Medicare Supplement (Medigap) Insurance

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When you turn 65, you can sign up for Medicare Part A & Medicare Part B. Then you have two options for additional coverage:

Option One is to buy a Medicare Supplement Plan and a Medicare Part D Prescription Drug Plan.

or

Option Two is to choose a Medicare Advantage Plan. These are “all in one,” “bundled” plans that include Medicare Part A, Part B, usually Part D, and sometimes additional benefits like vision, dental and hearing.

This page explains Medicare Supplement Plans. These are generally thought of as the most comprehensive and flexible plans. However, the premiums for Medicare Supplements are higher than premiums for a Medicare Advantage plan.

One of the key benefits of a Medicare Supplement Plan is that there is no “provider network.” You can use any doctor or hospital that accepts Medicare, anywhere in the U.S. And in most cases you don’t need a referral to see a specialist.

So if you go to the doctor or hospital six or more times per year, a Medicare Supplement Insurance plan may be right for you.

A Medicare Supplement Insurance (Medigap) plan pays some of the health care costs that Medicare Part A & Medicare Part B don’t cover, like coinsurance, copayments, or deductibles. Private insurance companies sell Medicare Supplement (Medigap) Plans. Some Medicare Supplement Plans also cover certain benefits that Medicare Parts A & B don’t cover.

Medicare Supplement Plans do not provide prescription drug coverage. Prescription drug coverage is provided by Medicare Part D plans.

One of the most important things to know about Medicare Supplements is that you must apply for your Medicare Supplement within six-month of your Medicare Part B effective date in order to be guaranteed issue for coverage. This six-month window is called your Medigap Open Enrollment Period. During this period, you can sign up for any Medicare Supplement Plan. You do not have to go through underwriting or answer health questions to get the coverage. You are guaranteed the coverage.

After that, you will have to be underwritten for a Medicare Supplement plan in most cases. This means the insurance company can deny you coverage. For example, they may deny you if you had certain previous or ongoing health conditions, like joint replacement, surgery for cancer, congestive heart failure, coronary artery disease, Diabetes with circulation problems, TIA, Stroke, Heart Attack, and Heart Disease.

In contrast, if you choose a Medicare Advantage plan, you are always guaranteed issue during a valid enrollment period. If you choose to save money initially by selecting a Medicare Advantage plan because of the low premiums, you may not be able to go back to a Medicare Supplement Plan. If you decide you want the fuller, more flexible coverage provided by a Medicare Supplement plan, you will have to be medically underwritten and you may not be approved for coverage, depending on your health conditions. However, you will not have to be medically underwritten for a Medicare Part D plan.

There is no reason to stress out about Medicare. Medicare does not need to be so confusing. You can learn how to lower your prescription drug costs and avoid the donut hole. Also, you will discover that while Medicare Supplement Plan F used to be the most popular plan, it isn’t smart to buy Plan F now.

Medicare Supplement Plans

There are ten different Medicare Supplement Plans: A, B, C, D, F, G, K, L, M, N.

Medicare Supplement Plan G now provides the fullest coverage at the most reasonable cost. In the past, Medicare Supplement Plan F was the plan of choice for those seeking the fullest, most flexible coverage, but in 2015 Congress passed Medicare Access and CHIP Reauthorization Act (MACRA) and that eliminated plans like C & F that provided first dollar coverage. More specifically, Medicare Supplement Plans C & F paid for the Medicare Part B annual deductible of $185. This meant that when you went to the doctor, in most cases, you did not pay anything. Congress wants Medicare beneficiaries to have skin in the game. Thus, they have decided to phase out Plans C & F for new Medicare beneficiaries.

Existing Plan C & F Medicare Supplements are grandfathered; you may keep your Plan C or F Supplement. If your Medicare Entitlement date is prior to January 1st, 2020. Plan F is still a good plan, but in some areas Plan G can provide comparable coverage at a lower overall cost. The only difference between the plans is that Plan F covers the Medicare Part B deductible and Plan G does not. In 2019, the Medicare Plan B annual deductible was $185. The premium savings for Plan G generally was greater than the additional $185 benefit that Plan F provides.

Medicare Supplement Plan premiums are generally based on your age, zip code and gender.

Issue Age polices base your premium on the age when you signed up for the Medicare Supplement. Future premium increases are based on the claims experience within the entire pool of insured that you are grouped with. Your premium does not increase because you are older or your personal claims experience.

Attained Aged generally start off with lower premiums than an Issue Age policy but eventually the Attained Age premiums become more expensive. Attained Age premiums are based on your current age, and therefore increase every year because you are older.

In some cases, every age pays the same amount. This is called a Community Rated policy.

Medicare Part D

When you buy a Medicare Supplement, you need to get a Medicare Part D Prescription Drug plan because none of the Medicare Supplements provide prescription drug coverage. In the past, some Medicare Supplement Plans did cover medications, but not anymore.

If you are over 65 and still have your health insurance through you or your spouse’s employer, you need to make sure that the employer’s prescription drug coverage is credible in the eyes of Medicare. If it isn’t, you will need to get a Medicare Part D plan. If you don’t sign up for a Medicare Part D plan when you are supposed to, you will pay late enrollment penalties when you do sign up. These penalties do not go away and remain with you for as long as you are on Medicare.

Medicare Enrollment

You don’t need to enroll in Medicare when you turn 65 if you are still working and have health insurance coverage based on you or your spouse’s active employment.

And it’s unwise to enroll in Medicare if you have a health savings account and plan to continue making contributions to your health savings account. You are not allowed to make a contribution to your health savings account if you are enrolled in Medicare Part A. Additionally, if you don’t sign up for Medicare Part A when turn 65, then when you do enroll in Medicare Part A, Social Security will backdate your Part A effective date six months when you do eventually enroll. You need to make any health savings account contributions before your Medicare Part A effective date.

If you are drawing Social Security benefits, by default you will be signed up for Medicare Part A. You can’t draw Social Security benefits without enrolling in Medicare Part A. And since you have Medicare Part A, you can’t contribute to a health savings account. Therefore, if you are drawing Social Security benefits, you can not make contributions to a health savings account.

If you enroll in Medicare after your 65th birthday, you can avoid a penalty from Medicare if you have employer group health insurance coverage through you or your spouse’s active employment. However, if the coverage is provided from an employer with less than 20 employees, you will generally need to sign up for Medicare when you turn 65. The reason for this is that Medicare will pay primary and your employer group plan will pay secondary on groups with less than 20 employees. Therefore, if you don’t sign up, you will be responsible for about 80% of your expenses (the amount Medicare would have paid) after age 65.

If the employer with less than twenty is part of a Multiple Employer Welfare Arrangement (MEWA), then Medicare may pay secondary and your employer group will pay primary.

Medicare Enrollment Periods

Initial Enrollment Period

Your Initial Enrollment Period is the seven-month period that runs three months before your birth month, your birth month, and three-months after your birth month. Medicare always starts on the first of your birth month, unless you were born on the 1st of the month, then your Medicare will begin the month prior.

If you sign up during your initial enrollment during the first three-months prior to your birth month, then your Medicare will be effective the first day of your birth month. If you sign up during your birth month, your Medicare will be effective the first day of the next month.

To sign up during your initial enrollment period, you are required to enroll through the Social Security Administration website, unless you are already drawing Social Security benefits. If you are already drawing Social Security benefits, you will be automatically enrolled in Medicare Parts A and B. You will also receive a Red, White and Blue Medicare Card. You have the option to defer enrolling in Medicare Part B, but you must have Medicare Part A if you are drawing Social Security. This has an impact on HSA contributions as discussed above.

Special Enrollment Period

The second enrollment period is called your Special Enrollment Period. Special Enrollment Periods apply to Medicare beneficiaries who choose to work past age 65 and have employer group health insurance. If you or your spouse has health insurance coverage through your or your spouse’s active employment, you can defer Medicare. You can defer Medicare enrollment provided you or your spouse is employed and you both have continuous coverage through the active employment of either of you. When you or your spouse decide to retire, then you have an eight-month window in enroll in Medicare. This window extends from the day you stop employment or your health insurance ends, whichever happens first.

Remember, if you work for an employer with less than 20 employees, the above paragraph does not apply to you. Employees on an employer plan with less than 20 employees should sign up for Medicare when they turn 65.

COBRA does not count as health insurance through you or your spouse’s active employment. Your eight-month window extends from the day your employment ends or your group health insurance ends, not from when your COBRA ends.

We generally recommend that people who plan to utilize their Special Enrollment Period begin the process at least three months before their group coverage is going to run out. As part of the process, you need to prove to Social Security that both you and your spouse had coverage through active employment since your individual 65th birthdays.

General Enrollment Period

The third enrollment period is the General Enrollment Period. This runs from January 1st to March 31st every year. This is for people who missed their initial enrollment period or their special enrollment period. You can sign up during this annual enrollment period and your Medicare will be effective July 1st of that year.

If you missed your Initial Enrollment Period and didn’t have a Special Enrollment Period, you must enroll in Medicare during a General Enrollment Period. You will also be penalized 10% of the Medicare Part B base premium ($135.50) for every 12-month period that you delayed your Medicare enrollment. This penalty does not go away and lasts as long as you are on Medicare.

Medicare Part A

Medicare Part A covers inpatient hospital care. Inpatient hospital care generally means that you are registered as inpatient and have been at the hospital for more than 23 hours. If you are under observation, that isn’t considered inpatient care and can effect your payments.

Medicare Part A also covers skilled nursing facility care (up to 100 days). In order for Medicare Part A to pay for skilled nursing, you must have a three-day hospital stay as an inpatient and released into a skilled nursing facility.

Medicare Part A does not pay for custodial or long term care. Part A will cover hospice care and some home healthcare. Medicare Part A has a $1,364 per benefit period deductible in 2019. A Medicare Supplement can help cover the deductible.

Medicare Part A is free for most people. It is free if you or your spouse has paid Medicare taxes for 40 quarters or 10 years. If you haven’t met that qualification, you can still buy Medicare Part A. In 2019, Medicare Part A premiums were as high as $437 per month.

Medicare Part B

Medicare Part B covers outpatient medical care and services. This includes services from doctors and other health care providers, durable medical equipment (like wheelchairs, walkers, hospital beds, and other equipment and supplies), physical therapy, and many preventative services. Medicare Part B generally covers 80% of outpatient charges. A Medicare Supplement can cover the remaining 20%.

Medicare Part B is not free. In 2019, the Medicare Part B monthly base premium is $135.50. 5% of Medicare Beneficiaries will pay more than $135.50 per month. Those beneficiaries will pay an income adjustment – as much as $325 more per month per person.

If you pay a Medicare Part B income adjustment, you will also have to pay a Medicare Part D income adjustment. You can appeal your Part B & D income adjustment if you have had a life changing event that has decreased your Modified Adjusted Gross Income. Social Security asks the IRS how you filed your taxes (individually or jointly) from two years ago. Then Social Security uses the Modified Adjusted Gross Income from that year to determine your Medicare Part B income adjustment. If you retired and your income decreased within the last two years, you may be able to appeal and lower or eliminate your Income Adjustment.

Your Medicare Part B premium will come out of your Social Security check unless you are not drawing Social Security. In that case, you will be direct billed and will have the option to pay by paper bill, credit card, or automatic bank deduction.


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