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.
If you're enrolled in original Medicare, you already know the importance of having a Medigap plan. Medigap is private supplemental insurance that helps fill gaping holes in original Medicare's government-administered coverage, like the $1,676 Part A deductible for hospital care or Part B coinsurance for doctor services, typically 20% in addition to this year's $257 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 65-year-old male in Texas could pay anywhere from $118 to $573 a month for Medigap Plan G, even though the coverage is identical.
That price differential is why it pays to periodically test the market.
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"I'd say about 50% of people are paying too much for their Medigap plans," Kelly Maxwell, owner of the insurance brokerage Seniors Mutual in Austin, Texas, tells Kiplinger. Insurers often offer attractive teaser rates to lure newcomers who have just turned 65 and joined Medicare, then hike those premiums later.
Maxwell explains that "companies have lower rates for new enrollees at, say, 75, than current policyholders at 75. This is because new customers have to go through underwriting. Because of this, the company knows the new people are healthy — at least healthier compared to existing policyholders that have developed health conditions."
He said he thinks it is worth shopping for a new policy every five years or so. If you switch, companies may offer lower rates because you have to pass health underwriting to qualify. "That can save people up to $100 per month, just a guess," he said. "But you have to be healthy. Any serious issues, and you can't qualify."
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 on making a Medigap switch
The good news is you can switch Medigap plans anytime, not just during Medicare's annual open enrollment from October 15 to December 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 underwriting applies. Most applicants are "likely to qualify for a new plan, unless they have something serious like diabetes or a heart condition," Kelly 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, Connecticut, Massachusetts, New York and Vermont, 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 original Medicare from its private insurance alternative, a Medicare Advantage plan, also known as Part C, with a few notable exceptions:
- Trial right: You joined a Medicare Advantage plan or Program of All‑inclusive Care for the Elderly (PACE) when you were first eligible for Medicare Part A at 65, and within the first year of joining, you decide you want to switch to original Medicare
- You leave a Medicare Advantage plan or drop a Medigap policy because the company hasn’t followed the rules, or it misled you
- You have a Medicare Advantage plan, and any of the following are true:
- Your plan is leaving Medicare
- Your plan stops giving care in your area
- You move out of the plan’s service area or
- Your plan’s network has a significant change
If you signed up for an Advantage plan right after joining Medicare, you have a 12-month trial window; 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.
Unless there is a qualifying exception, Advantage plan members who switch to original Medicare and want a Medigap plan will face underwriting. What's more, those Advantage policyholders will only be allowed to switch at set times: during original Medicare's open enrollment each fall and Medicare Advantage's annual open enrollment from January 1 to March 31.
Related Content
- What’s the Best Medigap Plan?
- How Medigap Insurance Is Affected by Preexisting Conditions
- What You Must Know About the Different Parts of Medicare
