.com/knowledge/publications/surveylhmedsuppsummary18-en.html. Accessed Sept. 4, 2018.
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