Guide to Understanding Medicare Supplement Plans in 2021

Upon retirement, or within a few months of turning 65, you’ll become eligible for Medicare. Medicare is the US government–funded health insurance program for senior citizens and, in some cases, those with disabilities.

Medicare is not a one-size-fits-all program. While some parts of Medicare are automatic for retired American citizens, there are quite a few areas where a person can opt in or out of additional coverage and benefits. These additional parts — or supplemental plans — can be costly, but may also make sense for your specific conditions or health requirements. We’ll explore Medicare supplemental plans, including Medigap and other available options. 

What Is Medicare Supplement Insurance (Medigap)?

Medicare Supplement Insurance, or “Medigap” as it’s often called, is an additional plan you can add to your Medicare insurance that will help pay the difference between what is covered by standard insurance and your out-of-pocket costs for health care services and supplies.

Learn about supplemental plans with this guide from our experts and speak to a licensed agent about Medigap and other options.

A Medicare Supplement Insurance policy may cover any of the following:

• Copayments
• Coinsurance
• Deductibles

Medigap may also cover medical treatments and services abroad that aren’t covered by Original Medicare insurance.

If you have Medicare insurance and also purchase a Medigap policy, Medicare will pay a certain amount of your expenses and Medigap will cover its share. There are several Medigap policies you can choose from, all of which are available for purchase from private companies. Policies are named by letter in most states and are available by region, with price being the only difference between policies with the same letter sold by different companies.

Who Is Eligible?

In addition to being 65 or older and having Original Medicare insurance, those who are eligible for Medicare Supplement Insurance (or Medigap)

• Must have Medicare Part A and Part B
• Must apply during the six-month open enrollment period

Generally, the best time to enroll in a Medigap policy is during your open enrollment period. Under federal law, you have a six-month open enrollment period that begins the month you are 65 or older and enrolled in Medicare Part B.

During your open enrollment period, Medigap companies must sell you a policy at the best available rate regardless of your health status, and they cannot deny you coverage.

You are also eligible if you are under 65 years of age, but have a qualifying disability.

If you’re considering a Medigap policy, it’s extremely important to make your selection and purchase during your six-month enrollment period. During this window, private insurance companies must sell you a policy at the best available rate, regardless of any health conditions you may have. Should you wait until after your six-month enrollment period expires, insurance companies may have you fill out medical questionnaires, quote you higher rates, or even reject your application.

You may still purchase a Medigap policy after your enrollment period ends, but there will likely be more hoops to jump through. It’s recommended that you take advantage of the convenience of your open enrollment period when applying for Medicare Supplement Insurance.

Standardized “Letter” Plans

Typically, each Medigap plan is identified by a specific letter that has a corresponding list of benefits. There are 10 plan types available in most states (see this sample of Washington state’s plans). Massachusetts, Minnesota, and Wisconsin are exceptions to this rule and standardize their policies differently from the rest of the country.

Private insurance companies that sell Medigap policies are not required to offer all 10 types but are required by law to offer Medigap Plan A. If an insurance company wants to sell additional plans, it must first sell Medigap Plans C and F before also offering other letter policies.

Below are some brief descriptions of what you can (generally) expect each standardized Medigap letter plan to cover.

Most people won’t need the coverage that all 10 plans offer. This list should give you a better idea of the type of standardized letter plan(s) you might need.

Is Medicare Supplement Insurance Private?

Because Medicare Supplement Insurance is sold by private companies, it is classified as private insurance to be used in conjunction with your government-funded Medicare plan. This is also why your application for Medigap coverage may be either approved or denied outside of the six-month open enrollment window, and why any insurance company may choose to offer only a limited number of Medigap letter plans.

To take full advantage of Medicare Supplement Insurance benefits, be sure to research and enroll in your chosen plan(s) during your open enrollment period. Each person’s enrollment period is different and occurs only once. It begins on the first day that your Medicare Part B becomes effective.

Who Needs Medicare Supplement Insurance?

Anyone can benefit from Medicare Supplement Insurance, but it’s a particularly good idea for seniors who enjoy extensive travel abroad or those who anticipate requiring frequent medical care.

One thing to note: if your income is very high or very low, you probably don’t need to enroll in Medigap coverage. For low-income beneficiaries, there are several public programs available to help pay out-of-pocket expenses that Medicare doesn’t cover. Additionally, 30% of people receive union-sponsored or employer benefits that supplement Medicare, rendering Medigap unnecessary.

For high-income retirees, it may be more worthwhile to pay out-of-pocket expenses as they are incurred rather than enroll in Medigap. The only caveat here is that there is no cap on these expenses, and Original Medicare doesn’t cover prescription drugs. Medicare Part D offers this coverage, but Part D is a separate plan that is purchased in addition to Medicare Parts A and B.

Plan Types

There are different Medicare Supplement plan types to consider before you purchase a policy. These plans encompass and categorize several standardized letter plans by high-deductible, select, or innovative categories.

High-Deductible Plans

Medicare Supplement Plans F and G are considered high-deductible plans. Here’s what you need to know:

• Each has both a regular and a high-deductible version. The basic plan benefits are the same, but for the high-deductible plan, you’ll have to wait until you’ve paid the deductible before the plan will cover your Medicare costs.
• The deductible for both Plans F and G in 2021 is $2,370.
• Both plans offer more coverage than other standardized letter plans.
• The difference between Plans F and G is that G doesn’t cover the Medicare Part B deductible, making F a more comprehensive selection.
• Medicare Supplement Part F will eventually be discontinued. This plan is not currently available for purchase (unless you were eligible for Medicare before January 1, 2020).

The primary benefit of a high-deductible Medicare Supplement plan is that you may be able to pay a lower monthly premium for outstanding coverage.

Is Medigap Plan F Still Available—or Has It Gone Away?

Medicare Supplement Plan was generally regarded as one of the most comprehensive policies available; however, these plans are being phased out, starting in 2021. New enrollees in Medicare will no longer have access to Medigap Plan F. However, if a person already has this plan, they can keep it. Private companies sell Medigap plans as an alternative to help people cover the out-of-pocket cost gaps in Medicare.

Select Plans

A Medicare Supplement Select Plan includes full coverage for hospitals and doctors within its network. Select policies typically cost less than other Medigap plans, but keep in mind that if you don’t use a Select-approved doctor or institution, you risk paying high out-of-pocket costs.

A Select policy entitles you to all of the services provided by a normal Medicare Supplement plan, but ultimately restricts the doctors and hospitals from which you can receive care.

In the event that you move out of your Medicare Select policy’s service area, the following Medicare Supplement plans are available to you: A, B, C, D, F, G, K, and L.

You can also always call the insurance company for more information about your options.

Innovative Plans

Medigap’s Innovative plans often have higher premiums than standard supplemental plans, but offer useful benefits like dental and vision coverage.

Technically, there are Innovative and Innovative Select add-ons to standardized letter plans  available with A, F, G, and N policies. An Innovative plan simply includes dental and vision coverage, while Innovative Select includes these benefits within a specific network of doctors and hospitals in exchange for a lower monthly premium.

Innovative plans, as well as high-deductible plans, can be difficult to find through some major insurance companies. However, with a bit of research, it shouldn’t be too difficult to find a company that offers the best options for your lifestyle.

How to Enroll

Enrolling in a Medicare Supplement plan is fairly easy, but can be a time-consuming process. To enroll in a Medigap plan, you’ll need to

• Decide which benefits you need now, or which ones could prove most useful in the future; you might not be able to change plans down the line
• Pinpoint which insurance companies sell Medigap policies in your state
• Compare costs across insurance companies
• Purchase/apply for your selection(s)
• Call your State Health Insurance Assistance Program (SHIP)
• Call your State Insurance Department

Conclusion

In summary, adding a Medigap policy to your Original Medicare plan may or may not be the best option for you. Before purchasing a Medicare Supplement plan, it’s important to spend some time evaluating which services and facilities will be most beneficial to you.

Should you decide to proceed with applying for a Medigap policy, be sure to complete the process during your one-time, six-month enrollment period. Doing so will greatly increase your odds of getting the policy or policies you want, and will help make the process easier and faster for you.

Frequently Asked Questions

Is it better to have Medicare Advantage or Medigap?

There’s no “better” selection when it comes to choosing between Medicare Advantage (Medicare Part C) and Medigap (Medicare Supplement).The two are simply different, and one may prove more relevant to your health conditions or lifestyle than the other.

Medicare Advantage may be better for individuals who want to avoid a monthly premium (or, at a minimum, need low monthly premiums). Medicare Advantage plans cover hospitals and doctors and sometimes include prescription drug coverage. If the Medicare Advantage plan you’re considering does not cover prescriptions, it may not be as useful as some Medigap policies.

In addition, Medicare Advantage may be a better option if it has an out-of-pocket cap to protect you from big bills, like extended hospital stays or costly accidents. On the flipside, Medigap policies may give you more flexibility when it comes to selecting services or centers for your health care, and they typically don’t require referrals.

Ultimately, your decision will boil down to your priorities: if you’d prefer to spend less for coverage and don’t mind some restrictions, Medicare Advantage may be your best bet over a Medicare Supplement plan.

Can you be turned down for Medicare supplemental insurance?

Because Medicare Supplement plans are sold by private insurance companies, your application for coverage can be rejected. But if you apply during your open enrollment period, the odds of your application being accepted are much higher due to the fact that the company cannot ask you health-related questions. Furthermore, during this six-month period, an insurance company must present you with the best possible rates.

Your odds of rejection may increase if you wait until after your open enrollment period has ended. That’s because insurance companies will then be able to consider your application based on your current state of health. By taking advantage of the six-month open enrollment period, you can significantly increase the odds that your application will be accepted.