- If you are dropping an Advantage Plan during open enrollment in favor of returning to original Medicare and pairing it with "Medigap," be sure you know the rules that apply.
- Once you are past your initial six-month "guaranteed issue" window, you may face medical underwriting if you don't meet an exception or your state's rules differ.
- Be sure you understand the coverage and the cost, as well as how the premiums may increase each year.
By this point, Medicare beneficiaries likely know that now is the time of year to get their 2021 coverage straight.
While many individuals stick with what they have, others may be exploring a more suitable option. If that involves a Medicare supplement plan, aka Medigap, it's important to know the various rules that apply and to understand the coverage and cost differences among those policies.
Medicare's annual open enrollment — now underway through Dec. 7 — is when you can change coverage for next year. That includes enrolling in an Advantage Plan (Part C), which delivers Part A (hospital coverage) and Part B (outpatient care coverage) and usually Part D (prescription drug coverage). You also can switch to another Advantage Plan.
Or, you can drop it in favor of Parts A & B, also called original Medicare. That's where a Medigap policy may come into play.
Here's what to know.
Medigap plans, sold by private insurance companies, help partially or fully cover cost-sharing aspects of original Medicare, including deductibles, copays and coinsurance.
They can only be paired with Parts A and B, not an Advantage Plan. And because they generally exclude any costs associated with prescription drug coverage, you would also need to purchase a standalone Part D prescription drug plan to cover that aspect of your health care.
While a number of companies offer Medigap insurance, they can only offer policies from a list of about 10 standardized plans. Each is simply assigned a letter: A, B, C, D, F, G, K, L, M and N. Some states also offer high-deductible versions of Plan F and G. (There also are Medicare Select plans, which are network-based Medigap plans and available in some places.)
This standardization means that, say, Plan A at one insurance company is the same as Plan A at another. However, not every plan is available in all states. And, Massachusetts, Minnesota and Wisconsin offer different standardized policies.
Medigap plans differ in what is covered. The Centers for Medicare and Medicaid Services has a chart on its website that shows the differences. You also can use the agency's search tool to find available plans in your ZIP code.
These policies come with their own set of rules. For starters, when you first enroll in Part B, you get a six-month window to buy a Medigap policy without the insurer asking you about your health and deciding whether to insure you.
After that, unless you meet a special exception or live in a state with no restrictions on enrolling, you typically must share your health history — including during the current open enrollment — unless you qualify for an exception. If you face that medical underwriting and have existing conditions or other issues, the insurer may charge you more or deny coverage altogether.
Switching during open enrollment
If you'll face underwriting, it's best to apply for the Medigap plan as soon as possible if you haven't already, wait to get approved — and then cancel your Advantage Plan, said Danielle Roberts, co-founder of insurance firm Boomer Benefits.
"When you return to original Medicare from an Advantage Plan, in most circumstances you should do it as early in open enrollment as possible," Roberts said.
"That way if you are declined, you would still have your Advantage Plan, or before Dec. 7 you can choose another one," she said.
There are situations that give you an exception to the underwriting, or a "guaranteed issue right." That includes if you tried an Advantage Plan for the first time and it's within 12 months of that initial enrollment, said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.
"In that case, if you don't like your [Advantage] plan, you can go to a Medicare supplement with no medical underwriting," Gavino said.
Other situations that may qualify for an exception to underwriting, Gavino said, are if your Advantage Plan ceases to exist, you've been enrolled in Medicare but are now coming off employer (group) or union coverage, or your existing Medigap company goes bankrupt.
The cost difference
You may notice differences in premiums from insurer to insurer for the same Medigap plan.
The American Association for Medicare Supplement Insurance recently looked at the highest- and lowest-cost Plan G policies in various markets — and the differences can be stark. For instance, it found that in one Dallas ZIP code, the lowest cost was $99 per month for a 65-year-old female and the highest was $381 monthly for that same consumer.
One difference in premiums can come from how they are "rated." If you know this, it may help you anticipate what may or may not happen to your premium down the road. Some insurers' Medigap policies are "community-rated," which means everyone who buys a particular one pays the same rate regardless of their age.
Others are based on "attained age," which means the rate you get at purchase is based on your age and will increase as you get older. Still others use "issue age": The rate won't change as you age, but it's based on your age at the time you purchase the policy (so younger folks may pay less).
Premiums also may go up from year to year due to other factors, such as inflation and insurer increases.
If you work with an agent, ask how many insurance companies they work with (or are "appointed with"), according to the Medicare supplement association. Agents may not recommend a particular insurer's policies if they don't get a commission to do so.
Also ask if there's a household discount. Many insurers offer this, the association said, and it can mean savings of 3% to 14%.
You also can call your State Health Insurance Assistance Program, or SHIP, to find out if it can give you free help choosing a policy.