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5 Steps to Buying a Medigap Policy

Most people in the Original Medicare Plan have some type of additional coverage to help with expenses that Medicare doesn't fully cover. Buying a Medicare Supplemental (Medigap) insurance policy is one way to cover the breaks in coverage. Once you have explored your health coverage options and have decided to buy a Medigap policy, the following five steps will help you find the plan that's right for you:

Step 1: Look at Your Health Care Costs

Look at how much you have spent on health care each year. As best you can, think about what your future health costs may be and list these also. Be sure to include your costs for any of the services covered by Medigap plans:

• Medicare Part A Deductible
• Medicare Part A (Hospital) Coinsurance
• Medicare Part B Deductible
• Medicare Part B (Doctor) Coinsurance
• Blood
• Skilled Nursing-Home Coinsurance
• Medicare Part B Extra Charges
• Foreign Travel Emergency
• Hospice Care

Step 2: Review and Compare Medigap Plans

Review Medigap Plans A-N in detail to decide which plan or plans have the benefits you need and want. Compare several plans to see which one has the right benefits for you.
Note: Plans E, H, I, and J will no longer be sold after May 31, 2010. But, if you already have or you buy Plan E, H, I, or J before June 1, 2010, you can keep that plan.

Step 3: Find the Medigap Insurance Companies

Find out which insurance companies sell Medigap plans in your state. Medicare Options Compare lists these companies. You can also call your state insurance department or State Health Insurance Assistance Program (SHIP) for help. The SHIP in your state provides information and one-to-one counseling to people with Medicare.

Step 4: Compare Insurance Companies

You will likely have several insurance companies to compare. Take your time and choose a company carefully.

For most people, premiums are a major factor in their decisions. Find out the premium each company would charge you for the Medigap plan (or plans) you are looking at. You can then compare the costs; you’ll notice that there can be big differences.

One reason for the wide range in price is the pricing or rating method the insurance company uses. While a policy may cost less when you first buy it, it may cost you more in the long run because of the rating method used. Here are the three ways policies are rated: attained-age, issue-age, and community-rated.

• Attained-age-rated policies generally are cheaper at age 65, but their prices increase automatically as you age.
• Issue-age-rated policies charge a rate based on your age when you first buy the policy, but the rate doesn't increase automatically as you age.
• Community-rated policies charge everyone living in your area the same rate regardless of age.

You might want to look for community-rated and issue-age-rated policies. They might be the best buy because, even though these policies might cost you more at age 65, they'll cost you less as you get older.

All policies increase premiums to keep up with climbing health care costs.
After you have compared premiums, there are several other things you can look for in an insurance company.

• Check to see if the companies you are looking at have arranged with Medicare to file your Medigap claims automatically.  If they do file claims automatically, ask if they charge extra for this service. Automatic claims filing can save you time and headaches.
• Check the financial soundness and stability of the companies in reports from independent-rating services. Check two of the rating services, Weiss Research Inc. or A.M. Best Company Inc., or look in your local library. As a rule, companies with an "A" or better rating are good choices.
• Check for complaints. The department of insurance in your state can tell you whether or not they have received complaints about a company.

Step 5: Choose an Insurance Company

Once you have compared Medigap premiums and looked into the stability of the insurance companies, take your time to sort through the information you have gathered.

Ask more questions and talk to people and groups that you trust. Help is available to you if you need it. Many SHIPs can provide you with more information about the insurance companies doing business in their state.