Medicare and Medigap

While most Americans know that Medicare is the federal health insurance program for people who are 65 and older, disabled or who have permanent kidney failure, "Medigap" may not ring as familiar a bell. Medigap, or Medicare Supplement Insurance, was created to fill the "gaps" in healthcare coverage that Medicare does not fill. If you are facing medical expenses that Medicare does not cover, then Medigap could be for you.

 

Medicare comes in two parts, A and B. Part A is hospital insurance. It helps pay for inpatient care in a hospital or skilled nursing facility after hospitalization, as well as some home health and hospice care. Part B is medical insurance. It helps pay for doctors' fees, outpatient hospital care, durable medical equipment, and other services and supplies that Medicare Part A does not cover.

 

Since Medicare does not pay for all your healthcare costs, you will probably need additional insurance to pay for out-of-pocket expenses, such as hospital co-payments and the yearly deductible for Medicare Part B. Medigap can help pay for the deductibles, co-payments and co-insurance that neither Medicare Part A nor B cover.

 

You must be enrolled in Medicare parts A and B to qualify for Medigap insurance. Being enrolled in a managed care plan, like an HMO, PPO or PFFS, receiving Medicaid, or already having a Medigap policy that you are not planning to cancel makes you ineligible for Medigap. In general, you must be 65 to purchase Medigap, although there may be exceptions to this requirement, depending on where you live.

The best time to buy a Medigap policy is when you sign up for Medicare Part B. As soon as you sign up for Part B, you have a six-month "open enrollment" period, in which you may purchase any Medigap plan you want. During open enrollment, which is offered only once, an insurance company cannot refuse to sell you a Medigap policy, delay the beginning of your coverage, or charge you extra for pre-existing conditions. If you are under 65 and receive Medicare for a disability, your open enrollment period won't begin until you turn 65.

 

If you miss open enrollment, an insurance company may insist on reviewing your health history before deciding whether to accept your application and how much to charge you for the policy. If your health is good, chances are the insurer will sell you a policy.

 

An insurance company cannot cancel your policy unless you neglect to pay your premium, have misled them about something in the policy, or they go bankrupt.

 

There are 12 different standardized Medigap plans that are labeled "A" through "L," (except in Massachusetts, Minnesota and Wisconsin, which have different standardized plans). These standardized policies are subject to Federal and state laws and work only with the original Medicare plan. They also must provide the same basic benefits, including coverage for some or all of your original Medicare plan's coinsurance and outpatient co-payments, as well as deductibles. More comprehensive plans with additional coverage are available, usually at greater cost.

 

Private insurance companies sell Medigap policies, although not all insurance companies sell every kind of Medigap policy. Ask your state insurance department or State Health Insurance Assistance Program (SHIP) for help in finding the companies that sell such policies in your state. Make sure the company you choose is highly rated by a respected, independent rating service, such as Weiss Research, Inc., or A.M. Best Company. You can also find a company's rating on its web site or at your local library. An "A" rating or better usually indicates that a company is financially sound. You can also check for Medigap companies online.

 

Prices for Medigap policies run the gamut. That's because insurance companies use different methods for pricing or "rating" their policies. Generally policies are attained-age rated, issue-age rated, or community-rated.

 

Attained-age-rated policies tend to be less expensive when you're 65 but become more expensive as you get older. Issue-age-rated policies, which are based on your age at the time of purchase, don't get more expensive as you age. Community-rated policies cost the same for everyone living in your area regardless of age. Since insurance companies may charge different premiums for the same kind of policy, it's wise to shop around.

 

SOURCES: 2005 Choosing A Medigap Policy: A Guide To Health Insurance for People With Medicare, U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, Baltimore, MD.

Medicare, Social Security Online Electronic Booklet, www.ssa.gov/pubs/10043.html#part

Understanding Medicare, Medigap and Medicaid, By Maggie Pouncey, AARP Magazine,