What is Medigap Insurance ?

Medicare supplement insurance (Medigap) helps pay some of the out-of-pocket health care costs that Original Medicare Parts A and B do not cover like deductibles, co-pays and co-insurance. Plans are offered through private insurance companies with the goal of covering the “gaps” that Medicare Parts A & B do not cover. It’s your decision whether to buy a plan or not.

There are 10 standardized Medicare supplement insurance plans, labeled “Plan A” through “Plan N”, not to be confused with Medicare Parts A, B, C and D labels. These Medigap plans and what they cover are determined by the federal government and are standardized so that every plan letter is identical in benefits regardless of the carrier you choose. For example, every carrier that offers a Plan F has the same identical benefits for Plan F as the other carriers. This is due to the fact that Medigap plans cover the “gaps” in Medicare. Any benefits considered “medically necessary” will be covered partially by Medicare and then “crossed over” by Medicare to your Medigap plan carrier for further coverage.

A question I hear quite often is, “if all plans are standardized then how will I know how to choose the right carrier for my Plan F or G?” This is a great question. There are a few differences to focus on when deciding which carrier will work best for your specific needs. The main difference between Medicare supplement plans with the same letter sold by different insurance companies is usually cost. However, it’s just as important to know the stability of the carrier you are choosing:

How does a specific carrier rate on the S&P Standard Ratings in relation to other carriers in the same space?
How long has a certain carrier been in the Medigap Industry in a given state?
What do the past 3-5 years of historical rate increases look like for this carrier?

These are very important factors to look at when determining which carrier you will choose for your Medigap insurance plan.

What Does Medicare Supplement Insurance Cover?

Most people over 65 have Original Medicare to cover the bulk of their health care costs. Original Medicare consists of Parts A and B. However, Medicare A & B do not pay 100% of your Medicare approved expenses, nor does it cover Part D prescription drugs. Original Medicare is designed to cover most of your approved inpatient hospital health care costs (Part A) and about 80% of your approved outpatient costs (Part B) leaving you to pay the balance. Because these out-of-pocket expenses can be significant, many people opt to buy a private Medigap insurance plan, or enroll in a plan that reduces these out-of-pocket expenses.

Original Medicare Costs without Medigap coverage

For those that choose to use only Original Medicare Part A & B, with no supplemental coverage, there are costs involved:

In 2017 the out of pocket costs for Medicare Part A are:

$1,316 deductible for each benefit period (for more clarification on benefit periods see the blog on my website called “Hospital & Skilled Nursig Benefit Periods Defined”
Days 1–60: $0 coinsurance for each benefit period.
Days 61–90: $329 coinsurance per day of each benefit period.
Days 91 and beyond: $658 coinsurance per each "lifetime reserve day" after day 90
for each benefit period (up to 60 days over your lifetime).
Beyond lifetime reserve days: all cost

In 2017 the out of pocket costs for Medicare Part B are generally 20% of all costs. Medicare will pay approximately 80%, leaving a 20% exposure to the beneficiary.

It’s very important to note that Medicare does not acknowledge a Maximum Out of Pocket threshold like private insurance plans do. This means that there is no safety net for high out of pocket costs with Medicare. Example: If you were hospitalized for 5 days and accrued $300,000.00 in expenses you would owe 20% of those costs. There is no maximum amount determined by Medicare to shelter you from these high costs. This is precisely the reason why many people choose to purchase a Medigap plan to cover these exposures.

How Does Medigap Insurance Work?

Medigap plans supplement your Original Medicare benefit costs (outlined above), which is why these policies are also called Medicare Supplement, or Medigap, plans. You’ll need to be enrolled in Original Medicare to be eligible for Medigap coverage, and you’ll need to stay enrolled in Original Medicare for your hospital and medical coverage. Medicare Supplement plans aren’t meant to provide stand-alone benefits.

Depending on the state that you live in, you may be able to get Medicare Supplement coverage if you’re under 65 and have Medicare because of disability, end-stage renal disease, or amyotrophic lateral sclerosis. However, not all states are required to offer Medigap coverage to beneficiaries under 65. If you’re under 65 and enrolled in Original Medicare, check with your state’s insurance department to find out if you’re eligible to enroll in a Medicare Supplement plan. Note: The state of CA does cover beneficiaries under the age of 65 with certain disabilities after the 24th month of eligibility.

Keep in mind that Medigap plans don’t include prescription drug coverage (Part D), so if you want help with your medication costs, you’ll need to enroll in a stand-alone Medicare Prescription Drug Plan.

If you have Original Medicare and a Medicare Supplement plan, Original Medicare will pay first, and your Medigap policy will fill in the cost gaps. For example, suppose you have a $5,000 ambulance bill, and you have already met the yearly Medicare Part B deductible. Medicare Part B will pay 80% of your ambulance bill. If you have a Medicare Supplement plan that covers Part B copayments and coinsurance costs, then your Medigap policy would then pay the remaining 20% coinsurance of your $5,000 ambulance bill. Some Medicare Supplement plans may also cover the Part B deductible.

For more information on specific plan choices, premiums, and other information, call Julie Brajenovich at 408-398-1929 or email me at julie@jbinsurance.biz