Medicare Supplement Insurance policies—also sometimes called Medigap policies—are insurance policies that are sold by private companies to cover gaps in Original Medicare (Part A and Part B) coverage. When you buy this type of policy, you “supplement” your existing Medicare coverage, which is the primary coverage.
What Medicare Covers
Before you can fully understand how a Medigap policy can cover holes in Medicare coverage, you must first understand what Medicare covers. There are two main ways to get your Medicare coverage — Original Medicare (Medicare Part A and Part B) or a Medicare Advantage Plan.
Medicare Part A (hospital insurance) helps cover the costs of (for example):
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- hospital care (inpatient), and
- skilled nursing facility, hospice, and home health care
Medicare Part B (medical insurance) helps cover the costs of (for example):
- doctors’ services, as well as the costs of other health care providers, hospital outpatient care, durable medical equipment, and home health care; and
- preventive services for maintaining your health and preventing illnesses from getting worse.
Medicare Part C (Medicare Advantage Plans), which is run by Medicare-approved private insurance companies, covers:
- the benefits and services covered under Part A and Part B
Medicare prescription drug coverage (Part D) as part of the plan (typically), and
- often includes certain additional benefits and services (at an additional cost).
Note: You cannot use or be sold a Medigap policy if you join a Medicare Advantage Plan.
Medicare Part D (Medicare prescription drug coverage), which is also run by Medicare-approved private insurance companies, helps cover the cost of prescription drugs
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What Medigap Policies Cover
Medigap policies can cover your share of, for example:
- Medicare Part B coinsurance or copayments
- Medicare Part A coinsurance
- Medicare Part A hospice care coinsurance or copayments
- skilled nursing facility care coinsurance
- Medicare Part A deductible
- Medicare Part B deductible, and
- emergency care while traveling in a foreign country.
Medigap policies usually do not pay for long-term nursing home care, vision care, dental care, hearing aids, glasses, or private-duty nursing.
In the past, some Medigap policies covered prescription drugs, but Medigap policies sold after January 1, 2006 are not allowed to include this type of coverage. To get prescription drug coverage, you can enroll in a Medicare prescription drug plan (Part D) offered by a private company, which has been approved by Medicare.
Also, Medigap policies only cover one person. If you and your spouse each want to be covered by a Medigap policy, you will have to buy two separate policies.
Basics About Medigap Policies
Medigap policies must follow federal and state laws, and must be clearly identified as “Medicare Supplement Insurance.”
In many states, insurance companies that sell Medigap policies are only allowed to sell a “standardized” policy identified by letters A through N. The standardized policies offer the same basic benefit, no matter which insurance company you buy it from. In most cases, the only difference between policies with the same letter sold by different companies is the cost. (Various insurance companies often charge different premiums for the exact same policy.)
You must pay a monthly premium to the private insurance company for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare.
How Medigap Policies Work
You must have Medicare Part A and Part B (Original Medicare) to buy a Medigap policy, which you can purchase from any insurance company that is licensed in the state where you live. If you have a Medicare Part C Advantage Plan, then you cannot purchase this type of policy.
Once you have Original Medicare plus a Medigap policy, Medicare will pay its fair share of the Medicare-approved amounts for covered health care costs and then the Medigap policy picks up its share.
Cost of Medigap Policies
The cost of Medigap policies varies widely depending on the benefits of the plan and the age and gender of the individual who enrolls. There can even be differences in premiums charged by various companies for exactly the same coverage.
How to Enroll
You can enroll in a Medigap policy during the six-month open enrollment period, which begins the month you are:
- 65 years old and
- enrolled in Medicare Part B.
If you apply for a policy during the open enrollment period, the medical information that you provide cannot be used against you to deny coverage or increase the monthly price of the policy.
However, after the open enrollment period ends, there are no guarantees that you can buy a Medigap policy if you do not meet the medical underwriting requirements, unless you’re eligible due to certain limited circumstances. And, if you are able to obtain coverage outside of the open enrollment period, the Medigap policy may cost more.
Even though the insurance company cannot make you wait for coverage to begin, it may be able to make you wait for coverage if you have a pre-existing condition.
What is a pre-existing condition? A pre-existing condition is a health issue that you had prior to the date that the new insurance policy begins. Sometimes, a Medigap insurance company may refuse to cover your out-of-pocket costs for a pre-existing condition for up to six months. This is known as the “pre-existing condition waiting period.” Once the six months expires, the Medigap policy covers costs relating to the pre-existing condition.
The insurer can exclude coverage for a pre-existing condition only if the condition was treated or diagnosed within six months before coverage starts under the Medigap policy. This is commonly referred to as the “look-back period.” After the six months expires, the pre-existing condition is covered under the Medigap policy. Also, please note that for Medicare-covered services, Original Medicare will still cover the condition—even in cases where the Medigap policy excludes coverage.
Avoiding a Waiting Period
It’s possible to avoid or shorten a waiting period for a pre-existing condition if you buy a Medigap policy during your Medigap Open Enrollment Period, and you’re replacing certain kinds of health coverage that count as “creditable coverage.” Prior creditable coverage is basically other health coverage that you had prior to applying for a Medigap policy. So long as you had a minimum of six months of continuous prior creditable coverage, the Medigap insurance company cannot impose a waiting period.
To qualify as creditable coverage, there can’t be a break in coverage for more than 63 days. The Medigap insurance company that you are working with can tell you if your previous coverage counts as creditable coverage.
An insurance company also cannot impose a pre-existing condition waiting period if you buy a Medigap policy when you have a guaranteed issue right. This is also called “Medigap protection.”
Guaranteed Issue Rights Explained
Basically, a guaranteed issue right is when, because of your circumstances, insurance companies are required to offer you certain Medigap policies. Guaranteed issue rights occur when you have other health care coverage that changes in some way.
Example. You can buy a Medigap policy if you are enrolled in a Medicare Advantage Plan and your plan leaves Medicare or stops giving care in your area, or you move out of the plan’s service area. Under these circumstances, you have guaranteed issue rights, but only if you change to Original Medicare rather than joining another Medicare Advantage Plan.
If you have guaranteed issue rights, the insurance company has to:
sell you a Medigap policy
cover your pre-existing condition or conditions, and
cannot charge you a higher price for the Medigap policy due to your past or current health issues.
In order to invoke your guaranteed issue rights, be sure to keep a copy of any letters, notices, emails, and/or claim denials that prove your coverage was terminated. You should also retain the postmarked envelope that these items arrived in so that you can prove when they were mailed. In some cases, you’ll have to submit this documentation with your Medigap application to prove you have a guaranteed issue right.
Individuals who have a Medicare Advantage Plan (for example, a HMO or PPO) but intend on switching to Original Medicare (Medicare Part A and Part B) are permitted to apply for a Medigap policy before coverage ends. To ensure that you get continuous coverage, you should ask the insurer to have the new policy take effect no later than when your Medicare Advantage Plan enrollment terminates.
How to Buy a Medigap Policy
Once you have determined that you want to purchase a Medigap policy, you should become an educated consumer. To do this, you must carefully compare available Medigap policies to see which one best suits your needs. As you shop, it is important to remember that different insurance companies can charge different amounts for the exact same Medigap policy. Also, not every insurance company offers Medigap policies.
For most people considering a Medigap policy, the first step is to figure out which benefits you want and then decide which of the Medigap policies fit your criteria. Next, you will need to determine which insurance companies in your state sell Medigap policies. Then, contact the insurance companies that sell Medigap policies to find out the cost of the policy you’re interested in. Once you find the best price, the final step is to purchase the Medigap policy.