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Living on a fixed income means every penny counts. You can anticipate, but never know with certainty, what your medical bills will be in the future. That’s where Medigap Supplement Insurance plans come in.
They cover you for both smaller expenses, such as co-payments, and also for major medical expenses, such as an unanticipated surgery or hospital stay.
Original Medicare, also known as Part A and Part B, does not have an out-of-pocket maximum, which can expose you to financial risk if a large medical bill comes due. Medigap plans provide coverage in such situations, helping to safeguard your finances.
[READ: Medicare Mistakes to Avoid.]
What Is Medigap?
Medigap plans are supplemental insurance plans that help those enrolled in original Medicare pay for the costs above and beyond what Parts A and B cover. After the deductible, original Medicare only covers 80%, not 100%, of a beneficiary’s medical costs. It is important to note that these plans may not be used in tandem with Medicare Advantage plans.
In 2021, Medigap covered 12.5 million people, or 41% of beneficiaries enrolled in original Medicare, according to KFF.
“There is no out-of-pocket maximum when you have original Medicare. If a beneficiary chooses original Medicare, they are wise to choose a Medigap plan where out-of-pocket expenses are limited and clearly defined,” advises Susan Stewart, a licensed insurance broker and advisor to the Senior Citizens League.
Medigap plans can help cover costs such as:
— Coinsurance
— Co-payments
Medicare Part A and Part B have gaps in coverage that beneficiaries need to be aware of when they consider their Medicare insurance options.
Medigap plans typically do not cover costs such as:
— Long-term care, such as assisted living
— Private duty nursing
There are 10 standardized Medigap plans that are offered in most states referred to by letter: A, B, C D, F, G and K, L, M and N. Each letter provides the same fundamental benefits no matter which insurance company you decide to get it through.
However, just because the benefits are the same does not mean each company provides it at the same cost. Be sure to compare the cost of the same plan offered by different companies to get the best deal.
As with most insurance, you will pay a monthly premium. That cost will depend on many factors, including:
— Age
— If you signed up during the Medigap open enrollment period or not
— Insurance company administering the plan
— Preexisting conditions
— Type of plan chosen
[READ: How to Change Your Medicare Supplement Plan]
Best Time to Enroll
The optimal time to purchase a Medigap policy is when you turn 65 or initially enroll in Medicare Part B. This period is known as your Medigap open enrollment period and lasts for six months after your Part B coverage begins. During this time, you can purchase any Medigap policy available in your state, regardless of preexisting health conditions.
This enrollment period does not repeat every year like the regular Medicare open enrollment period, so it is really important to consider if this is coverage you may need in the future.
Generally, you will lose this preferred status and pricing if you are changing your Medigap coverage outside of the Medigap open enrollment period.
However, there are some exceptions. Medicare.gov offers an online tool to check if you have a legal right to switch or drop Medigap policies. Outside of this six-month window, insurers may charge you more or decline coverage based on factors such as preexisting conditions or age.
“There are gaps in consumer protections at the federal and state levels that could leave you vulnerable to exorbitant premiums or even denial of access to a Medigap policy when you need one most,” explains Sheldon Friedman, the chair of the social action committee for the Well Spouse Association based in Freehold, New Jersey. “In particular, if you do not get coverage during the open enrollment period, you are at a disadvantage if you are under 65 and enrolling because of disability or if you want to switch back to original Medicare from an Advantage plan.”
[READ: How Do I Know When I’m Eligible for Medicare?]
Tips for Choosing a Plan
There are multiple plans from many different health insurance companies to evaluate. Keep in mind that these plans are for individuals, so if you and your partner are both looking, you will need to buy two policies, which can be a benefit if your health needs are very different.
So, how do you choose?
Step 1. Evaluate your needs
Nobody can foresee every long-term health challenge they may have, but working with your doctor to determine what may be coming in the future should be your starting point.
Ask yourself what benefits are nice-to-have and what benefits are must-haves. When determining that, remember you only get the preferred enrollment once, so look for a plan that will hopefully meet your needs years from now and not just in the immediate future.
While that may cost you more in premiums now, in the long run it can save you money if you need skilled nursing care or long-term hospitalization.
Step 2. Decide on a lettered plan
Once you are ready, the Medigap comparison chart on Medicare.gov will help you narrow down what Medigap lettered plan matches your needs. The plan details are the same in all, except for three states:
According to Medicare.gov, these states provide a narrower selection of plans with their own standards of coverage.
Step 3. Pick your policy
Once you have determined what lettered plan is best, find the companies in your area that sell them by going to Medicare.gov. Find detailed information to help guide your search at the U.S. News rankings on Medigap plans.
Keep in mind that even if a plan is offered in your state, not all insurance companies are required to sell it. For instance, while plans C and F may be available for those eligible but not yet enrolled in Medicare before January 1, 2020, they are not available for eligible beneficiaries after that date.
Also note that plans K and L do have an out-of-pocket limit, while the other plans do not.
Step 4. Compare pricing
The only way to find out the price of the plan is to contact the different insurance companies to get an official quote and compare.
The plans are standardized so the policy benefits are the same, but you may pay more based on what company you buy it from. While the Medicare.gov comparison chart gives you an overall view of benefits, it may be a good idea to request information on the full policy, take a look and ask any questions before committing.
Step 5. Sign up
When you are ready to buy, contact the insurance company you want to work with or a licensed Medicare agent to sign up. Prices can change at any time based on factors such as when you sign up, your health conditions or age, so do not wait long from the time you get quotes to sign up.
These policies generally begin the first of the month after you apply and are approved. Your policy will be automatically renewed every year as long as you pay your premium and the company stays in business.
Bottom Line
A Medigap is a prudent fiscal choice. Because it provides coverage for the gaps of original Medicare, it helps ensure that you won’t be nickel and dimed throughout the year by smaller charges (such as co-payments or coinsurance) or hit with larger, more expensive charges (such as nursing facility care or a long-term hospital stay).
The best time to buy is within the first six months after you turn 65 and get Medicare Part B. Insurance companies must sell you the policy regardless of any health conditions during that period, but not after that window.
More from U.S. News
Does Medicare Require Prior Authorization?
Worst Medicare Advantage Plans: How to Find a Good One
How to Pick a Medigap Plan originally appeared on usnews.com
Update 03/14/25: This story was published at an earlier date and has been updated with new information.
