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Medicare Supplement Basics

What is Medicare Supplement Insurance?

Medicare Supplement Insurance or "Medigap" policy is private health insurance that is designed to supplement Original Medicare. Medicare Supplement Insurance helps pay some of the health care costs or "gaps" that Original Medicare does not cover (like co-payments, coinsurance, and deductibles). If you are in Original Medicare and you have a Medigap policy, Medicare will pay its share of the Medicare-approved amounts for covered health care costs. Then your Medigap policy pays its share. Every Medigap policy must adhere to Federal and state laws and the policy must be clearly identified as “Medicare Supplement Insurance.” Medigap insurance companies in most states can only sell you a “standardized” Medigap policy identified by letters A through N. Each standardized Medigap policy must offer the same basic benefits, no matter which insurance company sells it. Cost is usually the only difference between Medigap policies with the same letter sold by different insurance companies. In Massachusetts, Minnesota, and Wisconsin, Medigap policies are standardized differently. In some states, you may be able to buy another type of Medigap policy called Medicare SELECT.

Do insurance companies offer all Medigap policies A-N?

Insurance companies selling Medigap policies are required to make Plan A available. If they offer any other Medigap plan, they must also offer either Medigap Plan C or Plan F. Not all types of Medigap policies may be available in your state.

What don't Medigap policies cover?

Medigap policies don’t cover long-term care (like care in a nursing home), vision or dental care, hearing aids, eyeglasses, and private-duty nursing.

What do I need to know if I want to buy a Medigap policy?

  • You must have Medicare Part A and Part B to buy a Medigap policy.
  • You pay the private insurance company a monthly premium for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare.
  • A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you each will have to buy separate Medigap policies.
  • You can buy a Medigap policy from any insurance company that’s licensed in your state to sell one.
  • If you want to drop your Medigap policy, contact your insurance company to cancel the policy.
  • Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company can’t cancel your Medigap policy as long as you pay the premium.
  • Although some Medigap policies sold in the past cover prescription drugs, Medigap policies sold after January 1, 2006, are not allowed to include prescription drug coverage.
  • If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan (Part D) offered by private companies approved by Medicare.

When is the best time to buy a Medigap policy?

The best time to buy a Medigap policy is during your Medigap open enrollment period. This period lasts for 6 months and begins on the first day of the month in which you are both 65 or older and enrolled in Medicare Part B. Some states have additional open enrollment periods including those for people under 65. During this period, an insurance company can’t use medical underwriting. This means the insurance company can’t do any of the following:

  • Refuse to sell you any Medigap policy it sells.
  • Make you wait for coverage to start (except as explained below).
  • Charge you more for a Medigap policy because of your health problems.

While the insurance company can’t make you wait for your coverage to start, it may be able to make you wait for coverage of a pre-existing condition. A pre-existing condition is a health problem you have before the date a new insurance policy starts. In some cases, the Medigap insurance company can refuse to cover your out-of-pocket costs for these pre-existing health problems for up to 6 months. This is called a “pre-existing condition waiting period.” Coverage for a pre-existing condition can only be excluded in a Medigap policy if the condition was treated or diagnosed within 6 months before the date the coverage starts under the Medigap policy. After this 6-month period, the Medigap policy will cover the condition that was excluded. Remember, for Medicare-covered services, Original Medicare will still cover the condition, even if the Medigap policy won’t cover your out-of-pocket costs. Even if you have a pre-existing condition, if you buy a Medigap policy during your Medigap open enrollment period and if you recently had certain kinds of health coverage called “creditable coverage,” it’s possible to avoid or shorten waiting periods for pre-existing conditions. Prior creditable coverage is generally any other health coverage you recently had before applying for a Medigap policy. If you have had at least 6 months of continuous prior creditable coverage, the Medigap insurance company can’t make you wait before it covers your pre-existing conditions. There are many types of health care coverage that may count as creditable coverage for Medigap policies, but they will only count if you did not have a break in coverage for more than 63 days. If there was any time that you had no health coverage of any kind and were without coverage for more than 63 days, you can only count creditable coverage you had after that break in coverage. If you buy a Medigap policy when you have a guaranteed issue right (also called “Medigap protection”), the insurance company can’t use a pre-existing condition waiting period.

Why is it best to buy a Medigap policy when I am first eligible?

It’s very important to understand your Medigap open enrollment period. Medigap insurance companies are generally allowed to use medical underwriting to decide whether to accept your application and how much to charge you for the Medigap policy. However, if you apply during your Medigap open enrollment period, you can buy any Medigap policy the company sells, even if you have health problems, for the same price as people with good health. If you apply for Medigap coverage after your open enrollment period, there is no guarantee that an insurance company will sell you a Medigap policy if you don’t meet the medical underwriting requirements. It’s also important to understand that your Medigap rights may depend on when you choose to enroll in Medicare Part B. If you’re 65 or older, your Medigap open enrollment period begins when you enroll in Part B, and can’t be changed or repeated. In most cases it makes sense to enroll when you are first eligible for Part B, because you might otherwise have to pay a Part B late enrollment penalty. However, if you have group health coverage through an employer or union, because either you or your spouse is currently working, you may want to wait to enroll in Part B. This is because employer plans often provide coverage similar to Medigap, so you don’t need a Medigap policy. When your employer coverage ends, you will get a chance to enroll in Part B without a late enrollment penalty which means your Medigap open enrollment period will start when you’re ready to take advantage of it. If you enrolled in Part B while you still had the employer coverage, your Medigap open enrollment period would start, and unless you bought a Medigap policy before you needed it, you would miss your open enrollment period entirely.

How do insurance companies set prices for Medigap policies?

Each insurance company decides how it will set the price, or premium, for its Medigap policies. It’s important to ask how an insurance company prices its policies. The way they set the price affects how much you pay now and in the future. Medigap policies can be priced or “rated” in three ways:

1. Community-rated (also called “no-age-rated”) - Generally, the same monthly premium is charged to everyone who has the Medigap policy, regardless of age.

2. Issue-age-rated (also called “entry-age-rated”) - The premium is based on the age you are when you buy (are "issued") the Medigap policy.

3. Attained-age-rated - The premium is based on your current age (the age you have "attained"), so your premium increases as you get older.

Other factors such as geographical rating, medical underwriting, and discounts can also affect the amount of your premiums.

What is Medicare SELECT?

Medicare SELECT is a type of Medigap policy sold in some states that requires you to use hospitals and, in some cases, doctors within its network to be eligible for full insurance benefits (except in an emergency). Medicare SELECT can be any of the standardized Medigap Plans A through N. Medicare SELECT policies generally cost less than other Medigap policies. However, if you don’t use a Medicare SELECT hospital or doctor for non-emergency services, you will have to pay some or all of what Medicare does not pay. Medicare will pay its share of approved charges no matter which hospital or doctor you choose.

What are guaranteed issue rights?

Guaranteed issue rights (also called “Medigap protections”) are rights you have in certain situations when insurance companies are required by law to offer you certain Medigap policies even if you have health problems and must cover any pre-existing conditions. In these situations, an insurance company must do the following:

  • Sell you a Medigap policy.
  • Cover all your pre-existing health conditions.
  • Can’t charge you more for a Medigap policy because of past or present health problems.

If you live in Massachusetts, Minnesota, or Wisconsin, you have guaranteed issue rights to buy a Medigap policy, but the Medigap policies are different.

When do I have guaranteed issue rights?

In most cases, you have a guaranteed issue right when you have other health care coverage that changes in some way, such as when you lose the other health care coverage. In other cases, you have a “trial right” to try a Medicare Advantage Plan and still buy a Medigap policy if you change your mind.

An insurance company can't refuse to sell you a Medigap policy in the following situations:

  • You are in a Medicare Advantage Plan and your plan is leaving Medicare or leaving your service area or you move out of the plan's service area. You have the right to buy Medigap Plan A, B, C, F, K or L that is sold by any insurance company in your state. You can apply as early as 60 calendar days before the date your health care coverage will end but no later than 63 calendar days after your health care coverage ends.
  • You have Original Medicare and an employer group health plan (including retiree or Cobra coverage) or union coverage that pays after medicare pays and that plan is ending. You have the right to buy Medigap Plan A, B, C, F, K or L that is sold by any insurance company in your state. You can apply no later than 63 calendar days after the latest of these 3 dates: 1. Date the coverage ends. 2. Date on the notice you get informing you that coverage is ending. 3. Date on a claim denial, if this is the only way you know that your coverage ended.
  • If you have Original Medicare and a Medicare SELECT policy and move out of the Medicare SELECT policy's service area, you can keep your Medigap policy or you can switch to another Medigap policy. You have the right to buy Medigap Plan A, B, C, F, K or L that is sold by any insurance company in your state or the state that you are moving to. You can apply as early as 60 calendar days before the date your health care coverage will end but no later than 63 calendar days after your health care coverage ends.
  • (Trial Right) You joined a Medicare Advantage Plan or programs of All-inclusive Care for the elderly (PACE) when you were first eligible for Medicare Part A at 65, and within the first year of joining, you decide you want to switch to Original Medicare. You have the right to buy any Medigap policy that is sold in your state by any insurance company. You can apply as early as 60 calendar days before the date your health care coverage will end but no later than 63 calendar days after your health care coverage ends.
  • (Trial Right) You dropped a Medigap policy to join a Medicare Advantage Plan (or to switch to a Medicare SELECT policy for the first time; you have been in the plan less than a year and you want to switch back. You have the right to buy the Medigap policy you had before you joined the Medicare Advantage Plan or Medicare SELECT policy, if the same insurance company you had previously still sells it. If it included drug coverage, you can still get the same policy, but without the drug coverage. If your formed Medigap policy is not available, you can buy a Medigap plan A, B, C, F, K or L that is sold in your state by any insurance company. You can apply as early as 60 calendar days before the date your health care coverage will end but no later than 63 calendar days after your health care coverage ends.
  • Your Medigap insurance company goes bankrupt and you lose your coverage or your Medigap policy coverage otherwise ends through no fault of your own. You have the right to buy Medigap Plan A, B, C, F, K or L that is sold by any insurance company in your state. You can apply no later than 63 calendar days from the date your coverage ends.
  • You leave a Medicare Advantage Plan or drop a Medigap policy because the company hasn't followed the rules , or it misled you. You have the right to buy Medigap Plan A, B, C, F, K or L that is sold by any insurance company in your state. You can apply no later than 63 calendar days from the date your coverage ends.

Can I switch to a different Medigap policy?

In most cases, you won’t have a right under Federal law to switch Medigap policies, unless you are within your 6-month Medigap open enrollment period or are eligible under a specific circumstance for guaranteed issue rights. But, if your state has more generous requirements, or the insurance company is willing to sell you a Medigap policy, make sure you compare benefits and premiums before switching. If you bought your Medigap policy before 1992, it may offer coverage that is not available in a newer Medigap policy. On the other hand, older Medigap policies might not be guaranteed renewable and might have bigger premium increases than newer, standardized Medigap policies currently being sold. If you decide to switch, don’t cancel your first Medigap policy until you have decided to keep the second Medigap policy. On the application for the new Medigap policy, you will have to promise that you will cancel your first Medigap policy. You have 30 days to decide if you want to keep the new Medigap policy. This is called your “free look” period. The 30-day free look period starts when you get your new Medigap policy. You will need to pay both premiums for one month.

Why would I want to switch to a different Medigap policy?

Some reasons for switching may include the following:

  • You’re paying for benefits you don’t need.
  • You need more benefits than you needed before.
  • Your current Medigap policy has the right benefits, but you want to
    change your insurance company.
  • Your current Medigap policy has the right benefits, but you want to find a policy that is less expensive.

What happens to my Medigap policy if I join a Medicare Advantage Plan?

Medigap policies can’t work with Medicare Advantage Plans. If you decide to keep your Medigap policy, you will have to pay your Medigap policy premium, but the Medigap policy can’t pay any deductibles, co-payments, coinsurance, or premiums under a Medicare Advantage Plan.

Can my Medigap insurance company drop me?

If you bought your Medigap policy aft er 1992, in most cases the Medigap insurance company can’t drop you because the Medigap policy is guaranteed renewable. This means your insurance company can’t drop you unless one of the following happens:

  • You stop paying your premium.
  • You were not truthful on the Medigap policy application.
  • The insurance company becomes bankrupt or insolvent.

However, if you bought your Medigap policy before 1992, it might not be guaranteed renewable. At the time these Medigap policies were sold, state laws might not have required that these Medigap policies be guaranteed renewable. This means the Medigap insurance company can refuse to renew the Medigap policy, as long as it gets the state’s approval to cancel your Medigap policy. However, if this does happen, you have the right to buy another Medigap policy.

Which states offer Medigap policies for people under the age of 65?

The following states required insurance companies to offer at least one kind of Medigap policy to people with Medicare under 65:

California, Maryland, Oklahoma, Colorado, Massachusetts, Oregon, Connecticut, Michigan, Pennsylvania, Delaware, Minnesota, South Dakota, Florida, Mississippi, Texas, Hawaii, Missouri, Vermont, Illinois, New Hampshire, Kansas, New Jersey, Louisiana, New York, Maine, North Carolina, Wisconsin.

A Medigap policy is not available to people with ESRD under 65 in California, Massachusetts and Vermont.

A Medigap policy is only available to people with ESRD in Delaware.

Even if your state is not on the list above, some insurance companies may voluntarily sell Medigap policies to people under 65, although they will probably cost you more than Medigap policies sold to people over 65, and they can use medical underwriting.


The Facts

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The States

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Medicare Supplement Plans by State
Alabama Delaware Indiana Massachusetts Nevada Oklahoma Texas
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Arizona Florida Kansas Minnesota New Jersey Pennsylvania Vermont
Arkansas Georgia Kentucky Mississippi New York Rhode Island Virginia
California Hawaii Louisiana Missouri North Carolina South Carolina Washington
Colorado Idaho Maine Montana North Dakota South Dakota Wisconsin
Connecticut Illinois Maryland Nebraska Ohio Tennessee Wyoming

 

 

 

 

 

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