Getting Medigap Can Be a Challenge for Those on Traditional Medicare

If you're on traditional Medicare, buying a supplemental “Medigap” policy may seem like a no-brainer. After all, Medigap helps pay co-payments, deductibles and other costs that Medicare doesn’t cover. But getting access to these policies—and determining which plan is right for you—may be anything but simple.

You’re guaranteed access to a supplemental policy during your Medigap open enrollment period—the six-month period that starts when you are 65 or older and also enrolled in Part B. Many people who miss that window do not have “guaranteed issue” rights, meaning Medigap insurers can charge them extra based on their health status or deny coverage altogether. That’s a potential headache for the millions of people on traditional Medicare who lack supplemental coverage as well as Medicare Advantage enrollees looking to switch to traditional Medicare and pick up Medigap.

The Medigap hurdles complicate decision-making during the annual fall Medicare open enrollment period, which extends through December 7. Open enrollment is a time for seniors to reassess their coverage and switch between traditional Medicare and Medicare Advantage plans offered by private insurers—but many who prefer traditional Medicare may find they’re effectively locked out of the Medigap market.

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Upcoming changes to Medigap plans are generating added confusion. Starting in 2020, two of the most comprehensive Medigap plans—those that cover the Part B deductible—will no longer be available to people newly eligible for Medicare. “Agents have been using the 2020 changes to convince people to change coverage,” says Bonnie Burns, a consultant at California Health Advocates—even though the changes don’t affect current Medicare beneficiaries.

Medigap is a critical backstop for millions of seniors because traditional Medicare requires beneficiaries to pay a significant share of costs and has no cap on out-of-pocket spending. In 2018, for example, beneficiaries typically pay 20% of the Medicare-approved amount for doctor services and a $1,340 deductible for inpatient hospital services. Medigap can also help make health costs more predictable and, in some cases, offer benefits not available in traditional Medicare, such as emergency health coverage overseas.

To buy Medigap, you must be enrolled in Medicare Parts A and B. (Part D is optional.) Enrollees in Medicare Advantage plans, which place caps on annual out-of-pocket spending, can’t use Medigap policies.

Even if you have a Medigap plan that you like, you should keep an eye on other supplemental insurance options. You may be able to save hundreds or even thousands of dollars a year with another Medigap policy that offers the same benefits. Here’s how to find the right policy, maximize your Medigap dollars and overcome the obstacles to accessing these plans.

Get Medigap Outside Open Enrollment

For most people, the best time to buy a supplemental policy is during their six-month Medigap open enrollment period. So what happens if you’re beyond that window?

A few other circumstances can qualify you for a guaranteed-issue Medigap policy under federal law. These include losing employer-sponsored retiree coverage or other supplemental coverage and moving to a new location that’s outside your Medicare Advantage plan’s coverage area. You may also have Medigap guaranteed-issue rights if you sign up for a Medicare Advantage plan but decide to switch to traditional Medicare within the first 12 months.

These are minimum federal requirements; states offer a hodgepodge of additional protections. Twenty-eight states, for example, offer guaranteed-issue rights to people whose employer-sponsored retiree health coverage has changed, and nine offer these rights to people who have lost Medicaid eligibility, according to the Kaiser Family Foundation. Four states—Connecticut, Maine, Massachusetts and New York—provide guaranteed-issue protections either continuously or on an annual basis to all Medicare beneficiaries age 65 and older, Kaiser found. Some insurers may also offer guaranteed-issue protections that go beyond state law.

People under age 65 who are eligible for Medicare because of a disability or disease face a particular challenge. “Under federal law, if you’re not 65 or over, the Medigap company doesn’t have to sell you a policy,” says David Lipschutz, senior policy attorney at the Center for Medicare Advocacy. But 31 states require insurers to offer at least one type of Medigap policy to Medicare beneficiaries under age 65, according to Kaiser.

To pin down the guaranteed-issue protections available in your state, contact your state health insurance assistance program. Go to shiptacenter.org to find your local program.

If you don’t have any guaranteed-issue protections, don’t give up. “That doesn’t necessarily mean you can’t get Medigap,” Burns says. “It just means you’ll have to go through the medical screening, which isn’t—for most companies—very intense.” It’s worth trying multiple insurers because one may accept applicants with a particular medical condition that another rejects.

Once you have a Medigap policy, it’s guaranteed renewable. Your coverage will continue as long as you pay the premiums.

Find the Right Medigap Policy

In most states, there are 10 types of Medigap policies, identified by letters A through N. (Plans E, H, I and J are no longer sold.) Each type offers a different set of standardized benefits. The plans offer varying levels of coverage of Part B co-insurance or co-payments. Most cover some or all of the Part A deductible, some cover a portion of foreign travel emergency costs, and two—Plans C and F—cover the Part B deductible. To compare plan benefits side by side, go to Medicare.gov and type “compare Medigap” in the search box. To find all plans available in your area, go to medicare.gov.

The 2020 changes to Plans C and F have spawned much misinformation that can lead seniors astray. These plans are closing only to people who become newly eligible for Medicare after the start of 2020. People who are Medicare-eligible before then can still buy C and F in 2020 and beyond, “and it’s available to that entire group of people ad infinitum,” says William Schiffbauer, a Washington, D.C., attorney who works with Medigap insurers.

But some companies seeking to sell Medigap policies would have seniors believe otherwise, claiming that current Medicare beneficiaries who want Medigap to cover the Part B deductible should enroll in Plan C or Plan F before 2020. Salespeople “are circulating all kinds of phony information,” Burns says.

While the 2020 changes shouldn’t trigger any panicked Medigap plan shopping, you may have other reasons to shop around—such as potentially saving thousands of dollars per year on premiums. Considering that policies of the same letter type must offer the exact same benefits, you might think they’d be similarly priced. But that’s not the case at all. A 65-year-old male in Connecticut, for example, could pay anywhere from $2,898 to $7,405 a year for Plan F, while a 65-year-old woman in Texas could pay $1,678 to $5,272 for Plan C, according to Weiss Ratings. “Whatever you do, don’t simply look at the insurer that you know and love, because you might find they are charging you hundreds or thousands of dollars more,” says Gavin Magor, director of ratings at Weiss Ratings.

You may find a real head-scratcher when you compare premiums for Plan F versus Plan G. The only difference between these plans is that Plan F covers the Part B deductible—$183 in 2018—and Plan G does not. Yet on average, Plan F costs nearly $450 more than Plan G for men and roughly $380 more for women, according to Weiss. While it’s a convenience to have the Part B deductible covered, Burns says, financially it may make more sense to simply pay it out of pocket.

In addition to the initial premium, pay attention to each plan’s premium “rating” system, which helps you “anticipate how premiums will rise in the plan over time,” says Gretchen Jacobson, associate director of Kaiser’s program on Medicare policy. States can regulate which of three rating systems insurers may use, and you may have a choice of plans using various systems. In “community rated” policies, typically all enrollees are charged the same premium, regardless of age or gender. In “issue-age rated” policies, the premium is based on your age when you buy the policy. And in “attained-age rated” policies, the premium is based on your current age—potentially leading to unpredictable rate increases as you grow older.

For help comparing plans, contact your state health insurance assistance program. Weiss also offers personalized reports listing all policies available in your area, along with their premiums, pricing method and insurer safety rating. Retirement Report readers can buy the report at a discounted rate of $49 at weissmedigap.com.