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Medigap Costs — Comparing the Prices of Medigap Insurance Plans

The costs for Original Medicare, Part A and Part B, generally include a monthly Part B premium, a Part A hospital deductible, a Part B deductible, and 20% coinsurance for medical expenses and outpatient services. There may be other costs in some situations. There’s no limit on out-of-pocket spending, and Original Medicare doesn’t cover many services that elderly and disabled Americans may need, like long-term care, prescription drugs (in most situations), and routine dental or vision services. On top of that, health-care costs continue to rise.

To help with these costs, many people choose to buy a Medigap insurance plan (also known as a Medicare Supplement Insurance plan). If you’re considering a Medigap plan, you’ll want to do your homework before selecting a policy that is right for you. Careful research might help you select the plan with the lowest and most competitive Medigap costs.

Medigap plans: standardized benefits, different costs

There are up to 10 Medigap plan types available in 47 states. Each plan type is identified by a letter and has different, yet standardized, basic benefits. This means that no matter which insurer you buy from, the basic benefits of each plan type of the same letter will be the same.

However, while the plans’ basic benefits are standardized across insurance companies, Medigap costs can be vastly different. So even though you’ll ultimately be getting the same basic benefits, it pays to shop around for the best price and select the plan with the most competitive pricing.

Buying a Medigap plan

The best time to buy a Medigap plan is when you are first eligible, during the Medigap Open Enrollment Period (OEP). This is the six-month window that automatically begins on the first day of the month when you are both at least 65 years old and enrolled in Medicare Part B. During this time, you have a guaranteed issue right to buy a Medigap plan, meaning that regardless of your health status or any pre-existing condition* you may have, the insurance company is required to sell you a plan regardless of your health status without charging you a higher price based on health status. During your OEP, you can choose any of the 10** Medigap plan options regardless of your health status, as long as those plans are available where you live.

If you don’t enroll in a Medigap insurance plan during your OEP, you might not be able to buy the plan you want later on. The insurance company may require you to undergo medical underwriting and can reject you based on your health status, or charge you a higher premium.

In general, once your OEP is over, you can’t get it back again and typically won’t have guaranteed issue should you decide to change plans. However, there are certain exceptions that may give you guaranteed issue later. Your age when you initially buy a Medigap plan can be an important deciding factor with regard to the Medigap costs you might pay.

How insurance companies set Medigap costs

Medigap plans are sold by private insurance companies, and each insurer prices its plans differently. When deciding which plan to buy, be sure to consider your age and how the insurance company sets its prices. The way that an insurance company prices (or “rates”) its Medigap insurance plans can strongly affect what you pay later on, even if the plan costs are initially low.

There are three ways an insurance company prices its Medigap insurance plans:

  • Under a community-rated or no-age-rated plan, all beneficiaries pay the same Medigap costs and premiums, regardless of age.
  • In an issue-age-rated or entry-age-rated plan, Medigap premiums are based on your age when you first enroll.
  • Under an attained-age-rated plan, your Medigap premiums are based on your current age in a given year.

Depending on your age when you first buy the plan, and the potential for your Medigap costs to increase based on the pricing method, what you pay now and in the future can vary greatly. Each of the three Medigap pricing methods can also vary depending on inflation and rising health costs.

If you are trying to switch to a better Medigap plan, and especially if you are trying to switch because of poor health, find out whether your insurance company considers current health status during Medigap enrollment. You may have guaranteed-issue rights even after open enrollment, depending on your situation and reason for changing plans.

Would you like to take a look at some of the Medigap insurance plans available in your area? Just enter your zip code in the box on this page to display a list and start comparing plans.

* Pre-existing conditions are generally health conditions that existed before the start of a policy. They may limit coverage, be excluded from coverage, or even prevent you from being approved for a policy; however, the exact definition and relevant limitations or exclusions of coverage will vary with each plan, so check a specific plan’s official plan documents to understand how that plan handles pre-existing conditions.

**Massachusetts, Minnesota, and Wisconsin residents offer Medigap plans that are standardized in a different way than the other states.

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This website and its contents are for informational purposes only. Nothing on the website should ever be used as a substitute for professional medical advice. You should always consult with your medical provider regarding diagnosis or treatment for a health condition, including decisions about the correct medication for your condition, as well as prior to undertaking any specific exercise or dietary routine.

 

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