What are Medigap Plans and How Do They Different From Medicare Supplements
To begin, Medicare Supplements, sometimes referred to as Medigap Plans, have been around since the 80s. These terms are used interchangeably and mean the exact same thing. They were designed to cover the gaps in Original Medicare. Fast forward to today. Medicare Supplements have plan names such as A, B, C, D, F, G, K, L, M, N, as well as high-deductible F and G.
These plan names do not coincide with Medicare Part A and Part B or Part C or Part D. Therefore, you may hear Medicare options referred to as “alphabet soup”. As of January 1, 2020, insurance companies are no longer allowed to sell Medigap plans covering the Part B Deductible to newly eligible beneficiaries. As a result, Plans C and F (including High-F) are only available to people who were already eligible for Medicare as of the first of this year.
Who Can Buy Medigap Plans F and C
Included as “already eligible” are people who turned 65 prior to 2020, regardless of whether they were already enrolled in Medicare. Also included are people under the age of 65 who are receiving Medicare due to a disability and whose Medicare Part A and Part B start dates are no later than December 1, 2019. Anyone who ages into Medicare from that point forward is not eligible to purchase Plan F or Plan C (Note: Remember that Plan C has nothing to do with Part C).
Premiums and Late Enrollment Penalties
Should you choose a Medigap plan, you will pay a monthly premium whether you use the plan or not. You will want to pair this with a stand-alone drug plan. Choosing not to purchase a prescription drug plan means you will be subject to a late enrollment penalty (LEP) later. Having another form of creditable drug coverage, such VA drug coverage, may eliminate the penalty if you did not go at least 63 days without coverage.
All Medigap Plan G’s are the Same…
And, all Medigap Plan F’s are the same. And, all Medigap Plan N’s are the same. When you hear the word “Plan…,” it is specific to whatever letter follows whether it is a “Plan G” or “Plan N” or any other of the letters. It can get a little confusing but to keep it simple, just remember that each letter is it’s own plan. All Medigap plans are issued by private insurance companies but they are standardized* meaning that each letter plan must pay the same. Each Letter Plan, covers the Original Medicare coverage gap differently. A Plan G is a Plan G regardless of insurance company. A Plan N is a Plan N and so on and so forth.
When Can I Enroll in a Medigap Plan
A window of opportunity must exist to enroll in a Medigap plan. The most appealing window of opportunity opens when you are turning 65. You are allowed to choose any plan without underwriting, which means you can waltz in singing and dancing to any tune you like and cannot be charged a higher premium because of your health, nor can you be turned down. You can, however, be charged a higher premium if you smoke. Once this window closes, it is locked forever.
In specific circumstances, you may have additional special enrollment periods in which to apply. Beyond this, you will have to go through underwriting, which means you may be charges a higher premium or you may be turned denied coverage because of pre-existing.** They do not have to accept you. There are extremely limited circumstances in which you may qualify for Guaranteed Issue but, these limited circumstances are uncommon.
Choosing a Medigap Plan
First, you will want to narrow down your selection by understanding what the different Letter plans pay. Keep in mind that same Letter plans pay the same, regardless of which insurance company it is. Now, let’s say you’re turning 65 and need help choosing a Medicare Supplement. You know which Letter plan you want but how do you choose an insurance company?
All Medigap plans will have price increases over time. If you choose a plan based on lowest price, you can always move to another plan if the premiums get too high – assuming you can pass underwriting. The flaw with this thinking is assuming because you are healthy now, you will always be healthy but that is not usually the case.
A more practical option is to choose a company that has a history of stable premium increases. You pay a few dollars more up front for that history of stability. The belief is that premiums will rise at a lower rate and in a few years, when someone can no longer pass underwriting, their premiums will be lower than someone who chose the plan with the lowest premium.
Of course, there are no guarantees when it comes to rate increases. As I have said again and again, knowledge is key in Medicare. The next post will cover Medicare Advantage Plans.
*Massachusetts, Minnesota and Wisconsin standardize plans differently.
**Connecticut, Massachusetts, Maine and New York can not deny coverage for pre-existing conditions.