Q. What is Medigap insurance? Do I need it?
A. Medicare supplemental insurance is not part of the Medicare program. It is private insurance you can purchase separately, for an additional premium, to cover some or most of your out-of-pocket costs if you’re enrolled in the traditional Medicare program. That’s why it’s often called “Medigap.”
You can buy one of 10 standardized Medigap policies. Each policy is labeled with a letter of the alphabet — A, B, C, D, F, G, K, L, M, N — and offers a different range of benefits from the others. All policies include coverage for certain core benefits, such as copays for Part B services and extended stays in the hospital. For example: Medicare pays 80 percent of a doctor’s bill and your share is 20 percent. Medigap pays your share and you pay nothing. Some policies provide more benefits — for example, covering additional out-of-pocket costs in Medicare and emergency medical treatment abroad. Generally: the greater the coverage, the higher the premium.
If you’re age 65 or older and buy a Medigap policy within six months of enrolling in Part B, you get full federal guarantees and protections. This means that a Medigap insurer cannot turn you down or charge a higher premium because of current or past health problems and must cover preexisting medical conditions. (However, in some circumstances an insurer may delay coverage of treatment for a preexisting condition for a period, typically six months, after purchase. Some state laws give additional consumer protections in this regard.)
There are several other situations in which you’re entitled to these protections — such as losing employer health coverage, COBRA or retiree benefits that serve as secondary coverage to Medicare, or if you’re enrolled in a Medicare Advantage plan that closes down or you move out of its service area. In these circumstances, the time frame for buying a Medigap policy is about two months.
If you’re under 65 and have Medicare due to disability, these federal guarantees do not apply, although some states have similar protections. See related article: “Getting Medigap Insurance Under Age 65.”
Things to remember when considering Medigap insurance
- You pay a premium for Medigap in addition to your Medicare Part B premium — Medigap doesn’t cover that premium.
- You can use Medigap only to cover out-of-pocket costs in the traditional Medicare program. You can’t use it if you’re enrolled in a private Medicare health plan. (For the differences between traditional Medicare and Medicare Advantage plans, see a related article, “Explaining Medicare Options.)
- You can’t use Medigap to cover out-of-pocket costs for outpatient prescription drugs, unless you’re still using an H, I or J policy that dates from before 2006. (The law prohibited insurers from selling new Medigap policies that cover prescription drugs after the Medicare Part D drug benefit became available.)
- You can generally use Medigap to cover the out-of-pocket costs specified in your policy when obtaining Medicare services from any doctor, hospital or other provider anywhere in the country. However, if you buy a type of policy called “Medigap SELECT” — which typically has a lower premium than most Medigap policies — it covers your bills only when you go to providers in its network, except in an emergency.
Comparing Medigap policies
Each lettered Medigap policy must by law offer exactly the same set of benefits, regardless of the insurer that sells it. But insurers still charge widely varied premiums, so it pays to shop around. You can compare policies, and find contact information for the insurers that sell them, by following these steps:
1. Go to the Medigap policy search page on Medicare’s website, at http://medicare.gov/find-a-plan/questions/medigap-home.aspx.
2. Enter your ZIP code, ignore the question on health status and check "No" to the question on whether you already have a Medigap policy. Click on "Continue."
3. You will now see a chart listing each of the different Medigap plans with broad information about them.
4. To see cost and benefit details of each kind of policy, click on the letter name of each plan.
5. To see which companies sell any plan, click on the "Companies offering this policy" link at the top of the "details" page for that plan. (Or go back to the main chart and click on the link in the right-hand column for that plan.) To find out the premium you would be charged, you will have to contact the companies by phone or through their websites, using the contact information provided for each company.
6. This page also tells you each insurer's rating method, which affects the premiums you will be charged. "Community rating" means that the premium is the same for everybody, regardless of age and cannot increase as you become older. "Issue age rating" means that the premium is based on your age when you first buy the policy and cannot increase as you grow older. "Attained age rating" means that the premium increases with every birthday. (In all these cases, the premiums can go up for other reasons, such as inflation.)
Patricia Barry is a senior editor for AARP Integrated Communications and author of "Medicare For Dummies" (Wiley/AARP, October 2013)