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What is a Medicare Supplement?
Medicare: An Overview
Before we look into what a Medicare Supplement is and why it is needed, it is important to understand the basics of a Medicare coverage. Medicare is insurance provided by the federal government to people who are at least 65 years old, or below 65 but with certain disabilities and/or those with permanent kidney failure (End-Stage Renal Disease). Every American that falls under any of these three conditions is qualified for coverage and you only need to file for eligibility to make it official.
Medicare has four parts: A, B, C and D. Part A pertains to hospital insurance, Part B refers to medical insurance, and Part D refers to coverage for prescription drugs. Part C, also called Medicare Advantage, is not part of the U.S. government’s coverage and is acquired through private insurance agencies. It is considered an alternative to Medicare. Part D is also provided through private agencies, but the rules are set by the government..
The coverage of Part A, B, and D are as follows:
| Medicare Coverage Per Plan
|
||
| Part A | Part B | Part D
|
| · skilled nursing facility care
· inpatient care in a hospital setting · home health care · hospice care |
· outpatient care
· services from doctors’ clinics and other health care providers · home health care · many preventive services such as shots, annual wellness visits and screenings, durable medical equipment (DME) such as walkers, hospital beds, wheelchairs, etc. |
· the cost of prescription medications |
Not all healthcare expenses are covered by Medicare, mainly because of the limited government budget. For that reason, Medicare Supplements were created. Also called Medigap, these supplementary policies are designed to help pay for out-of-pocket expenses that are not covered by the original plan.
Supplementation can also be through private insurance policies, though Medigap plans are recommended because their coverage and distribution are government sanctioned.
Medicare Supplement Defined
What is Medigap and Why Was it Created?
Medicare Supplement, also known as Medigap, is a private health insurance policy designed by the federal government to help defray the costs that are not covered by Original Medicare plan.
While the government is not able to fully cover the cost of healthcare for seniors and differently abled, what it did was create a set of policy plans that private insurers can distribute and sell while still abiding by the guidelines the Health Department has set. This way, Americans have access to standardized basic health care services without worrying too much about the expense.
Medigap is not free and Medicare will not pay for expenses related to it. Seniors will be asked to pay a monthly premium out of the own pockets, though in varying degrees depending on the coverage of the Supplement plan they choose. Different insurance agencies might price their Medigap offerings differently if they include certain add-ons that other providers do not give, but the basic benefits will be the same across states.
What Medigap Covers
Medicare Supplements cover the part of the health care expense that Original Medicare is not able to shoulder. For example, if a person gets hospitalized, Medicare will first pay for the approved amount based on its guideline, and then Medigap pays for the remainder according to the chosen policy’s guidelines. In some cases, policy holders’ costs will be paid for 100%.
Note that Medicare Supplements have a standardized list of benefits that do not cover long-term care, dental or vision care, private duty nursing, hearing aids or eyeglasses. These items will have to be paid for out-of-pocket or through a separate insurance policy from a private insurer.
Insurance Policies That Are Not Medicare Supplements
Insurance providers may provide Medicare-looking policies that are not to be mistaken as Medigap. This means that they have a different premium and are not standardized by the government.
Insurance Plans That Are NOT To Be Mistaken as Medicare Supplements |
· Medicaid
· Medicare Part D (Prescription Drugs) · Medicare Part C (Medicare Advantage, ex. PPOs and HMOs) · TRICARE · Employer or Union Plans · Long-Term Care Insurance Policies · Veterans’ Benefits · Indian Health Service, Tribal and Urban Indian Health policies · Qualified Health Plans that are sold in the Health Insurance Marketplace |
Requirement to Get a Medicare Supplement Policy
In order to get a Medicare Supplement plan, you should already have both Original Medicare Part A and Part B.
Important Things To Know Before Buying a Medigap Plan
- Medigap covers only one person. Spouses will have to purchase a plan separately.
- Payment for Medigap monthly premiums will be in addition to what you are paying for Medicare Part B.
- If you are currently employed and have a Medicare Advantage plan through your company, you may apply for Medigap before your private coverage ends. You can purchase a Medigap plan as long as your Medicare Advantage is ending.
- You may purchase a Medigap plan from any licensed insurance agency in your location during your Open Enrollment period.
- If you already have a Medigap plan but want to change to another policy, you will have to contact your insurance provider directly, not the agent who sold it to you.
- If you develop health issues while on your Medigap plan, your insurance provider is not allowed to cancel your policy as long as your monthly premiums are paid.
- Check if your state offers additional benefits to the standardized Medicare Supplement plans to see if you can get extra protection.
10 Types of Medigap Plans
Benefits |
A |
B |
C |
D |
F* |
G |
K |
L |
M |
N |
Part A coinsurance and hospital expenses (up to 365 days after Medicare benefits are used up) |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
Part B copayment or coinsurance |
100% |
100% |
100% |
100% |
100% |
100% |
50% |
75% |
100% |
100% |
First 3 pints of Blood |
100% |
100% |
100% |
100% |
100% |
100% |
50% |
75% |
100% |
100% |
Part A hospice care copayment or coinsurance |
100% |
100% |
100% |
100% |
100% |
100% |
50% |
75% |
100% |
100% |
Skilled nursing facility care coinsurance |
x |
x |
100% |
100% |
100% |
100% |
50% |
75% |
100% |
100% |
Part A deductible |
x |
100% |
100% |
100% |
100% |
100% |
50% |
75% |
100% |
100% |
Part B deductible |
x |
x |
100% |
x |
100% |
x |
x |
x |
x |
x |
Part B excess charges |
x |
x |
x |
x |
100% |
100% |
x |
x |
x |
x |
Foreign travel emergency expenses (based on plan limits) |
x |
x |
80% |
80% |
80% |
80% |
x |
x |
80% |
80% |
Notes:
- Out-of-pocket limit in 2019: $5,560 for Plan K and $2,780 for Plan L
- Plan F is also available as a High-Deductible plan. Policy holders must pay for Medicare-approved expenses up to a $2,300 deductible amount (2019) before Medigap pays anything.
- Plan N pays Part B coinsurance in full, except for a $20 copayment for certain clinic visits and a $50 copayment for emergency room visits that do not end up in a hospital admission.
The Best Time to Buy a Medigap Plan: Open Enrollment Period
The Open Enrollment Period starts on the first day of the month when you turn 65 years old and ends 6 months after. Remember that it will only be valid if you are already enrolled in Medicare Part A and Part B.
|
For example, if your 65th birthday is June 15, the Open Enrollment Period starts June 1 and will end November 30. |
Take note that during this period, insurance providers cannot deny your application, even if you have existing health issues. The insurer will not be allowed to use medical underwriting to assess your application, which means you are guaranteed of a Medigap policy. It cannot charge you more for having an existing health problem, nor that can it make you wait for coverage to begin under a pre-existing condition waiting period of 6 months.
The Medigap Open Enrollment period gives you a 100% guarantee that your application will be approved.
What happens if you miss the Open Enrollment period?
If you do not choose a Medigap policy within this 6-month Open Enrollment period, the insurance provider may impose add-on fees, make you wait 6 months, or deny your application entirely.
Medicare Select
Medicare Select is a type of Medicare Supplement plan that is sold in certain states to be used within a specific network of hospitals and doctors’ clinics, except during an emergency. Medicare Select typically costs less than the usual Medigap plans although its coverage is exactly the same as Medigap.
The guidelines are the same: Original Medicare will still pay for the part that it covers, and then your Medicare Select policy will shoulder the rest as per its guidelines as long as you seek services in a health care provider that is part of its network.
If you live in an area where there is easy access to the members of the Medicare Select network, you may choose this option to save on monthly premiums.
States that offer Medicare Select |
Alabama, Arizona, California, Florida, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio, Oregon, Texas, Washington, and Wisconsin |
Switching Your Medigap Policy
There are four reasons why you might want to give up your current Medigap plan and seek a new one:
- You need more benefits than before
- Your current plan has benefits you don’t really need
- Your current plan’s benefits are all right, but you want to change your insurance provider
- Your current plan’s benefits are all right, but you want to look a policy that will cost less
If you decide to change your current Medigap policy, you will have to promise that you will cancel the first one when you apply for the new plan. You will be given 30 days to make a decision, called a “free look period,” to keep the new policy. This 30-day period begins when you acquire the new plan and you will be asked to pay for both premiums for one month.
Note that you cannot just switch Medigap policies whenever you feel like it. Federal law states that you can only change your plan if you are within the 6-month Open Enrollment period or qualify under a specific situation for guaranteed issue rights.
Would I need to wait a certain length of time before I can switch to another Medigap plan?
No, you won’t.
If your old Medigap policy has been with you for less than 6 months, the insurance provider may make you wait for 6 months for coverage of an existing health condition. However, if your old plan has the same coverage and if you have had it for more than 6 months, the insurance company cannot exclude your existing condition.
If your new Medigap policy offers benefits that are not part of your old plan, you may be asked to wait 6 months before that benefit can be covered, regardless of the length of time you’ve had your old policy.
Medicare Supplement FAQ
Why is it important to buy a Medigap plan when you are first eligible?
When you are first eligible, not only will you get better prices and choices among the available policies, the insurance provider will also not be allowed to conduct medical underwriting. This is why you need to understand the Open Enrollment period guidelines, because during this time no insurance provider can decline your application, even if you have a pre-existing health condition. The price of your monthly premiums will be the same as those with good health.
What are guaranteed issue rights and when do I have them?
Guaranteed issue rights are the rights you have to acquire certain Medicare Supplement policies based on specific situations and when your Open Enrollment period has passed.
Examples of situations where you have guaranteed issue rights, what Medigap policy you can buy and when you must buy it.
| Examples of Guaranteed Issue Rights | ||
| Situation | What Medigap Policy to Buy | When You Must Buy It |
| If you have a Medicare Advantage plan and
1) that plan stops giving services in your area, 2) when it is leaving the Medicare network, or 3) when you move out of its service area |
You may purchase Medicare Supplements A, B, C, F, K, or L | within 60 calendar days before the end of your existing health care coverage, but not later than 63 calendar days after it ends |
| If you joined a Medicare Advantage plan or Programs of All-Inclusive Care for the Elderly (PACE) and when you first eligible for Medicare at 65 years and then you decide to switch to Original Medicare within the first year | You may purchase any Medicare Supplement | within 60 calendar days before the end of your existing health care coverage, but not later than 63 calendar days after it ends |
| If you have Original Medicare plus a Medicare Select plan and then you move out of that Select plan’s service area. | You may purchase Medicare Supplement plans A, B, C, F, K, or L | within 60 calendar days before the end of your existing health care coverage, but not later than 63 calendar days after it ends |
| You leave a Medicare Advantage plan or drop a Medigap policy because the provider did not follow the guidelines | You may purchase Medicare Supplement plans A, B, C, F, K, or L | within 60 calendar days before the end of your existing health care coverage, but not later than 63 calendar days after it ends |
There are other situations that apply to Medigap guaranteed issue rights. To learn more about your options specific to your case, get in touch with our expert Medigap advisors to determine what will best work for you.
Can my Medigap insurance company drop me?
The main reasons why your insurance provider might drop you from its services are:
– You weren’t honest during the Medigap plan application,
– You stopped paying your monthly premiums, and
– The insurance company goes insolvent or bankrupt.
I found out Medicare Supplement Plan F will no longer be sold after 2020. If I am currently on Plan F, will I still be able to keep it?
Yes. If you have a Medigap plan F before 2020, you can keep it well after that year. However, you might notice an increase in your monthly premiums because of 1) the reduced number of members under Plan F, and 2) the aging risk pool of beneficiaries who remain with Plan F.
What can you do?
- You can choose to stay with current Plan F policy.
- You can move to another Medigap policy that has a lower premium.
- You can move to a Medicare Advantage plan that costs less.
Talk to our expert Medicare Supplement advisors to find out what works best for your specific health situation and budget. If you need more help understanding how Medigap benefits you in your senior years and in choosing what types of policies are most efficient, we will gladly discuss all alternatives.
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