Key considerations if your Medicare coverage will include Medigap

Marcos Elihu Castillo Ramirez | iStock | Getty Images

Considering a Medicare supplement plan, aka Medigap? Be sure to choose one based on more than just its cost.

These policies, sold by private insurance companies, generally cover part or most cost-sharing — i.e., copays or deductibles — that comes with basic Medicare (Part A hospital coverage and Part B outpatient care). And, they are standardized across most states so you know the benefits are the same regardless of where you live or which insurance carrier is offering, say, Plan G or Plan N.

However, the cost can vary widely among insurers and locations. For instance, monthly premiums for the popular Plan G range from $90 to $476 for a 65-year-old, according to eHealth research that reviewed 67 regions around the country. For Plan N, the range is $78 to $284. (Those two plans are the most popular, accounting for about 87% of Medigap plans newly purchased through eHealth.)

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Regardless of which plan you pick, the premiums generally will rise each year — some more than others — and switching to a different plan may be difficult, depending on where you live and whether you’d need to undergo medical underwriting.

“What happens if you choose a plan strictly by the price, ignoring all other factors and later your health deteriorates, premiums were increased significantly, and now you are stuck with that carrier?” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

Here’s what to know.

The basics

When you can enroll

If you know going in that you have a health condition that will likely prevent you from being able to switch plans down the road, ask your broker for recommendations … for the long-term.

Danielle Roberts

Co-founder of Boomer Benefits

The plans differ on what is covered. For example, some offer limited coverage for overseas travel, while others do not. 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. 

How they are priced

One difference in premiums can arise 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 policies are “community-rated,” which means everyone who buys a particular plan 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 individuals may pay less).

Premiums also may go up from year to year due to other factors, such as inflation and insurer increases. 

It’s worth choosing an insurance company that has a good track record, Gavino said.

“Some carriers may come into the marketplace with low [premiums] to attract business, but the next year may raise rates by a significant amount once they have a bit of claims history,” she said.

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