Medigap policies are supplemental health insurance policies sold by private insurers, designed to fill some of the “gaps” in health coverage provided by Medicare. Although Medicare covers many health care costs, you still have to pay certain coinsurance and deductible amounts, as well as paying from your own pocket for services that Medicare does not cover.
Generally, you must be enrolled in the original Medicare Parts A and B before you’re able to purchase a Medigap insurance policy. Other types of health insurance coverage, such as Medicare Advantage, other Medicare health plans, Medicaid, or employer-provided health insurance, do not work with Medigap policies.
Under federal regulations, private insurers can only sell “standardized” Medigap policies. Through May 21, 2010, there were 12 standardized Medigap policies, termed plans A, B, C, D, E, F, G, H, I, J, K, and L. Effective June 1, 2010, plans E, H, I, and J could no longer be sold, and plans M and N were added. Individuals who purchased a plan E, H, I, or J before June 1, 2010 may keep those plans.
The standardized policies allow you to compare “apples with apples.” For example, a plan F policy will provide the same benefits, no matter which insurance company it is purchased from. However, a plan C policy will provide different coverage thana plan D policy. All Medigap policies must provide certain “core” benefits.
These standardized plans are not available to those living in Massachusetts, Minnesota, or Wisconsin; there are separate Medigap policies available for residents of these states.
There are two primary factors to consider when choosing a Medigap policy.
|Pricing Method||Payment||Other Issues|
|Community (No-Age)||Each insured pays the same premium, regardless of age.||Premiums may increase due to inflation.|
|Issue-Age||Policy premium is based on your age when you purchase the policy.||Younger buyers pay lower premiums. Premiums may increase due to inflation.|
|Attained-Age||Premiums are based on your age each year, thus premiums increase annually.||Younger buyers pay lower premiums. Premiums can increase each year. Premiums may also increase due to inflation.|
Professional guidance in dealing with any aspect of a Medigap policy is strongly recommended. Other available resources include:
The views or opinions in this article are those of the author and do not necessarily represent the views of Washington Trust Bank or senior management. Washington Trust Bank believes that the information used in this blog was obtained from reliable sources, but we do not guarantee its accuracy. Neither the information nor any opinions expressed constitutes a solicitation for business or a recommendation of the purchase or sale of securities or commodities.
As Vice President and Senior Wealth Advisor, Greg provides financial analysis to high net worth individuals. He is the author of several articles for various publications and nonprofit organizations on estate and financial planning subjects.