What are Medicare Supplement Plans?

man in white medical scrub suit standing beside girl in blue denim jacket

Medicare supplemental insurance, also more commonly known as Medigap, helps fill “gaps” in original Medicare and is sold by private insurance carriers. While Original Medicare pays the lion’s share for covered healthcare services and supplies, a Medigap policy can help reimburse some of the remaining costs (up to 20%), like:

  • Co-payments
  • Co-insurance
  • Deductibles
  • Care outside the U.S.

However, Medigap plans are different from Medicare Advantage plans. MA plans provide an avenue to obtain various Medicare benefits, while Medigap only supplements the benefits of Original Medicare.

How Do Medigap Plans Work?

Pricing

The Centers for Medicare and Medicaid Services (CMS) requires that each Medigap plan provides the same benefits coverage nationwide, although premiums vary from state to state and between insurance companies. The Medigap policy prices are determined in three ways:

  • Community-rated: The same monthly premium rate is given to everyone who purchases the Medigap policy, regardless of age.
  • Issue age-rated: The policy price is based on your age at the time you purchase the policy and does not increase as you get older, but may increase due to other factors.
  • Attained age-rated: This initial policy price is based on your current age and increases as you age. While prices may start out low, they may eventually cost more over the years.

Eligibility

You become eligible for Medigap when you turn 65 years old or if you have a disability and are enrolled in Original Medicare. Medigap plans offer coverage to one person per policy, and your plan is guaranteed to be renewed by a private insurance company as long as you pay the premium.

Enrollment

The best time to enroll in Medigap is during open enrollment in Medicare, which starts the day your Part B coverage kicks in. After this period, you may not be able to purchase a plan, or it might cost you more. Alternatively, you can also enroll during a special enrollment period, but you need to find out from CMS whether you’re eligible. 

When enrolling in Medigap, you should:

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  • Decide your required benefits and then select a plan that meets those needs.
  • Research insurance companies in your state that are licensed to sell Medigap plans.
  • Contact the company and request a quote so you can compare various options.

What are Some Advantages of Medicare Supplement Plans?

Medigap doesn’t cover prescription drugs (Part D) or services like visual, auditory, and dental care, long-term care, and private-duty nursing. You can purchase a separate prescription drug plan while enrolled in Medigap, but you cannot have a Medigap plan and an MA plan simultaneously. However, there are still plenty of upsides to Medicap plans, such as the following:

  • You pay fewer out-of-pocket costs.
  • They offer coverage in any state and sometimes medical care outside the U.S.
  • You aren’t restricted to a primary care provider or network of providers and don’t need referrals to see specialists.
  • They offer hospital coverage up to a year after Medicare benefits run out.

Is a Medigap Policy Right for You?

Not everyone can afford increasing out-of-pocket healthcare expenses, and once you meet the annual Medicare Part B deductible (if applicable), you’re responsible for paying any remaining costs. Fortunately, Medigap plans can supplement those costs and are a wise financial investment. With this information in your toolbox, you can make informed choices about your healthcare.

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