What Is a Medicare Supplement Plan (Medigap)?

Medicare Supplement Plans, also known as Medigap policies, provide additional health insurance coverage for individuals enrolled in Original Medicare. These plans help cover out-of-pocket costs like deductibles, copayments, and coinsurance that Original Medicare (Parts A and B) does not fully pay.

What Supplement Plans Are

Medigap policies bridge financial gaps in Original Medicare (Parts A and B). While Original Medicare covers most services, beneficiaries are responsible for out-of-pocket costs like deductibles, copayments, and coinsurance. For example, Medicare Part B typically pays 80% of approved services, leaving a 20% coinsurance that a Medigap plan can help cover.

Medigap plans work with Original Medicare, not as a replacement. Medicare pays its share of approved costs first. Then, the Medigap policy pays its share of the remaining approved costs, based on the specific plan.

Medigap policies differ from Medicare Advantage Plans (Part C). They do not include prescription drug coverage (Part D); individuals need a separate Part D plan for that. Each Medigap policy covers only one person, so spouses must buy separate policies. These policies are guaranteed renewable as long as premiums are paid.

Standardized Medicare Supplement Plans

Medigap plans are standardized across most states, identified by letters A through N. This means a Plan G from one insurer offers the same benefits as a Plan G from another, regardless of location. The main difference between identical lettered plans is the premium charged. Not all plans are available in every state.

Plans C and F are not available for purchase by individuals eligible for Medicare on or after January 1, 2020. However, if you were eligible before this date and already have one, you can keep it. If you were eligible before this date but did not enroll, you may still purchase Plan C or F.

Plan A covers Part A coinsurance and hospital costs for an additional 365 days after Medicare benefits are exhausted, Part B coinsurance or copayment, and the first three pints of blood. Plan B includes Plan A’s benefits, plus the Medicare Part A deductible.

Plans C and F offer comprehensive coverage. Plan C covers the Part A and B deductibles, Part A and B coinsurance, skilled nursing facility coinsurance, Part A hospice care coinsurance, first three pints of blood, and foreign travel emergency healthcare. Plan F, the most comprehensive, covers all Plan C benefits, plus Part B excess charges. A high-deductible Plan F is available for those eligible before 2020, requiring a significant deductible before the plan pays.

Plans D and G are similar to Plans C and F. Plan D covers the Part A deductible, Part A and B coinsurance, skilled nursing facility coinsurance, Part A hospice care coinsurance, first three pints of blood, and foreign travel emergency healthcare. Plan G, the most comprehensive plan for new enrollees, covers all Plan F benefits except the Medicare Part B deductible. Plan G also covers Part B excess charges, which are amounts providers can charge above the Medicare-approved amount. A high-deductible Plan G option is available, requiring a deductible before the plan pays.

Plans K and L are cost-sharing plans, covering a percentage of certain costs. Plan K covers 100% of Part A coinsurance and hospital costs for an additional 365 days, but 50% of the Part A deductible, Part B coinsurance, Part A hospice care coinsurance, skilled nursing facility care coinsurance, and the first three pints of blood. Plan K has an annual out-of-pocket limit; once met, the plan pays 100% of covered services for the year. Plan L offers similar coverage at a higher percentage: 100% of Part A coinsurance and hospital costs for an additional 365 days, and 75% of the Part A deductible, Part B coinsurance, Part A hospice care coinsurance, skilled nursing facility care coinsurance, and the first three pints of blood. Plan L also has an annual out-of-pocket limit.

Plan M is similar to Plan D but covers only 50% of the Medicare Part A deductible. It covers Part A and B coinsurance, skilled nursing facility coinsurance, Part A hospice care coinsurance, first three pints of blood, and 80% of foreign travel emergency healthcare. Plan N covers all basic benefits, excluding the Part B deductible and Part B excess charges. Plan N also requires a copayment for some office and emergency room visits not resulting in inpatient admission.

Eligibility and Enrollment Windows

To be eligible for a Medigap plan, you must be enrolled in Original Medicare (Parts A and B). Medigap policies work alongside Original Medicare, not as a standalone option.

The best time to enroll in a Medigap policy is during the Medigap Open Enrollment Period (OEP). This six-month period begins the first day of the month you are both 65 or older and enrolled in Medicare Part B. For example, if your Part B coverage starts August 1st, your OEP runs from August 1st through January 31st of the following year.

During this six-month OEP, insurers cannot deny coverage or charge higher premiums due to pre-existing health conditions. This guaranteed issue right ensures you can purchase any Medigap policy sold in your state without medical underwriting, which assesses health status for eligibility and rates.

After the Medigap OEP, you may lose these guaranteed issue rights. Outside this period, insurers can use medical underwriting to decide whether to sell a policy and how much to charge. Waiting to apply could result in denial or significantly higher premiums based on your health history.

Understanding Plan Costs

The cost of Medigap plans varies based on several factors, primarily monthly premiums. While standardized plan benefits are identical across insurers, pricing is not. Insurers use different methods to set premiums, and individual characteristics also play a role.

Three primary pricing methods exist for Medigap policies: community-rated, issue-age-rated, and attained-age-rated. Community-rated policies charge everyone in a geographic area the same premium for the same plan, regardless of age. Premiums may increase due to inflation but not solely because the policyholder ages.

Issue-age-rated policies base premiums on your age when you first buy the plan. Younger enrollees typically have lower initial premiums. Premiums can increase over time due to inflation or claims experience, but not simply because you age.

Attained-age-rated policies calculate premiums based on your current age. As you get older, your premiums will typically increase. While these policies may offer lower initial premiums, they can become more expensive over time.

Other factors influencing Medigap premiums include the specific insurance company, geographic location (due to regional healthcare costs and state regulations), health status, smoking habits, and marital status. These factors are especially relevant outside the Medigap Open Enrollment Period.