Medigap: Everything You Should Know [Ultimate Guide 2022]

— Last Updated May 27, 2022

Medigap: Everything You Should Know [Ultimate Guide 2022]

In this article

— Last Updated May 27, 2022

Read Time
8 mins
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Reviewed by
Eric Berkman
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Medigap: Everything You Should Know [Ultimate Guide 2022]

Stephanie Wilson

Director of Operations

Read Time

8 mins
Group-27.png

Reviewed by

Eric Berkman

In this article

Medicare and other common health insurance plans cover a multitude of medical costs, and having a general healthcare plan in place is key to getting the care you need regardless of the situation. However, even the best plans leave small gaps that may impact your ability to get specific types of care or medications. That’s where Medigap comes in. 

You may have heard about Medigap in the news or when you were speaking to your healthcare provider, but many people don’t understand exactly what it is and what is the difference between medicare vs medicaid

So, what is Medigap?

The Basics of Medicare Supplemental Insurance

Like we said, even the best insurance plans leave small gaps in their coverage that can cost you quite a bit in the right situation. Fortunately, there are supplemental insurance options available to fill those gaps.

Supplemental insurance plans can help cover co-pays, insurance deductibles, and other small things that aren’t covered by your main insurance plan. These supplemental insurance options function separately from your main plan, and you often have to maintain them separately when it comes to monthly payments. 

What Is Medigap?

Medigap is a form of supplemental insurance designed to help cover out-of-pocket costs many Medicare recipients are responsible for. Once Medicare pays its part of your medical bill or prescription fees, Medigap steps in to pay even more before you’re left with whatever amount remains. Since Medicare is primarily for those over the age of 65, and often on a fixed income, Medigap’s extra coverage of costs can mean the difference between financial stability and crippling healthcare fees. 

medigap

However, Medigap isn’t a substitute for a general health insurance plan. It won’t cover long-term care, and it doesn’t pay would-be out-of-pocket costs until your primary plan pays its share. It’s also sold separately by private insurance providers, and it comes with its own monthly premium. Luckily, the cost of the monthly premium is often outweighed by the money saved in copays, coinsurance, and deductibles. 

How Medigap Compares to Other Insurance Plans

Currently, the main competitor for Medigap plans is the new Medicare Advantage plan that many people searching for insurance confuse as a form of Medigap insurance. The two are completely different, and while they share a focus on the Medicare system, that’s where the similarities end. So, how does Medigap stack up against it? 

Well, Medigap functions alongside Medicare parts A and B, but it’s a privately sold option with several variants to help it work in a several different situations. Medicare Advantage is simply a more advanced Medicare option that has built-in cost-reduction features.

These features function similarly to Medigap, but they don’t come with an added premium or allow for plan cancellation if you have a pre-existing condition, and they add a payment cap to your out-of-pocket costs. However, Medicare Advantage, and many similar alternatives, tend to have weak healthcare networks that can make finding certain kinds of care difficult.

Also, while there is a payment cap, it can be quite high for some of the most common emergency treatments, making its impact on certain medical bills negligible. This all-in-one plan can make keeping track of payments and coverage easy, but as outlined, it has some major drawbacks. 

In contrast, Medigap keeps things simple, and it’s a lot more flexible. Rather than cram everything into an existing plan, Medigap lets your normal Medicare parts A and B plans do their part first. When there are copays, coinsurance fees, or deductible costs leftover, Medigap pays a portion relevant to your specific plan. You’re left with whatever costs remain, but after two insurance plans have paid their shares, this is often a much more affordable option that is well worth the monthly premiums and it is highly likely that all or close to all of your costs will be covered. 

Speaking of premiums, Medigap will cause you to take on another monthly fee. Since it’s sold separately by private companies, it doesn’t get attached to your Medicare bill as Medicare Advantage does. You handle all payments and billing responsibilities for Medigap separately. 

One drawback to Medigap is you may be denied a Medigap plan for pre-existing conditions if it’s not your first time enrolling in Medicare.  Additionally, Medigap also doesn’t cover many long-term healthcare costs, vision, and dental, or things such as fitness training; all things that some Medicare Advantage plans help cover. 

Offsetting those shortcomings, Medigap guarantees approval for anyone filing for Medicare for the first time, and it’s accepted by any medical service that accepts Medicare insurance. This means that you don’t have to worry about pre-existing conditions unless you allow your Medicare plan to lapse.  You also get the option to opt-out of, or change your Medigap insurance plan regularly. As long as you keep the plan, any conditions you may have won’t disqualify you. This is part of Medigap’s “guaranteed renewal” policy. 

Premiums are low for both options, with Medicare Advantage typically allowing you to keep your Part B premium with no extra costs. Medigap’s added premium averages about $122 per month once your Part B premium is factored in. 

medigap

Both options also have annual out-of-pocket limits. This means that if you spend the full limit over a year, both insurance providers will fully cover the rest of your costs. 

In general, Medigap is a better option for those who like to choose their healthcare providers and want lower costs across the board. However, its monthly premium is an added cost, and some plans do not have an out-of-pocket cost limit. 

The same general comparison works for other competitors, but it’s important to note that Medicare Advantage is the most relevant alternative in almost all cases. 

What Does Medigap Cover? 

In general, Medigap covers three primary costs that are passed down to Medicare plan holders:

  • Coinsurance
  • Copays
  • Deductibles

Coinsurance is similar to a copay, but it functions off percentages. When your medical bills exceed the limit of your deductible, you pay a coinsurance percentage. The lower the percentage, the less you have to pay.

Copays are the leftover fees you pay for prescriptions or healthcare services after your insurance provider pays their share. They’re much lower than paying full price in nearly every case, but they can be financially crippling for those on limited or fixed incomes. Medigap’s coverage of these fees helps alleviate that issue. Copays are highly predictable, though. They’re flat-rate fees that do not change without notification. 

Simply put, your deductible is what you have to pay before your primary insurance provider will pay their share. This can be costly, and Medigap helps greatly reduce the amount you have to pay out-of-pocket. 

All three of those insurance facets are covered in part by Medigap, but there are quite a few things that Medigap doesn’t cover. 

Most notably, Medigap does not provide drug coverage. This leaves you with the full copay responsibility provided by your primary insurance provider. The only way to receive drug coverage is to have purchased a plan before the 2006 rule change. 

It also doesn’t cover long-term healthcare services such as assisted living or other prolonged services, and long-term health insurance plans are excluded, too. 

Beyond that, Medigap is not compatible with a variety of insurance plans:

  • Tricare
  • Veteran’s Benefits
  • Federal Employee Insurance
  • Medicare Advantage
  • Medicare Prescription Drug coverage
  • Employer-based plans
  • Tribal citizen insurance plans
  • Or Medicaid

Medigap is compatible with some plans, but it is mostly limited to supplementing Medicare Parts A and B. You must also have both parts A and B to enroll in a Medigap plan; with Part B being Medigap’s main focus in terms of coverage. 

On a positive note, Medigap does cover care costs from any medical service provider that accepts Medicare. This is in stark contrast to plans such as Medicare Advantage that require you to seek services from specific doctors in a limited network. 

Finally, Medigap plans K and L will cover all of your out-of-pocket costs once you exceed the cost limit placed at the point of your enrollment. This is not covered by other Medigap plans, but it is part of the K and L packages. 

Which Medigap Plan is the Best?

Determining which Medigap plan is best is a highly personal process. Your unique needs will determine exactly which features you need, and they will help determine what price point is reasonable for your financial capabilities and medical needs. This is why it’s best to consult a professional before enrolling in any insurance plan. However, most soon-to-be Medigap policyholders will get the most out of Plan G. 

Plan G comes in two variants, and each one differs in price and functionality slightly. 

The first plan is the Medigap Plan G Standard plan. This is a basic Medigap plan that suits most Medicare holders over age 65, and it provides all the cost-saving features Medigap is known for. However, it has a fairly low deductible that you have to exceed before your benefits kick in and Medigap starts paying its share. It’s easy to max out this deductible and receive your benefits, but this standard plan has higher monthly payments. For those who don’t require medical care frequently and are in relatively good health, this can end up being costly due to the premiums. 

The second option is the Medigap Plan G High Deductible plan. As its name suggests, this variant has a higher annual deductible that you must meet before your benefits kick in. This leaves you without any Medigap benefits until you’ve already spent a considerable amount, but the trade-off is that your monthly premiums are much lower. This isn’t a great option if you consistently need assistance with healthcare costs, but it’s a great option for those in relatively good health, and if an emergency occurs, you’re more likely to exceed the deductible and get your benefits when you need them the most. 

medigap save money

Plans K and L are also valid options since they include out-of-pocket cost limits, but their monthly premiums can be exceptionally high, and most policyholders won’t make use of the limits that make these plans worthwhile. 

Before deciding which plan is best for you, it’s important to understand your options, situation, and financial capabilities. Plan G simply works for most policyholders. 

Who Offers Medigap Plans? 

Unlike alternatives such as Medicare Advantage, Medigap plans are extremely accessible. Beyond just having guaranteed acceptance and re-enrollment policies, the plans are available just about anywhere insurance plans are sold. 

If an insurance provider is licensed to sell Medicare Supplement insurance, they can sell any of the Medigap variants available. This is true in all 50 states, and most health insurance providers seek out the proper licensing to ensure they can cover the large portion of the population that relies on Medigap and medigap planning.

Blue Cross Blue Shield and AARP are two big names in the insurance industry that offer Medigap plans, but most other providers will usually offer them. If you like your current provider, ask a representative if Medigap is available. Chances are, they can provide you with a policy. 

Where Can I Find Out More and Get Advice on Medigap?

Medigap supplemental insurance plans provide essential coverage where Medicare fails to do so. Its renewal guarantee and first-time enrollment guarantee are vital for ensuring that even those with pre-existing conditions can receive the help they need with healthcare payments. Compared to its most popular alternatives, Medigap stands out for its flexibility, low-cost options, and accessibility for all. 

However, it can be difficult to navigate the complex policy guidelines and coverage features to determine exactly which Medigap plan is right for you, or if you need a different option. 

This is where Policy Solvers comes in. At Policy Solver, we give you fully customized advice, backed by years of hands-on experience with the insurance field, to ensure you get the best possible policy for your situation. 

Don’t try to do it on your own. Contact Policy Solver today or schedule a free consultation, and take the risk out of purchasing healthcare insurance!

Sources:

Medicaresupplement.com, How Does Medigap Plan G Work?

https://www.medicaresupplement.com/medigap/plans/high-deductible-plan-g/#:~:text=High-deductible%20Medigap%20Plan%20G%20will%20offer%20the%20same,and%20your%20Plan%20G%20benefits%20will%20kick%20in.

Penelope Wang, Consumer Reports, The Pros and Cons of Medicare Advantage October 14, 2021

https://www.consumerreports.org/medicare/pros-and-cons-of-medicare-advantage-a6834167849/

Official Medicare Posting, What’s Medicare Supplement Insurance (Medigap)?

https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap

November 23, 2021

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