Medicare Supplement Insurance plans—also known as Medigap insurance—help cover gaps in coverage from Original Medicare (Parts A and B). Supplement plans help pay for some of the remaining healthcare costs left by Original Medicare, like copayments, coinsurance, and deductibles. Unlike Medicare Advantage plans, which are an alternative to Original Medicare, Medicare Supplement plans are meant to be purchased in addition to Original Medicare.
Understanding the Structure of Medicare Supplement (Medigap) Plans
The Medigap Alphabet: What Each Plan Covers
Medicare Supplement insurance plans are denoted by the letters A through N (plans C, E, F, H, I, and J are no longer sold). With this naming convention, it’s important to keep in mind that Medicare Part A and Part B (Original Medicare) are not the same as Medigap Plan A and Medigap Plan B.
The main benefit of Medicare Supplement plans is that they are all standardized and can be used anywhere that accepts Medicare. Since the plans are standardized, there is typically no difference in the benefits offered between insurers. For example, this means Medigap Plan A from one insurer is the same as the Medigap Plan A from another insurer.
Identifying the Gaps in Original Medicare
Did you know that Original Medicare only covers about 80% of Part B costs? That means you are typically left responsible for expenses like deductibles, coinsurance, and copayments. These out-of-pocket costs can add up fast, making Medicare Supplement plans an important consideration for Medicare beneficiaries.
Key Strategies to Save on Medicare Supplement Plans
Comparing Premiums for Identical Coverage
If you enroll in a Medicare Supplement plan, you will pay a monthly premium to the insurance company in addition to your Medicare Part B premium. The cost of your plan depends on various factors, such as the type of policy you buy, the insurance company, your location, and your age. Although premiums vary among insurance companies, the benefits of each standard plan are always the same.
The Impact of Your Enrollment Window
If you’re 65 or older, you can enroll in a Medicare Supplement plan beginning the first month you have Medicare Part B. The enrollment period lasts for six months and is the only time you can buy a Medicare Supplement insurance policy without being subject to medical underwriting.
Medical underwriting is a process where insurers review your health status, including pre-existing conditions and medical history, to decide whether to offer you a policy and how much to charge. By enrolling during this six-month window, you have a guaranteed right to buy any Medigap policy sold in your state, at the best available rate, regardless of your health. If you miss this period, and you don't have a specific "guaranteed issue right," insurers can deny you coverage, charge you higher premiums based on your health, or impose waiting periods for pre-existing conditions, which can lead to significantly higher costs and limited options.
Choosing a Plan Based on Your Coverage Needs
When choosing a Medigap plan, it's essential to consider your individual coverage needs and financial situation. Each of the standardized plans, identified by letters, offers different levels of coverage for your out-of-pocket costs, such as deductibles, copayments, and coinsurance. For example, some plans, like Plan G, offer comprehensive coverage but require you to pay the Part B deductible. Other plans, such as Plan N, have lower premiums but require copays for some doctor and emergency room visits. It’s important to consider the trade-off between a plan's monthly premium and the amount you're comfortable paying out-of-pocket for medical services. Since the benefits for a plan with the same letter are standardized, you can shop around for the best price among different insurers offering the same plan.
Taking Advantage of Discounts
One way to reduce the cost of a Medicare Supplement plan is through a household or spousal discount. While Medigap policies are standardized, premiums can vary significantly between carriers, and these discounts can make a substantial difference. Generally, to qualify, you and a spouse or another adult must both be enrolled in a Medigap policy with the same company and reside in the same household. However, the exact rules and discount percentages, which typically range from 5% to 15%, vary widely by insurer and state. Some companies may extend the discount to any two Medicare-eligible people living together, while others may offer it even if the second person is simply an adult who is a permanent resident, regardless of whether they have a Medigap plan. It’s important to check the specific eligibility requirements with different carriers in your state when comparing Medigap plans.
Re-Evaluating Your Plan
While Medigap plans automatically renew each year, it's financially beneficial to periodically reevaluate your plan. As premiums can increase annually due to age, inflation, and other factors, shopping for the same plan from a different insurance company could save you a significant amount of money. If your health has improved, you may also be able to switch to a less comprehensive plan with a lower premium, but be aware that you may need to go through medical underwriting to do so, which could result in a denial based on your health..
The Total Cost of Your Medicare Plan
Balancing Premiums with Out-of-Pocket Expenses
When choosing a Medigap plan, you're essentially deciding on a trade-off between your monthly premium and your potential out-of-pocket costs. Some plans may have a higher monthly premium but offer more comprehensive coverage. On the other hand, some plans may have lower monthly premiums but come with additional expenses like copayments and deductibles.. Evaluating your health and your anticipated use of medical services can help you determine which financial model is better for you. If you rarely visit the doctor, a plan with a lower premium and some copays might save you money in the long run. However, if you have chronic health issues and frequent appointments, a plan with a higher premium but minimal copays could offer greater financial predictability and peace of mind.
Accounting for Prescription Drug Coverage
When evaluating Medigap plans, it’s important to keep in mind that they do not cover prescription drugs. While they can help cover expenses not covered by Original Medicare, they do not include the benefits of Medicare Part D, which is a separate prescription drug coverage program. If you want prescription drug coverage, you may choose to enroll in a stand-alone Medicare Part D plan. Keep in mind you will pay a separate monthly premium for your Part D plan in addition to your Medigap and Part B premiums.
Special Considerations for Medicare Advantage
It is very important to understand that you cannot have a Medigap plan and a Medicare Advantage (Part C) plan at the same time. Medigap is supplemental insurance that works with Original Medicare, helping to cover its costs. Medicare Advantage is an alternative to Original Medicare; when you enroll in a Medicare Advantage plan, the private insurer becomes your primary source of Medicare benefits. Attempting to have both is not permitted, so you must choose one or the other.
How to Find and Enroll in the Right Medigap Plan
The Benefit of an Independent Broker
Navigating the complexities of Medicare and Medigap can be overwhelming, which is why an independent broker can be an invaluable resource. Unlike an agent who works for a single insurance company, an independent broker is contracted with many different carriers. This allows them to provide an unbiased comparison of numerous plans from various companies, helping you find the right fit for your specific health and financial needs. They can also help you identify which companies offer the best rates for the same standardized Medigap plan and assist you in finding discounts that you may not have known about, such as household or spousal discounts. This personalized guidance can save you time, effort, and money, ensuring you make the most informed decision possible.
SelectQuote Can Help You Review Medicare Supplement Plans
SelectQuote can help you navigate the complexities of Medicare, walking you step-by-step through the process to help you find the most affordable option that’s available to you. Save yourself time and let us do the comparing.
