Introductions to Medicare Supplemental plans
Many people assume that Medicare will fully cover their medical expenses once they turn 65. In reality, Medicare Part A and Part B do not provide coverage for everything and tend to only cover 80 percent of recipients’ medical expenses. Medicare Supplemental Insurance (also called Medigap) plans are designed to cover certain healthcare expenses that Original Medicare refuses to pay entirely or only pays for partially.
Three expenses that can add up very quickly are: deductibles, coinsurance and copayments. Medigap can do much to ease the strain of patients’ accrued medical bills. For example, these plans are ideal for patients that require an extended stay at the hospital or visit a specialist or a doctor’s office on a regular basis.
In order to apply for Medigap, original Medicare recipients must have Original Medicare coverage. It’s true that many beneficiaries can benefit from Medigap coverage. However, the policyholder needs to think about their personal situation to determine whether or not Medigap is appropriate for them. Specific factors that they will need to consider are:
- Their present healthcare and any healthcare they might possibly need (services and supplies) in the future
- The percentage of healthcare their Original Medicare covers
- The frequency of traveling done outside of the United States
Should you purchase a Medigap policy?
In some cases, Medicare patients may already have sufficient coverage that does not require that they also pay for a supplemental policy. For example, relatively healthy Medicare patients with very low medical bills or that visit their doctor only for routine checkups on a yearly basis will likely not need to purchase a Medigap plan.
You may not need Medigap if a majority of your medical bills are for services and supplies that are not covered by a Medigap plan. Medigap is not a recommended option or is not a possibility if: you have group health insurance via a spouse or through an employer or union; or, you have a Medicare Advantage plan (also known as Medicare Part C or MA). Medicaid may also be a good option for those qualifying for Medicaid. A joint state and federal program, Medicaid provides health and medical services for low-income people, regardless of age.
On the other hand, potential candidates that could benefit from Medigap include a variety of Medicare patients. Among these are:
- Those who may require extensive medical services and supplies
- Those who have declining health
- Those who engage in high-risk activities that could result in complications from an injury
- Those who travel outside of the States often
- Those who have a condition that may require ongoing treatment.
In regard to Medigap, eyeglasses, hearing aids and routine dental care and vision care are all considered out-of-pocket costs. In general, Medigap policies will not cover long-term care or private-duty nursing.
Finding coverage when frequently traveling outside the United States
Original Medicare typically won’t cover healthcare costs outside the United States. Therefore, some people purchase Medigap to cover unexpected medical emergencies while they are in a foreign country or one of the United States’ territories. Actually, foreign travel emergencies are covered by six Medigap plans: C, D, F, G, M and N.
How much will a Medigap policy cost?
One of the main factors for a Medicare patient selecting a Medigap policy is finding a monthly premium payment that fits within their budget. The monthly premium will depend on the type of Medigap plan they choose. There are presently 10 standardized Medigap plans (A, B, C, D, F, G, K, L, M) and a high-deductible version of Plan F available in most states. Medigap plans E, H, I, and J were previously available, but were discontinued.
However, those who already have Medigap Plans E, H, I, or J are able to keep these coverages and the company they buy it from. All insurance companies that sell Medigap policies must offer Plan A and will set their own monthly premiums, so costs vary from company to company.
Because Medigap plans are issued and sold through private insurance companies, each company has the right to set policy rates as they see fit. While the benefits offered for each Medigap plan will be the same, the price paid for these benefits can vary widely. More benefits typically will create a higher premium. As such, it’s crucial that a Medigap applicant compare several quotes before buying a Medicare Supplemental Insurance policy.
Three methods used to calculate Medicare Supplemental Insurance premiums
No age-rated premiums (community-rated): All policyholders are charge the same monthly premium under the plan, regardless of their ages. In addition, a community-rated plan will not increase due to age, but may rise due to inflation or other factors.
Issue-age-rated (entry age-rated): This Medigap premium is based upon the policyholder’s age when they first purchased their coverage (the time the plan was issued). As a result, people who purchase Medigap plans at a younger age will have a lower premium. However, the premium may become higher due to inflation or other similar factors.
Attained-age-rated: Medigap insurance carrier premiums are charged based on your current age. This means that a Medigap premium will start lower for younger policyholders and then rise, as these individuals gets older. The total monthly premium is also affected by: marital status, living conditions, geographical location and possible discounts due to medical underwriting status and deductibles. Medigap recipients may also be eligible for various premium discounts.
What insurance companies are required to provide
There are certain things that insurance can and cannot do when providing a Medigap plan. An insurance company can’t charge more for someone with preexisting conditions, since there is no health exam required to receive Medigap coverage.
- An insurance company can’t refuse to sell or cancel any Medigap policy it offers as long as the policyholder pays their premiums.
- An insurance company typically doesn’t make Medigap applicants wait to start their Medigap coverage as long as it’s done within the guaranteed issue or open enrollment period. This period starts on the first day of the month in which someone turns age 65 and is also enrolled in Medicare Part B; it lasts for the following six months.
- It is illegal for an insurance company to sell a Medigap policy that significantly duplicates any existing coverage someone already has. If a Medigap applicant is approved for coverage, the carrier is obligated to automatically renew the plan as long as they keep making premium payments. In addition, there are annual open enrollment periods, where a person can buy a new Medigap policy or change their existing one, with the same benefits as mentioned earlier.
If you apply for Medigap coverage after your open enrollment period, there’s no guarantee that an insurance company will sell you a Medigap policy, if you fail to meet the medical underwriting requirements. However, certain situations may affect your eligibility.
In some states, you may be able to buy another type of Medigap policy called Medicare SELECT. Medigap applicants should thoroughly research any further enrollment requirements or restrictions associated with applying for Medicare Supplemental Insurance.
Whatever plan is selected:
* Plans A through N offer different levels of coverage.
* A Medigap policy only covers one person. Spouses will have to buy a separate policy.
* It’s illegal for anyone to sell a Medigap policy to someone with a Medicare Medical Savings Account (MSA) Plan.
* A Medigap applicant needs to make sure that they can leave their Medicare Advantage plan before their Medigap policy begins.