Medicare Supplemental Insurance Plans
Although private-sector insurance companies underwrite, price and administer Medicare Supplement—or “Medigap”—policies, they must follow strict guidelines set by the federal government. In fact, the Feds dictate precisely what forms private companies can offer. Working from these templates, each state then approves the Supplement plans for sale within its borders.
There are many types of Medicare Supplement coverage available; these are called Plans A, B, C, D, F, G, K, L, M and N. (These letter denominations are completely separate of and unrelated to Medicare Parts A, B, C and D. But people often confuse the two sets—and this confusion is understandable.
Medicare Supplement, or Medigap, plans fill in some of the gaps in coverage in Original Medicare.
What is Medicare Supplement Insurance?
Medicare Supplement, or Medigap, plans fill in some of the gaps in coverage in Original Medicare, such as deductibles, coinsurance, copayments, and overseas emergency health coverage. These are costs you’d normally be responsible paying out of pocket for under Original Medicare. It’s important to note that prescription coverage is not included with current Medigap plans. You can get coverage through a Medicare Part D plan.
What are the Benefits of a Medicare Supplement Plan?
Medicare has substantial deductibles and copayments, and you can easily spend thousands of dollars each year for out-of-pocket medical expenses. Medigap insurance provides coverage for these “gaps” in your Medicare coverage and can save you tons of money. Here are some benefits of a Medicare Supplement plan:
- Freedom to choose any doctor or hospital: Unlike Medicare Advantage which has a network of doctors you have to select from that can change midyear.
- Predictable out of pocket expenses: With Medicare Supplement you will always have an idea what you will need to pay. With Medicare Advantage deductibles and copayments can change every year, which can become extremely confusing.
- No referral necessary: Unlike Medicare Advantage where a referral is necessary for most plans, which is just more work for you.
- As long as you pay your premium your plan cannot be dropped.
- With Medicare Supplement you have the ability to travel the country and see any doctor. (Medicare Advantage does not allow this)
To be eligible to enroll in a Medicare Supplement plan, you must be enrolled in both Medicare Part A and Part B. Some states may offer Medigap plan options to beneficiaries under 65 who qualify for Medicare because of disability or certain conditions (such as end-stage renal disease). Federal law doesn’t require states to sell Medicare Supplement insurance to beneficiaries under 65. However, depending on where you live, some states may offer Medigap coverage to beneficiaries under 65; eligibility and the specific available options may vary by state. If you’re a Medicare beneficiary under 65 and interested in purchasing Medicare Supplement insurance, contact your state insurance department to learn if you’re eligible for Medigap coverage in your state.
In 47 states (excluding Massachusetts, Wisconsin, and Minnesota), there are 10 standardized Medigap plans available; each labeled by the letters A through N. These plans are available through private insurance companies, and insurance companies aren’t required to offer all 10 plan types. However, any insurance company that sells Medicare Supplement policies must offer at least Plan A and, if they offer any other Medigap policy, must also offer either Plan C or Plan F.
Each lettered plan offers the same benefits no matter where you buy the plan (although prices and availability may vary). For example, a Medigap Plan M in Texas has the same benefits as a Medigap Plan M in Colorado. But the different lettered plans cover different portions of Original Medicare costs, as you can see in the following chart. *Please note that Medigap plans are different from the “parts” of Medicare. That is, Medicare Part A, Part B, Part C, and Part D are not the same as Medigap Plan A, Medigap Plan B, Medigap Plan C, and Medigap Plan D.
(See Chart Below)
Yes = the plan covers 100% of this benefit
No = the policy doesn’t cover that benefit
% = the plan covers that percentage of this benefit
N/A = not applicable
Like almost all insurance plans, Medicare Supplement policies do require premium payments. Because Medigap plans are offered through private insurance companies, the costs associated with each plan may differ. For example, a Medigap Plan M you buy in Boston may not cost the same as a Medigap Plan M you buy in Laredo, but the coverage would be the same.
Each private insurance company offering Medicare Supplement plans can set its own plan premiums using one of these rating systems:
- Community-rated: Each beneficiary is charged the same monthly premium, regardless of age. These premiums will not increase as you age, but may increase over time as a result of inflation.
- Issue-age-rated: The premium cost of these plans is based on your age when you first buy the Medigap policy. In general, premiums are lower for younger buyers. These premiums will not increase as you get older, but may increase as a result of inflation.
- Attained-age-rated: Premiums are set based on your current age and increase as you get older. Premiums are lower for younger buyers but increase over time.
Some factors that might affect the costs of a Medigap plan:
- Some insurance companies may offer discounts to women, people who are married, and non-smokers.
- Insurance companies might give discounts to those who pay yearly, or who pay their premiums using electronic funds transfer.
- You may be able to purchase a high-deductible option for Medigap Plan F, which might offer a lower premium, but requires you to pay a substantial deductible before the plan begins its coverage.
- If you enroll in a Medicare SELECT plan (a type of Medigap policy that may limit you to using doctors in the plan’s network), you might have a lower premium.
Besides your Medigap plan premium, you still need to pay your Original Medicare premium(s) as well; Medigap doesn’t cover your Medicare Part A or Part B premium. If you worked at least 10 years while paying Medicare taxes, Part A is premium-free. But most beneficiaries pay a monthly Part B premium.
Any doctor or medical facility that accepts Medicare will accept Medicare Supplement Insurance.
Medicare Supplement enrollees are guaranteed renewal each year unless the application contained errors or the premium is unpaid. The benefits in each plan remain the same each year.
A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you’ll each have to buy separate policies.