Health Insurance: What is Medigap Insurance?

Know the Potential Benefits and Problems Involved in Medigap Plans

Older woman talking to doctor in office
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If you are an American citizen, once you turn 65 years old, your cost of healthcare will be partially covered by Medicare. Medicare is a federal, taxpayer-supported program that helps seniors pay for their medical care, including screenings, diagnoses, treatment and other forms of medical support. It's not an entitlement program in the strictest sense of the word since you have paid into Medicare, like a tax, since the very first job you ever had.

You can learn the basics of how Medicare works through Medicare 101.

The problem is that Medicare doesn't cover all your costs of care. No matter how much money you paid into Medicare in your lifetime, your ability to have Medicare pay for your medical care after age 64 is limited. There will be extra costs for care that isn't covered at all, and there may be costs that are only partially covered, such as prescription drugs or specialized treatments.

You Have Four Options for Those Extra Costs involved:

  1. Purchase a Medicare Advantage program through a private insurer to supplement your care.
  2. Purchase a Medigap insurance plan through a private insurer to supplement your care. That's what this article addresses - see below.
  3. Don't seek care that requires you to pay anything extra. (Probably impossible.)
  4. If you have a low enough income, you may qualify for a state program such as Medicaid.

The second option is a Medigap insurance plan.

A Medigap plan is intended to do just that - cover the "gap" between the actual cost of your care, and what Medicare will pay on your behalf. It may cover copayments, coinsurance, deductibles and other aspects of your care depending on the Medigap plan you choose.

(Be advised, however, that a Medigap plan will not cover every additional cost.

For example, it will not cover prescription drugs.)

The cost of covering those gaps varies, depending on your needs, and the state you live in. Today there 12 different types of Medigap plans exist; Plan A through Plan L. As the plans go through the alphabet, they offer increasing forms of extra coverage and, of course, they get more expensive.

Important Details to Know about Medigap Insurance Plans

Don't purchase both a Medicare Advantage Plan and a Medigap Plan since they won't both pay your medical costs. An Advantage plan trumps a Medigap plan, so if you already have a Medigap plan, then drop it if you decide to enroll in a Medicare Advantage Plan. (Timing wise - be sure to drop it BEFORE you enroll in the Advantage plan.)

If you are married, you and your spouse will need separate Medigap policies. Unlike insurance plans that can cover a family, Medigap only covers one individual.

In order to purchase a Medigap plan, you must already be enrolled in both Medicare A and Medicare B. (Learn more about Medicare A through D.)

It is important to understand what Medigap policies will help you pay for, and what they won't. Their coverage will likely vary by the plan you choose. In general, most won't cover long-term care, dental care, vision care, eyeglasses, hearing aids, home health or private nurses.

Important: As mentioned above, they cannot be used for prescription drugs (which are covered instead by Medicare Part D.)

Once you have purchased a Medigap policy, you cannot be dropped by your insurance company - it's against the law. They must continue offering you new Medigap policies each year as long as you keep current with your payments. If you run into problems, contact your state's insurance department or your state's attorney general.

If you decide to make a change in your coverage - for example, you want to purchase Medicare Advantage instead of Medigap, or vice versa - then the timing will be very important to make sure you don't pay late penalties.

You can learn more about the timing at the Medicare website (see link below).

If you travel outside the United States, your Medigap insurance may, or may not, cover the cost of your care. Be sure to check with your insurer before you leave the country.

Trust but Verify!

There are many hucksters out there who would love nothing more than to take advantage of seniors who don't understand how the many kinds of Medicare, Medigap, and Medicare Advantage plans work. They will happily take your money even if their practices are illegal, and they are selling you something that doesn't really exist.

There are tools you can use to be sure you are getting the coverage you need, legally, at the best price for you:

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