Making Your Money Last

The Rules for Making a Medigap Switch

You want to find the best Medicare medigap plan for your budget. Sometimes that means changing things up. Here's some guidance.

If you're on traditional Medicare, you already know the importance of having a medigap plan. Medigap is private supplemental insurance that helps fill gaping holes in traditional Medicare's government- administered coverage, like the $1,556 Part A deductible for hospital care or Part B coinsurance for doctor services, typically 20% in addition to this year's $233 Part B deductible.

There are 10 types of medigap plans, each labeled by a letter from A to N, and every plan with the same letter has identical benefits, even if the insurer is different. But the monthly premiums can be worlds apart. Depending on the insurer, a 70-year-old male in South Carolina could pay anywhere from $95.92 to $353.45 a month for medigap Plan G, even though the coverage is identical, says John Hill, president and CEO of Gateway Retirement in Rock Hill, S.C.

That price differential is why it pays to periodically test the market. "I'd say about 50% of people are paying too much for their medigap plans," says Kelly Maxwell, owner of the insurance brokerage Seniors Mutual in Pflugerville, Texas. Hill says insurers often offer attractive, teaser rates to lure newcomers, who have just turned 65 and joined Medicare, before hiking those premiums later on. But just how easy is it to switch medigap plans, and are you still guaranteed coverage the way you were during your initial enrollment?

Rules and Restrictions

The good news is you can switch medigap plans any time and not just during Medicare's annual open enrollment from Oct. 15 to Dec. 7. The bad news is you aren't guaranteed to qualify for a different plan, including one with the same letter. That guaranteed acceptance, regardless of your health, only lasts for the six months after you turn 65 and first sign up for Medicare Part B.

After that, medical underwiting applies. Most applicants are "likely to qualify for a new plan, unless they have something serious like diabetes or a heart condition," Hill says. The decision will vary by insurer. You could be denied coverage outright, accepted but charged a higher premium, or face a waiting period of up to six months after you enroll before a preexisting condition is covered. During that time, only Parts A and B would cover the condition, leaving you to foot the bill for any coverage gaps.

A few states, such as California, Massachusetts and New York, make it easier to switch plans and still qualify for coverage. But even these states "usually have limits to ensure that people can only switch to equal or lesser coverage, not to upgrade their coverage," says Louise Norris, an author with medicareresources.org.

You are also guaranteed coverage if you must switch medigap plans through no fault of your own -- for instance, if your insurer goes bankrupt. Otherwise, acceptance isn't guaranteed, so don't cancel an existing policy until you're sure you've qualified for a new one.

Medicare Advantage Exceptions

The same medigap underwriting restrictions also apply if you switch to traditional Medicare from its private insurance alternative, a Medicare Advantage plan, also known as Part C, with three notable exceptions.

If you signed up for an Advantage plan right after joining Medicare, you have a 12-month trial window, and the same is true if you have a medigap plan and drop it to join Medicare Advantage for the very first time. During that trial window "you can leave your Advantage plan, switch to original Medicare, and you'll have limited guaranteed-issue access to medigap," says Norris. You'll be allowed to switch back to your previous medigap plan, or if you didn't have one before, sign up for any medigap plan in your area.

If you move to a place not covered by your Advantage plan or the insurer stops providing coverage, you get another medigap guaranteed-issue period. But medigap enrollees who move to another region don't because medigap plans offer nationwide coverage.

Outside of these exceptions, Advantage plan members who switch to traditional Medicare and want a medigap plan will face underwriting. What's more, Advantage policyholders will only be allowed to switch at set times: during traditional Medicare's open enrollment each fall and Medicare Advantage's annual open enrollment from Jan. 1 to March 31.

Most Popular

15 Stocks Warren Buffett Is Buying (And 7 He's Selling)
stocks

15 Stocks Warren Buffett Is Buying (And 7 He's Selling)

Berkshire Hathaway CEO Warren Buffett is a bull once more! The Oracle and his team entered eight new positions and added to others in a big way.
May 17, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 5, 2022

Recommended

11 Best Things to Keep in a Safe Deposit Box
home

11 Best Things to Keep in a Safe Deposit Box

These valuables and documents, along with some items you hold dear, should be stored securely at your bank.
May 18, 2022
12 States That Tax Social Security Benefits
social security

12 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in one of these states, your Social Security benefits may be subject to state taxes.
May 17, 2022
10 Least Tax-Friendly States for Retirees
retirement

10 Least Tax-Friendly States for Retirees

Retirees in these states are likely to have a higher overall state and local tax burden than retirees in other states.
May 16, 2022
Should Retirees Stay Invested and Ride Out These Volatile Times?
retirement

Should Retirees Stay Invested and Ride Out These Volatile Times?

If the markets’ ups and downs have you feeling sick, it’s time to take stock of your whole financial picture. Here are five pieces of that puzzle to h…
May 13, 2022