What are Medicare supplement plans?
Medicare supplement plans, also known as Medigap, are supplemental benefits to Original Medicare. These plans don’t add any health benefits. Instead, they add coverage for some or nearly all of your out-of-pocket costs with Parts A and B. This can include things like the Part A deductible, Part B excess charges or emergency medical coverage when you’re traveling in a foreign country. Coverage varies by plan, since Medigap is sold by private companies.
Here are 7 things to know about Medicare supplement plans:
- Medigap is only available to people with Original Medicare, and you must have both Part A and Part B to enroll.
- You can enroll in any Medigap plan that’s legally sold in your state as long as you enroll when you’re first eligible. Your initial eligibility runs for six months, starting from the month you enroll in Part B.
- If you try to enroll outside of your initial eligibility window, you may not be able to get Medicare supplemental coverage at all. That’s because outside of the initial signup period, Medigap insurers can use medical underwriting (taking a look at your health and medical history) to set rates or deny coverage altogether. The best time to enroll is during that 6-month window when you’re first eligible.
- There is a separate premium for Medigap. You’ll pay your regular Part B premium, the Part A premium if you have to (most don’t) and an additional premium for your Medicare supplement plan. Premiums depend on the company selling the plan and where you live.
- There are 10 plan types, labeled by letter, and these plans are standardized by the federal government in all but three states (Massachusetts, Minnesota and Wisconsin). Each plan of the same letter type covers the same set of benefits, regardless of where you buy the plan or who’s selling it. Plan G in Florida, for instance, covers the same benefits as Plan G in Nebraska. The only difference is cost.
- Medigap plans only cover one person. If your spouse needs the extra coverage, he or she will need to get a separate plan.
- You can’t have Medicare Advantage and Medigap at the same time. If you choose to get a Medicare supplement plan and you have an Advantage plan in place, you’ll be disenrolled from your Advantage plan.
Medigap covers costs, not benefits.
Medigap doesn’t add any coverage for services that Original Medicare doesn’t cover. These plans provide supplemental cost coverage, meaning they help pick up the tab for your medical bills under Original Medicare.
Medigap plans do not cover:
- Prescription drugs (for plans sold after 2006)
- Vision benefits, including routine eye appointments and eyewear
- Hearing aids or the exams to fit them
- Routine or comprehensive dental care
- Private nursing care
Medicare Advantage may cover these types of services. It’s the private alternative to traditional Medicare. By law, Advantage plans must cover at least the same benefits as Original Medicare. Beyond that, these plans have leeway in covering a broader range of benefits, such as prescription drug coverage, dental and vision care, hearing aids, transportation, post-hospital meal delivery, gym memberships and more.
If you need these or other benefits that Original Medicare doesn’t cover, consider a Medicare Advantage plan instead.
How much does Medigap cost?
How much Medicare supplement plans cost depends on different factors, including when you enroll, where you live and who’s selling the plan. As we said earlier, all coverage is the same across the different letter types. This means that Plan A will cover what Plan A covers regardless of any other factors. These are standardized plans. But some companies charge higher rates for their Medigap policies.
How companies set rates is not a mystery, though. They use one of three methods in determining how much a premium costs. Medigap policies can be:
- Community-rated. If a plan’s pricing is community-rated (or “no age-rated”), it means that everyone is charged the same monthly premium, regardless of how old they are. Pricing will only fluctuate as a result of outside forces, such as overall inflation, rather than the age of the policyholder.
- Issue-age rated. In an issue-age-rated (“entry age-rated”) plan, the amount of money paid every month is based on your age when you purchase the plan. So the younger you are when you buy the plan, the cheaper the plan’s premium will be over time. Note that the cost may fluctuate because of factors not related to your age.
- Attained-age rated. If you have an attained-age rated Medigap plan, the monthly premium is determined by your current age. This means that when you first enroll in a Medigap plan, the premium will likely be fairly low. As you get older, the monthly premium will increase based on your age and other external factors, like inflation.
Not sure which kind of rating system the Medigap plan you want to buy uses? Ask. Before you buy a plan, ask the insurer — if you can’t find the info in the plan documents — what kind of rating system they use. If you buy an attained-age rated plan, the premium might be low at first. But you’ll face higher costs as you get older, which may not work for you.
Don’t just look at the initial premium. Knowing how a plan prices its premiums is important so you don’t waste money in the long run.
Other factors that determine cost
How a plan rates its premiums affects how much you pay per month, but there are other factors that can affect your price tag for the plan, too. These include:
- Medical underwriting. If you enroll in Medigap outside of your initial signup window, you may have to go through medical underwriting. This is a process in which the insurance company looks at your health history and sets rates accordingly. They can also deny your application altogether because of it. Some states bar or limit this practice for Medigap, so check with your state health insurance department to make sure. But if you try to get Medigap outside of your initial open enrollment period, you may have to pay more for your coverage.
- Plan discounts. Medigap plans may offer discounts for different personal situations, like being a woman, being married, and/or not smoking; or administrative discounts, like paying premiums yearly or having your premiums electronically drafted. Check with the insurer to see if they offer any discounts to help lower your premiums.
- High-deductible options. Some companies sell a high-deductible version of Medigap Plan F and/or G. (Note: Plan F is not available to people new to Medicare on or after January 1, 2020.) If you get a high-deductible Plan G, you’ll need to cover the deductible yourself before your plan will cover its share of your bills. That deductible changes each year. In 2022, it’s $2,490. The tradeoff for having a deductible is that these plans tend to have lower premiums than the standard version of the same letter type.
When you’re shopping for Medicare supplement plans, take these and other factors into account when looking at rates. You may get a discount or may pay more for a policy depending on different scenarios. And if you’re not sure about your premium, ask the insurer up front.
Pro tip: You can also call us 1-800-485-6202 and talk to a licensed agent, who can walk you through your options and pricing so you know what you’re getting into ahead of time.
Remember: Get Medigap when you first can.
We’ve mentioned it before and we’ll say it again: If you want a Medigap policy, get it when you’re first eligible. Your Medigap Open Enrollment Period starts when you’re 65 and you enroll in Part B for the first time. It ends in six months. So, for example, if you turn 65 in April but don’t enroll in Part B until May, your Medigap signup window will run from May through October that year.
Outside of this initial eligibility window, you may not be able to get a Medigap plan at all, though some states may have different rules about this. But even if you’re able to get a Medicare supplement plan outside of the initial enrollment period, you may pay more for the coverage thanks to medical underwriting.
Medigap can help offset the out-of-pocket costs of Original Medicare. You’ll need to weigh the pros and cons of the coverage against the added monthly premium to make sure it’s right for you. Consider all of your options carefully so that you’ll be covered as you get older.