Medicare supplemental insurance — or Medigap — plans are policies that private insurance companies sell to people with traditional Medicare. These policies help reduce Medicare’s out-of-pocket costs.
Examples of out-of-pocket costs include copayments, deductibles, and costs for blood transfusions.
Learning the amounts of these costs can help a person get the best value from their insurance plan.
Taking out a Medigap plan is one way of limiting these expenses and covering as many treatments as possible.
In this article, we explain what Medigap plans cover and how much they cost.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Private insurance companies sell and administer Medicare supplemental insurance, or Medigap. They partially cover traditional Medicare’s out-of-pocket costs.
If a person has Medicare Advantage, they cannot also have a Medigap plan.
Medigap policies cover the following out-of-pocket costs for people with traditional Medicare:
The Centers for Medicare & Medicaid Services mandate that Medigap policies must provide the same level of coverage, regardless of which company is administering them.
Medigap policies range from A to N. The premium price is the key difference between them.
Private insurance companies do not have to offer every Medigap policy, but the government does require that they at least offer Medigap Plan A.
Medigap policies help cover out-of-pocket costs of existing Medicare plans. However, as of 2020, they no longer cover the Part B deductible.
The following table shows each Medigap plan and what it covers. This is subject to change on a year-by-year basis.
|Part A coinsurance and hospital costs, up to 365 days after using up Medicare benefits||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Part B coinsurance or copayments||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|First 3 pints of transfused blood||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Part A hospice care coinsurance or copayment||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Coinsurance for skilled nursing facility care||No||No||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Part A deductible||No||Yes||Yes||Yes||Yes||Yes||50%||75%||50%||Yes|
|Part B deductible||No||No||Yes||No||Yes||No||No||No||No||No|
|Part B excess charge||No||No||No||No||Yes||Yes||No||No||No||No|
|Foreign travel exchange (up to the plan’s spending limits)||No||No||80%||80%||80%||80%||No||No||80%||80%|
|Out-of-pocket limit for 2020||N/A||N/A||N/A||N/A||N/A||N/A||$5,880||$2,940||N/A||N/A|
About 25% of people in the United States with traditional Medicare had a Medigap plan in 2015, according to the Henry J. Kaiser Family Foundation. However, only around 5% of enrolled people under the age of 65 years had a supplemental plan.
It is important to note that Medigap plans do not cover some elements of care. Examples include long-term care, dental care, eyeglasses, private-duty nursing, and hearing aids.
Also, several states have Medicare waivers, including Massachusetts, Minnesota, and Wisconsin. This means that companies do not have to offer the standard Medigap plans in these states.
If a person applies for a Medigap policy, the insurer should provide them with a full explanation of the benefits for each part. This will help the person make the best decision, according to their healthcare needs.
However, policy changes mean that not every private insurer can sell every Medigap plan. For example, as of January 1, 2020, private insurance companies can no longer offer Plans C and F to newly enrolled people.
If a person enrolled in one of these plans before January 1, 2020, they can typically keep it.
The reason for the change is that Medicare does not allow Medigap to cover the Part B deductible anymore.
Costs of Medigap vary by plan and by what is offered in a person’s area.
To check available policies and get an estimate of monthly premiums, a person can visit the Medicare.gov site and enter their zip code.
Paying for Medigap involves paying a monthly premium to a private insurance company. Typically, Medicare will also pay part of the coverage.
The Medigap plan pays its portion of costs to a doctor or healthcare facility directly.
Below are some estimates of Medigap costs in specific areas:
- New York City, NY: The premium for Medigap Plan A ranges from $137–336, while that for Medigap Plan K ranges from $64–175. Medigap Plan G is the most expensive, ranging from $220–455.
- Houston, TX: The cost of Medigap Plan A ranges from $80–275, while that of Medigap Plan D ranges from $95–268. Medigap Plan B is potentially the most expensive, ranging from $94–313.
- Los Angeles, CA: The premium for Medigap Plan A ranges from $71–194, while that of Medigap Plan M ranges from $107–199. Medigap Plan G could be the most expensive, ranging from $110–253.
- Birmingham, AL: The monthly cost of Medigap Plan A ranges from $72–140, while that of Medigap Plan M ranges from $105–126. Medigap Plan B could be the most expensive, ranging from $103–170.
Costs vary widely by location, and a person may have to contact several insurance companies in their area to obtain the most cost-effective price.
There is a 6-month open enrollment period for Medigap policies. The period begins in the first month during which a person qualifies for Part B and lasts for 6 months.
The open enrollment period is often the most cost-effective time to purchase a Medigap policy. This is because private insurance companies cannot refuse to sell a person a Medigap policy or require them to provide information on preexisting medical conditions during this time.
If a person wants to purchase a Medigap policy outside of the open enrollment period, they can. However, an insurance company may require medical underwriting and exclude preexisting conditions from coverage.
As a result, the person may need to undergo a physical examination or provide information about their health before the insurance company offers them a Medigap policy.
Also, outside of the open enrollment period, the insurance company can deny a person coverage.
Medigap policies can help reduce out-of-pocket costs and unexpected expenses that traditional Medicare does not cover.
Laws concerning Medigap policies and costs vary by state. If a person wants to learn more about state-specific guidelines, they should contact their State Health Insurance Assistance Program.
A note on insurance
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