What Is Medigap?

Senior Woman Portrait being explained What is Medigap

What Is Medigap – Medigap insurance plans are also referred to as Medicare supplements. They are one of the two options Medicare beneficiaries have to reduce their out-of-pocket medical expenses. This article will explain how Medigap plans work, why you need one, how much they cost, and who can enroll.

Do I need a Medigap plan?

You do not have to enroll in Medigap. There are no penalties if you don’t enroll in either Medigap or Medicare Advantage, which is the other way you can supplement your Original Medicare benefits. So, no, you don’t have to enroll in Medigap. However, let’s review the expenses you’ll have if you choose not to.

First, let’s look at Medicare Part A. Right off the bat, you’ll have a deductible of $1,556 if you get admitted to the hospital. Plus, you’ll have to pay that deductible each time you’re admitted, as long as 60 days have passed since you were discharged. In addition to the deductible, you’ll have a copay expense for each day you’re in the hospital past 60 days.

Next, Medicare Part B expenses. You will have a $233 annual deductible, after which Medicare pays on an 80/20 split, with you paying about 20% of the cost for services. While that doesn’t sound too bad, you should know that there is no out-of-pocket maximum on either Part A or Part B. There is no limit to how much you could be responsible for.

To help reduce all these expenses, nearly every beneficiary enrolls in either a Medicare supplement or a Medicare Advantage plan.

How do Medigap plans work?

If you enroll in a Medicare supplement plan, it will act as your secondary insurance plan. Original Medicare will remain the primary payor. Once Original Medicare pays on a claim, it will be sent to the Medicare supplement for payment. The amount the plan pays will depend on which Medigap policy you have.

You have about ten options when it comes to Medicare supplements. Each Medigap plan is called by a letter of the alphabet. They include Plans A, B, C, D, F, G, K, L, M, and N. One thing that makes Medigap plans easy to understand is that they were standardized by the federal government. That means that no matter where you purchase a plan, it will always have the same coverage and benefits. In addition, they do not change from one year to the next.

Another nice feature of Medigap plans is that you can use them almost anywhere. As long as your healthcare provider accepts Medicare, they will also accept your Medicare supplement plan.

senior couple counting money and taking notes in notebook during relocation planning out Medigap plan cost
Medigap premiums are largely dependent on which plan you enroll in and where you live.

How much do Medigap plans cost?

Medigap premiums are largely dependent on which plan you enroll in and where you live. The more coverage your plan includes the higher your premium. The two plans with the highest premiums are Plans F and G. Also, if you live in a higher cost-of-living area, you’ll pay a higher monthly premium for your Medicare supplement.

Other factors that help determine your premium are your age, gender, and tobacco use. Lastly, each insurance carrier is allowed to set their own rates, so you should work with an independent insurance agent to make sure you’re getting the most competitive rates on the market. Remember, Medigap plans are standardized, so there is no reason to pay more for the same policy!

Since our healthcare needs tend to increase as we age, so will your Medigap plan. You can expect an annual increase on your anniversary date. That being said, rate increases are not set in stone. Some years you may have a bigger increase than others, and sometimes you may not see an increase at all. If you work with an insurance brokerage, they’ll be able to tell you the history of rate increases of the plan and carrier you’re considering.

Who can enroll in a Medigap policy?

Anyone who is already enrolled in Parts A and B can enroll in a Medigap plan. There are no enrollment periods that are specific to these plans, so you can choose to enroll or change your current plan at any point during the year.

However, you may not always have guaranteed issue rights to a plan. “Guaranteed issue” means that a company cannot deny you a policy based on your health history. Everyone has these rights during the Initial Enrollment Period, which is a 7-month window around your 65th birthday. You’ll be able to choose any plan you want with any insurance company you want.

Outside of your IEP, you may not have these same rights. Some states do have limited guaranteed issue rules at other times of the year. For example, several states have a birthday rule, which allows you to switch to a plan with the same or lesser benefits without undergoing medical underwriting.

If you’d like to learn more about Medicare supplements or have other questions about Medicare, contact one of our Medicare experts. We are happy to answer all your questions and help you find a plan that suits your needs. Give our office a call today to schedule your appointment!

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