Vital issues to know when contemplating the Medigap coverage with Primary Medicare
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When you enroll in Medicare, you’ve probably realized that there are a lot of prime costs associated with your coverage.
For about 23% of Medicare’s 65.1 million beneficiaries, the solution to covering these expenses is a plan called a Medigap plan.
These policies, sold by private insurance companies, generally cover some or most of the co-payments—that is, deductibles, co-payments, and co-insurance—that accompany basic Medicare (Part A hospital coverage and Part B outpatient coverage).
They do have limitations, however, and monthly premiums can be expensive.
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Still, some beneficiaries are finding that combining Basic Medicare with a Medigap policy is a better fit than opting to receive their Parts A and B benefits through an Advantage Plan (or not having supplemental insurance at all). These plans, which may limit coverage to in-network providers, typically also include Part D prescription drug coverage, are often premium-free, and may offer extras such as dental care and vision aids.
According to Elizabeth Gavino, founder of Lewin & Gavino and independent broker and general agent for Medicare plans, the reasons some beneficiaries instead choose Medigap alongside basic Medicare vary from person to person.
For example, she said, they may want more freedom in choosing doctors and other providers, or need coverage when they are away from home – meaning they travel a lot, sometimes for longer stays. (Benety plans allow you to opt out if you’re outside of their service area for a specified amount of time—usually six months.)
Here’s what you should know about Medigap policies if you’re considering buying one.
Medigap policies are standardized
Medigap policies are standardized across most states – available plans are labeled A, B, C, D, F, G, K, L, M, and N – so you know the benefits are the same regardless of where you live or which one Insurance carrier is, same are offering, say, Plan G or Plan N.
However, not every plan is available in all states. And Plans C and F aren’t available to people who are newly eligible for Medicare in 2020 or later.
To be clear, each plan labeled differs in what is covered.
For example, some may pay the full Part A deductible ($1,600 per benefit period in 2023) while others do not. The Centers for Medicare & Medicaid Services have a table on their website showing the differences. You can also use the agency’s search tool to find available plans in your zip code.
Many states allow physicians to charge a 15% “deductible.”
Also note that in many states, some physicians or other providers may charge you the difference between the Medicare-approved Part B amount and their full fee, with a 15% cap on this “deductible.”
“If your state allows a surplus of up to 15%, consider that [a plan] that covers it,” Gavino said.
Also note that Medigap plans do not cover costs related to prescription drug coverage (unless the policy may have been issued before 2006). This means you must purchase a standalone Part D plan if you want this coverage.
Medigap also does not cover services that are generally excluded from Medicare coverage, such as: B. dental treatment or visual disturbances.
There are rules that come with Medigap enrollment
When you first enroll in Part B, you generally have six months to take out a Medigap policy without an insurance company reviewing your medical history and deciding whether to cover you.
After that, you may need to go through a medical underwriting, depending on the specifics of your situation and the state you live in.
There are big cost differences
Despite the standardization of Medigap policies, premiums can vary widely.
In New York, for example, the lowest monthly premium for Plan G is $278 and the highest is $476, according to the American Association for Medicare Supplement Insurance. In Iowa, the cheapest Part-G policy is $79 and the most expensive is $192.
There are several reasons for the large price differences, said Danielle Roberts, co-founder of insurance company Boomer Benefits. These include the cost of health care in your area, the open enrollment rules for your state, and the actual loss rate the insurance company sees across all policyholders with the same plan, she said.
“For example, Medigap plans in New York cost more because they have open enrollments year-round,” Roberts said.
If the carrier can’t get medical insurance, they have to increase the tariffs for everyone.
Co-founder of Boomer Benefits
“That means residents there can literally wait until they get sick to get a policy,” she said. “If the airline can’t provide health insurance, they have to increase the rates for everyone.”
Additionally, insurance companies routinely roll out new plans, Roberts said. So when an insurer starts offering a plan and hiring new policyholders for it, over time the premiums go up a little each year due to inflation and claims, making that plan less competitive when another insurer opens a new plan that doesn’t Has suffered casualties though, she said.
“Healthy people who can pass underwriting start switching plans to the cheaper company, and then the first company is left with a lot of people who can’t pass underwriting to switch,” Roberts said. “It’s an aging block of business with many policyholders who have costly health conditions, which is pushing rates further up.”
The way a Medigap plan is “scored” also plays a role
Another difference in Medigap premiums may arise from the “rating” of the plans. Knowing this can help you anticipate what may or may not happen to your reward later.
Some plans are “community-rated,” meaning everyone who buys a particular plan pays the same price, regardless of age.
Others are based on ‘reached age’, meaning the price you get when you buy is based on your age and increases as you get older. Still others use ‘age of issue’: the rate doesn’t change with age, but is based on your age at the time you took out the policy (so younger people may pay less).
These are some other things to consider
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According to the American Association for Medicare Supplement Insurance, if you work with an agent, ask how many insurance companies they work with (or are “on appointment”) with. They may not recommend the policies of any particular insurer unless they receive a commission for doing so.
A household discount may also be offered.
“One trend we’re seeing is that airlines are becoming more lenient with this and not requiring the spouse to be on the policy to qualify,” Roberts said. “Many will give you a discount just because another person lives in the same apartment.”
Also note that some insurance companies give big discounts to new signups, but the price drop may disappear in a year or two.
“You should know that beforehand,” Roberts said.
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