This article provides an overview of Medicare Supplement insurance, also known as MediGap insurance. As with all things Medicare, the more you explain, the more questions arise. For more information and those inevitable questions, contact me here.
What is Medicare Supplement (MegiGap) Insurance?
Medicare Supplement Insurance (Medigap) is extra insurance offered by private health insurance carriers to help pay your share of out-of-pocket costs in Original Medicare.
Gaps in Original Medicare
Except for preventative screenings, Original Medicare does not pay for anything 100%. In fact, there are six coverage gaps in Original Medicare, three in Part A and three in Part B. (See graphic: Gaps in Original Medicare)
Without any additional coverage, you would be responsible to cover those gaps out of your own pocket. Further adding to your financial exposure on Original Medicare is the fact that there is no maximum out-of-pocket cap on medical costs. So, in the face of a serious diagnosis, your financial exposure to out-of-pocket costs would be without limit. That's where Medicare Supplement plans come in. They cover the gaps in Original Medicare and protect you from burdensome medical costs.
Who is Eligible for a Medicare Supplement Plan and When to Buy?
To buy a Medicare Supplement, you must first have both Original Medicare Part A and Part B coverage. Beyond that, there are no other eligibility requirements. One of the important considerations in buying a Medicare Supplement is when to buy it. Note the following:
MediGap Open Enrollment Period (OEP): This period starts on the first day of the month of your Part B effective date and lasts six months. During this period, carriers must sell you a Medicare Supplement plan without medical underwriting, meaning they can't ask you any health questions.
Guaranteed Issue Rights: In some situations, you may have a guaranteed issue right as long as there is not a break in creditable coverage of more than 63 days. Guaranteed issue simply means that, like in MediGap OEP, the carriers must sell you a Medicare Supplement plan without medical underwriting. Some of these guaranteed issue situations include: when you are covered by a Medicare Advantage plan and move to a new area; when you lose an employer-sponsored retiree plan due to plan termination; when you exercise your Medicare Advantage plan trial right.
Outside of the above scenarios, carriers will sell you a Medicare Supplement plan only if you can pass medical underwriting. To pass medical underwriting you must be able to answer "no" to several medical questions about medical diagnoses and your prescription drug record must show that you are not being treated for any of the conditions asked about.
Medicare Supplement Plan Designs
There are several different Medicare Supplement plan designs, each designated by a plan letter. In this article, we will look at Plan F, Plan G and Plan N.
Gaps Covered by Plan F
Unless you turned 65 before January 1, 2020, you are not eligible to enroll in Plan F. We're looking at it here for its historical value. As you can see in the accompanying graphic (Gaps Covered by Plan F), Plan F covers all six gaps in Original Medicare. For many years, Plan F was the go-to Medicare Supplement plan because of its broad coverage. Plan F is the most insurance you can buy in a Medicare Supplement and it also has the highest premiums. Because Plan F has not been available to those aging into Medicare since January 1, 2020, the pool of insureds on Plan F is getting older and sicker, causing higher rate increases for Plan F.
Gaps Covered by Plan G
If you turned 65 on January 1, 2020, or after, Plan G is the most insurance you can buy in a Medicare Supplement. As you can see in the accompanying graphic (Gaps Covered by Plan G), Plan G covers five of the six gaps in Original Medicare.
Gaps Covered by Plan N
Plan N is a popular alternative to Plan G, especially in areas where Medicare Supplement premiums are high. Plan N covers four of the six gaps in Original Medicare, plus has co-pays for the following services:
Up to $20 co-pay for office visits to primary care providers and specialists
$50 co-pay for emergency room visits that do not result in hospital admission
What are Medicare excess charges? If a provider agrees to treat Medicare patients but will not accept "assignment" (meaning, what Medicare is willing to pay for services), they are considered "non-participating" (non-par, in Medicare speak). Medicare allowable charges for non-par providers are 5% less than for participating providers, and the provider is permitted to bill the patient no more than 15% on top of what Medicare allows. Here's a payment example:
Let's assume a $100 Medicare-authorized service that is not an office visit. The Medicare allowable amount would be 5% less , or $95 to a non-par provider.
Of that $95 allowable amount, Medicare would pay 80%, or $76 directly to the provider, leaving the patient to pay the $19 balance. Both Plan G and Plan N would pay the $19 balance in full.
The non-par provider is permitted to bill the patient an additional 15% of the $95 allowable charge, or $14.25. Plan G would pay the $14.25 Medicare excess charge in full. Plan N would not pay the $14.25 Medicare excess charge leaving the patient to pay it out-of-pocket.
Is the fact that Medicare excess charges are not covered by Plan N a serious financial risk? No. Online research and information presented by carriers in their annual trainings indicate that nationwide, around 4% - 5% of Medicare Supplement claims involve Medicare excess charges. In Southeast Florida where I am located, that number is even lower.
Do my doctors accept Medicare assignment? Excellent question! And it's a simple matter of looking up your doctors at the online lookup provided by the official Medicare.gov website: Medicare.gov provider lookup
What Are We Shopping For?
Medicare Supplement plans are exactly the same from carrier to carrier. Plan G, for example, is exactly the same plan regardless of the carrier from which you buy it. Same for Plan N, and all of the Medicare Supplement plans. So, when we shop plans for you, what are we shopping for exactly? A few things:
Carriers with competitive new policy rates. Not necessarily the lowest, but at least competitive for the area in which you live.
Carriers with year-over-year premium stability
Carriers that have been in business at least five years, not start-up Medicare Supplement carriers
Carrier financial stability
Carrier customer service record
Assessing these variables and making a good recommendation for your particular Medicare Supplement is where the skill and experience of your agent comes into the picture.
A Word About the Part B Annual Deductible
For anyone turning 65 after January 1, 2020, there is no Medicare Supplement plan that pays the Part B annual deductible ($240 for plan year 2024). The first time you receive any Part A or Part B services in a calender year, you will first have to pay the Part B deductible before Medicare pays. That amount will show up in a bill directly from the provider(s) usually showing as "your responsiblity" in an explanation of benefits (EOB) and finally as a bill from the provider(s) that you will have to pay out-of-pocket. After you have paid the Part B annual deductible, Medicare will pay its part and your Medicare Supplement will pay according to the plan in which you are enrolled.
The Part B annual deductible is NOT prorated based on the number of months left in the calendar year. If you enroll in Medicare and a Medicare Supplement plan in December, for example, you will still have to pay the entire Part B annual deductible before Medicare and your Medicare Supplement will pay.
Concluding Thoughts
Again, this is really just an overview of Medicare Supplement insurance. There are all sorts of nuances in selecting a Medicare Supplement plan and carrier, and that's why you should work with a qualified, local, independent Medicare agent. Please don't hesitate to contact me for Medicare Supplement quotes or to answer any questions you may have: contact me here