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If you enroll in Medicare, you’ve probably discovered that there are a lot of out-of-pocket costs that come with your coverage.
For about 23% of the 65.1 million Medicare beneficiaries, the solution to cover these expenses is a so-called Medigap plan.
These policies, sold by private insurance companies, typically cover some or most of the cost sharing – i.e. deductibles, co-payments and coinsurance – that come with the insurance. -basic sickness (hospital coverage of part A and outpatient care of part B).
However, they have limits and the monthly premiums can be expensive.
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Nevertheless, some beneficiaries determine that combining basic health insurance with a Medigap policy is a better solution than choosing to get their Part A and B benefits through an Advantage plan (or not having any). supplementary insurance at all). These plans, which may restrict coverage to in-network providers, also typically include Part D prescription drug coverage, are often premium-free, and may offer extras like dental and vision care.
The reasons some beneficiaries choose Medigap instead alongside basic Medicare vary from person to person, according to Elizabeth Gavino, founder of Lewin & Gavino and independent broker and general agent for Medicare plans.
For example, she says, they may want more freedom in choosing doctors and other providers or need coverage when away from home – i.e. traveling. many, sometimes for extended stays. (Advantage plans can opt you out if you stay outside of their service area for a period of time, usually six months.)
Here’s what to know about Medigap policies if you’re considering buying one.
Medigap policies are standardized
Medigap policies are standardized across most states – available plans are designated A, B, C, D, F, G, K, L, M, and N – so you know the benefits are the same regardless of size. where you live or the insurance company. offering, say, a plan G or a plan N.
However, not all plans are available in all states. Also, Plans C and F are not available to people newly eligible for Medicare in 2020 or later.
To be clear, each literate plan differs in what is covered.
For example, some may pay the full Part A deductible ($1,600 per benefit period in 2023), while others do not. The Centers for Medicare & Medicaid Services has a chart on their website that shows the differences. You can also use the agency search tool to find plans available in your postcode.
Many States Let Doctors Charge 15% “Extra Fee”
Also be aware that in many states, some doctors or other providers may charge you the difference between the Medicare-approved amount under Part B and their full fee, with a 15% cap on these “excess charges.”
“If your state is one that allows up to 15% excess fees, consider [a plan] that covers it,” Gavino said.
Also be aware that Medigap plans do not cover costs associated with prescription drug coverage (unless, perhaps, the policy was issued before 2006.) This means you will need to purchase a standalone Part D plan if you want this coverage.
Medigap also does not cover services that are generally excluded from Medicare coverage, such as dental or vision care.
There are rules that come with signing up for Medigap
When you first enroll in Part B, you typically have six months to purchase a Medigap policy without an insurance company checking your medical history and deciding whether to insure you.
After that, depending on the specifics of your situation and the state you live in, you may need to go through medical underwriting.
There is a huge variation in cost
Despite the standardization of Medigap policies, premiums can vary widely.
For example, in New York, the lowest monthly premium for Plan G is $278 and the highest is $476, according to the American Association for Medicare Supplement Insurance. In Iowa, the cheapest Part G policy is $79 and the most expensive is $192.
There are several reasons for the wide variation in prices, said Danielle Roberts, co-founder of insurance company Boomer Benefits. That includes the cost of health care in your area, open enrollment rules for your state, and the actual loss rate incurred by the insurance company for all policyholders with that same plan, she said.
“For example, Medigap plans cost more in New York because they have year-round enrollment,” Roberts said.
If the carrier can’t underwrite for health, then they have to raise the rates for everyone.
Co-founder of Boomer Benefits
“That means residents there can literally wait until they’re sick to buy a policy,” she said. “If the carrier can’t underwrite for health, it needs to raise rates for everyone.”
Additionally, insurance companies roll out new plans regularly, Roberts said. So if an insurer starts offering a plan and taking on new policyholders, over time the premiums go up a little each year due to inflation and claims, making that plan less competitive when another insurer opens a new plan which has suffered no loss. yet, she said.
“Healthy people who can pass the subscription start switching plans to the cheapest company, and then the first company ends up with a lot of people who can’t pass the subscription to switch,” Roberts said. “It’s an aging block of business with many policyholders who have costly health conditions, driving up rates even further.”
How a Medigap Plan Is “Rated” Matters, Too
Another difference in Medigap premiums may come from how the plans are “scored.” Knowing this can help you anticipate what may or may not happen to your premium later.
Some plans are “community-based,” meaning that everyone who purchases a particular plan pays the same rate, regardless of age.
Others are “attained age” based, meaning the rate you get on purchase is based on your age and will increase as you get older. Still others use ‘age at issue’: the rate won’t change with age, but is based on your age when you took out the policy (so younger people may pay less).
These are other things to consider
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If you work with an agent, ask how many insurance companies they work with (or are “named”), according to the American Association for Medicare Supplement Insurance. They may not recommend policies from a particular insurer if they do not receive a commission for doing so.
A household discount may also be offered.
“One trend we’re seeing is carriers becoming more lenient with this and not requiring the spouse to be on the policy to qualify,” Roberts said. “Many will give you a discount just for having another person living in the same residence.”
Also be aware that some insurance companies give significant discounts to new enrollees, but the price reduction may disappear in a year or two.
“You’ll want to know that up front,” Roberts said.
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