The Need-to-Know Medigap Guide

Family Health, Featured Article, Healthy Aging, Healthy Living, Power to the Patient
on September 30, 2011
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Medicare is a lifesaver for folks who qualify for it. But like most insurance policies, Medicare doesn’t cover 100 percent of your medical expenses. Original Medicare (Parts A and B) doesn’t cover prescription drugs, and can leave you owing money to health care providers for annual deductibles, office visit copays and other charges.

One way to cover those extra health expenses is with a “Medigap” policy—a supplemental health insurance policy intended to cover the cost “gaps” left by Medicare. “If you can afford a Medigap plan—with premiums ranging from about $40 to $140 a month depending on benefits—it’s a great way to eliminate significant out-of-pocket medical costs,” says Cindy Holtzman, a licensed health insurance agent based in Marietta, Ga. “Better yet, you don’t have to worry about whether your doctor is ‘on your plan.’ Any professional who takes Medicare will also be covered by your Medigap plan.”

You should buy a Medigap policy is when your Medicare eligibility kicks in, a six-month period beginning the first day of the month during which you turn 65 and have enrolled in Medicare Part B. During this initial enrollment period, you’re automatically approved for a policy without medical underwriting. Insurance companies can’t deny you coverage or charge more for your policy due to a pre-existing health condition.

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Each year, you can change your Medigap policy—to a different letter plan or a different company—during Medicare’s open enrollment period. (currently October 15-December 7). There are some special situations in which you can switch plans at other times of the year, such as when you move to another state or your insurer goes out of business. Medicare.gov outlines all the rules.

Here are a few questions to ask before you choose a specific plan.

1. How often do you visit the doctor? Can you afford to pay out-of-pocket for some expenses?
There are many different “flavors” of Medigap plans, distinguished from each other by an alphabet soup of letters: Parts F, G, K, L, M and N. Each “letter plan” pays differently: Some cover your deductibles, others don’t. Some plans cover 100 percent of your office visit copays, others pay a percentage. Some states allow residents to choose from the entire range of plans, while other states only allow a handful of options. (Find out what plans your state approves at Medicare.gov).

Once you know your plan options, do a cost comparison. List your guesstimated medical expenses for the upcoming year. How many doctor’s office visits and lab tests do you usually need? (Check last year’s insurance files if you’re not sure.) Do you go in for regular dialysis treatments? Is an emergency room visit a possibility? Note the price for these services (available in the plan’s outline of benefits) for each Medigap plan you’re considering and total them up. Add in each plan’s annual premium and any deductibles, then compare overall costs to see which plan makes the best financial sense for you.

2. How much can you afford to pay in premiums per month?
According to Holtzman, the coverage offered by a Part K plan from ABC Company will be exactly same as a Part K from XYZ Company. The only difference may be the premium—the monthly amount you pay for the policy. Medicare.gov lists which private companies offer Medigap policies in your state. Use that list to obtain policy quotes and find out which is cheapest.

3.What perks does this plan offer?
Also ask whether the company offers any policy discounts for things like being a nonsmoker, paying premiums electronically or paying once a year instead of once a month. “Some companies may also offer ‘perks’ like discounts on gym memberships, weight-loss programs or eldercare benefits, so be sure to ask about them,” says Holtzman.

4.How financially stable is the insurer?
Check the insurer’s financial stability through rating agencies like AMBest.com or StandardandPoors.com. Ask friends and relatives who have a Medigap policy how they like their company. Your state’s insurance department should also have records of complaints that have been made against each insurance company.