- Medicare Supplements are individual policies. There are no husband-wife policies.
- There are, however, many companies who offer a discount for members of the same household.
- Medicare Supplements are ‘guaranteed renewable’. They can never be cancelled unless you don’t pay your premium.
- Medigap coverage doesn’t change each year.
- You can change your supplement plan at any time. There is NOT an annual enrollment period.
- Rates vary based on age and zip code (in most cases).
- In some states, you don’t have to pay a higher rate because of tobacco use when you are in open enrollment.
- You have a 63-day ‘guaranteed issue’ period when you are losing employer coverage.
- No current Medicare Supplements include drug coverage.
- Some companies may offer some discount programs (for drugs, eyewear, hearing etc) to go along with the supplement.
- No plans cover routine dental or vision, nor does Medicare.
- You get the same rate signing up with an agent or directly through the insurance company.
Medicare Supplement Insurance
Medicare Supplements (also called Medigap) are plans sold by private companies that are designed to fill in the “gaps” in “original” Medicare (Medicare Part A and Medicare Part B). For these plans, you pay a monthly premium, and then in most cases, do not have any (or very few) out of pocket costs at the doctor or hospital. The advantages to the supplement plans are many, and we’ve elaborated on those below, as well as explaining Medicare and Medigap coverage.
Medicare Coverage Basics
Before you can understand much about Medicare Supplement plans, it is important to have some understanding about Medicare itself – what it covers, does not cover, and how it works.
What are the Parts of Medicare
There are four parts of Medicare:
Medicare Part A is the part that covers hospital and inpatient services. You get this automatically from paying into the Medicare system during your working life.
Medicare Part B is the part of Medicare that covers doctor's office and outpatient services (like labwork, etc.). You must sign up for Part B in order to have this part of Medicare. There is a $115.40/month premium for this that is generally paid through a Social Security deduction (unless you are grandfathered in at a lower Part B premium rate).
Medicare Part C is an optional part of Medicare that is also known as Medicare Advantage. If you wish to stay with "original" Medicare (Medicare Parts A & B), you do NOT need to sign up for Part C. In fact, if you sign up for 'C', all of your coverage is provided through the private Part C company and Parts A & B no longer provide your benefits.
Medicare Part D is the prescription drugs part of Medicare. This part of Medicare is also optional and provided through private companies. In order to have prescription drug coverage, you must sign up for Part D. You can do this by calling 1-800-MEDICARE or going through an independent agent.
Although the parts of Medicare provide relatively comprehensive coverage, there is still a need for supplemental insurance, and that is where Medigap plans come in. With ONLY Medicare coverage, you are responsible for 20% of charges, with no maximum limit. This can be 20% of a huge amount if you have health problems, have to have a surgery or ongoing treatment etc. There is NO “cap” on the amount you will owe if you have only Medicare.
Medigap Coverage Chart and Terms
The chart below is the standardized plans chart that all companies must go by. You can also view it here: Medigap Coverage chart.
- Basic Benefits – Basic Benefits of a Medicare Supplement policy are benefits offered by all plans (except K and L, which are much less common plans). These basic benefits are:
- Part A (hospitalization) coinsurance for 365 days after Medicare benefits end.
- Part B (medical expenses) coinsurance, which is generally 20% of the Medicare-approved expenses. See note on Plan N, which has some cost-sharing.
- Blood. Basic benefits include the first 3 pints of blood each year.
- Hospice coverage. This includes the Part A coinsurance and respite care expenses.
- Part A Deductible – This deductible is $1,132/benefit period for 2011. It must be met before the hospital coverage part of Medicare begins. All plans (except A and M, which only covers 50%) cover this deductible in full.
- Part B Deductible – This deductible is $140/year for 2012. It must be met before the Part B (medical expenses) part of Medicare begins. Plans C and F cover this deductible – the other plans do not.
- Part B Excess Charges – Part B Excess charges are when a doctor charges more than the Medicare-approved amount. This happens, according to some surveys, in about 1% of the instances where a doctor takes Medicare patients. The amount of “excess” that a doctor can charge is limited by law to 15% over the Medicare-approved amount (and some states have a lower percentage restriction). Plans F and G are the only two plans that cover this.
- Foreign Travel Emergency – Foreign travel emergency is coverage in a supplement plan that would cover you when traveling abroad. There is a separate $250 deductible to this benefit. Also, there is a lifetime maximum amount of coverage ($50,000). Plans C, D, F, G, M and N include this benefit.
The Advantages to Having a Medicare Supplement Plan
There are some definite advantages to having Medicare Supplement coverage, which is why the majority of people on Medicare choose to do so. Here are a few of those advantages:
- Medicare Supplements give you predictable out of pocket costs. Medicare itself has no maximum out of pocket amount. So with only Medicare, you pay 20% of an unlimited amount. With a supplement plan, you know exactly what your out of pocket costs will be for the year, no matter if you are in great health or have health problems that year.
- Medicare Supplement plans do not change each year. Once you sign up for a plan, you coverage will never change, unless you elect to change plans or companies.
- Coverage is ‘guaranteed renewable’. Put simply, what this means is that you can never be cancelled for any reason other than not paying your premiums. No matter what your health conditions, your policy can not be cancelled for any reason other than lack of payment.
The Most Frequently Asked Questions
- When can you enroll in a Medicare Supplement plan?
You can apply for a Medicare Supplement at any time, as long as you meet the following criteria: you are on Medicare A & B and live in an area in which the plan you are enrolling is sold. Many people mistakenly think that you can only enroll in a Medicare Supplement plan during the end of the year enrollment period; however, this actually applies only to Medicare Part D drug plans and Medicare Advantage plans.
That said, there are a few times that it is advisable to enroll in a supplement plan. Companies may ask you medical questions if you do not fall into an “open enrollment” or “guaranteed issue” period. Open enrollment occurs when you are both on Medicare Part B and over 65 – it lasts for 6 months. There are many guaranteed issue periods that can apply. Some of these include:
- Losing employer coverage
- Losing Medicare Advantage coverage
- Moving out of your Medicare Advantage plan’s service area
- How much will my premiums go up over time?
No matter which company you choose or how they set their rates, premiums do go up over time. Anyone that tells you otherwise is uninformed or being less than honest. That said, there are a couple of ways to insure that you are with a company that will be relatively “rate-stable” over time. First of all, you should choose a highly rated company. Although they will still have rate increases, if the overall stability of the company, you can be assured that they aren’t going anywhere. Second, you can get information from your agent about history of past rate increases. A good agent should be able to provide this information.
There is no simple answer to this question, though. Different companies go up different amounts in different years! I’ve seen rate increases as low as 2% and seen them as high as 20%. The key is being with a stable company and then being willing and able to re-evaluate your options if you do get a large increase.
- Which supplement plan do you recommend and why?
While most agencies “push” the Plan F, I believe the Plans G, D or N to be a better value in nearly all cases. A simple math equation allows you to figure why those plans may be a better value. For example, in the case of Plan G, the only difference between F and G is the Part B deductible, which is $140/year for 2012. If you are saving $20/month with Plan G vs. Plan F, then it is easy to see why Plan G makes the most sense. Also, and this is something many people and even many agents don’t realize, Plan G is not offered under many of the ‘guaranteed issue’ circumstances mentioned above. What this means is that, on average, the people on Plan G may be more healthy than the people on Plan F. This would result in fewer claims and fewer rate increases (or smaller rate increases) for that plan.
- What Medicare Supplement plan is best in my area?
The only true way to determine this is to get updated quotes, comparing all the options. There are usually (in most areas) 3-4 very competitively-priced options for each plan. Most companies that offer Plan G do not offer Plan D and vice versa – because the plans are so similar. Likewise, many companies that offer Plan C do not offer Plan F and vice versa. But you should be able to get a chart comparing the options so that you can easily see for yourself which plan makes the most sense for your area. If you talk to an agent who is pushing for one specific plan or company, be cautious. There are lots of options to consider, and you should be able to get the information, asked questions and make an informed Medicare supplement choice on your own.
- If the coverage is really the same, why are the prices so different?
This one may be the MOST frequently asked question. Just like anything else on the free market, Medicare Supplement companies are free to set their own rates. Although they do have to be approved by the state departments of insurance, they can set their rates based on lots of factors including (but not limited to): their administrative costs, how they want to market their plans, their anticipated claims ratios, and demand for their product. Also, some companies attempt to be more competitive for certain plans or certain ages.
- Where can I use my Medicare Supplement plan?
With a Medigap plan, you can go to any doctor or hospital, nationwide, that takes Medicare. If they take Medicare, they are required to take the standardized supplement plan. This makes it easy and is much easier than dealing with the network restrictions on other plans, such as Advantage plans which typically have networks or require referrals.
- Which Medigap plan pays “the best”?
Medicare supplement claims are all processed through Medicare’s “crossover” system. So ,one company does not pay claims any better, or faster, than another.