Individuals receiving health care benefits through Medicare frequently search for additional supplemental insurance, also known as Medigap and / or Major Medical coverage. These plans are sold by private companies to fill in coverage "gaps" in the original insurance program.
There are currently fourteen standardized Medicare supplemental insurance plans, and these are conveniently referred to as Medigap plans A through N; each of these insurance policies has a slightly different set of benefits.
Medigap insurance plans have grown substantially since they were first introduced back in 1949. According to the Census Bureau's Housing and Household Economic Statistics Division, there are an estimated 49.0 million individuals covered by the Medicare program and many of those same individuals purchase supplemental insurance (October 2014).
While some people might consider Medicare benefits generous, there are some significant coverage gaps, and the expense of the standard cost-sharing arrangement for medical services can quickly add up. Working in concert with private health care insurance companies, federal and state governments developed a system to help individuals fill in these insurance gaps.
One of the important aspects of the Medigap plan structure is that as you move alphabetically from A to N, subsequent plans add to the previous plan's health care coverage. Therefore, Plan A is considered the core Medigap plan, since all the other plans contain at least the benefits of Plan A. At the other end of the spectrum, Plan N is the most comprehensive supplemental insurance plan offered.
There are exceptions to this rule, and one important exception is the Medicare SELECT policy. This plan can cost less than the standard policies mentioned above, but the plan works more like a health maintenance organization in that there is a network of doctors and hospitals. Not every state sponsors a Medicare SELECT program.
There are also competing insurance offers to these plans, for example there is Medicare Part C, formerly known as "Medicare+Choice," and now known as "Medicare Advantage." Individuals entitled to Medicare Part A, and enrolled in Medicare Part B, are eligible to switch to a Medicare Advantage plan, provided they reside in the plan's service area.
Another feature of these policies is they are standardized across the United States (Massachusetts, Minnesota and Wisconsin are exceptions). This means it's possible to make a direct comparison between insurance companies regardless of where the purchaser lives. In theory, this means the only difference between company plans is the cost of the policy.
In general, when purchasing a Medigap policy there are at least two components to a policy, Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). Even if a policy is purchased, a monthly premium for Medicare Part B is owed to Medicare.
The following is a list of the basic benefits that all supplemental plans offer:
There were several significant changes to coverage offered by the Medigap program in 2010, including:
As mentioned earlier, as you progress from Medigap Plan A through Plan N, both higher premiums and additional medical benefits are offered by each insurance plan. The following list explains some of the additional benefits offered by these Medigap plans (policies purchased before June 1, 2016):
The list of medical and health care benefits that none of the plans cover is relatively small and includes:
The cost of Medicare supplemental insurance policies can vary widely. Although the coverage is standardized, there can be a large difference in the cost that each health care insurance company will charge for the same coverage. For example, some companies may base the insurance cost on the applicant's age upon enrollment. Other companies may change premiums annually as the plan participant ages.
In addition, while the exact cost sharing relationships are different for each plan, they all include the following components:
As the benefits of each of these payment types become more attractive to the consumer, the monthly premiums will increase. In practice, participants may also decide they value other features of an insurance company, such as their customer service reputation. Everything else being equal, cost is the only difference worth evaluating.
The best time to enroll in a Medigap plan is during the open enrollment period. Open enrollment lasts for six months, and starts on the first day of the month in which an individual turns age 65 or older and is enrolled in Medicare Part B. Once the six-month Medigap open enrollment period starts, it can't be changed.
Finally, the advantages of purchasing this insurance during the open enrollment period include:
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