Medigap: The Basics
Supplemental Insurance Policies Offer Extra Medical Protection
Medicare, the federal health insurance program, covers 39 million Americans but does not pay all expenses. Many people, therefore, choose to buy a supplemental Medigap policy. Under federal mandate, private insurance companies in most states offer 10 different Medigap plans, referred to as Plan A through Plan J.
All plans with the same letter must offer the exact same benefits, according to government regulations. However, the costs of plans from different companies can vary significantly.
Every Medigap policy must offer certain basic benefits. These include:
Coinsurance for Medicare-covered hospital stays.
Coinsurance on doctors' bills and on all other Medicare-covered outpatient services.
The cost of the first three pints of blood the patient may need per year.
Medigap Plan A covers only these basic benefits. Plans B through J cover all these basic benefits, plus different combinations of extra benefits. However, none of the plans cover vision or dental care, hearing aids, private-duty nursing, unlimited prescription drugs or long-term custodial care.
If you are a caregiver helping a senior choose a Medigap policy, talk with the senior about short- and long-term costs and most-needed benefits.
The most affordable policy now may not be the most cost-effective policy in the long run. Insurers use three main parameters to calculate prices:
Attained age, in which the cost of the premium rises each year as the beneficiary's age increases. These policies are probably the cheapest at age 65 but may be the most expensive once the person reaches 80.
Issue age, in which the premium depends upon the beneficiary's age when the policy is first purchased. An individual who buys a policy at age 65 will always pay what 65-year-olds do, even at age 80. These policies cost more initially than attained age policies, but the price does not rise as rapidly or as much.
Community rating, in which all beneficiaries in the same geographic area pay the same price, regardless of health or age. Community rating policies are much more expensive at age 65 but become competitive for people at later ages.
In choosing a Medigap policy, seniors should first consider the particulars of their own situation. Then they need to decide if the extra benefits offered are worth the cost. For example, Plans H, I, and J offer some prescription drug coverage. One of these plans may be worth the expense to someone who needs many prescription drugs.
Do comparative shopping to choose an insurer, weighing costs, benefits and the reliability of the insurer. Your state's insurance department should be able to provide reports on the relative stability and soundness of companies selling policies in your area.
Although millions of Medicare beneficiaries have some sort of Medigap coverage, millions do not. Many of the latter have joined Medicare managed care plans, which often pay for some services that would be covered by Medigap insurance.
Medicaid also fills some of the gaps in Medicare, so seniors who become eligible for Medicaid can suspend their Medigap coverage for up to 24 months. They can reinstate their Medigap coverage without penalty if they inform the Medigap insurance company within 90 days of losing Medicaid.
An open enrollment period is available to Medicare beneficiaries in the six months following their enrollment at age 65 or over in Medicare Part B, the component of Medicare covering doctors' fees and other outpatient services. Some states also require insurers to sell Medigap policies to Medicare-covered disabled individuals under 65. Contact your state's department of insurance for more information.
During open enrollment, insurance companies cannot deny Medigap coverage to Medicare beneficiaries. The open enrollment period is a one-time-only opportunity; after it is over, most states allow insurance companies to refuse applicants for Medigap coverage. Contact your state's department of insurance for more information.
Waiting and switching
Companies can refuse to cover pre-existing health conditions for up to six months after a policy is purchased; however, some companies have shorter waiting periods. After enrollment, the company must continue to renew Medigap policies as long as beneficiaries pay the premiums. Individuals can switch to a different plan at the same company or switch Medigap insurance companies or both without a new waiting period if they buy the same or lower level of coverage and have had a Medigap policy for at least six months.
For more information
Contact your state insurance department for information on insurance companies selling policies in your area. To obtain the phone number, check your phone book or contact the National Association of Insurance Commissioners. Visit the NAIC Web site at www.naic.org or contact them at:
National Association of Insurance Commissioners
Kansas City, MO 64108-2604
You can also order publications about Medigap and Medicare by calling (800) 633-4227 or (800) MEDICARE, an official U.S. government telephone resource. Three publications might be useful:
Medigap: Supplemental Insurance
The Guide to Health Insurance
Information and Medical Health Plans in Your Area