How to Choose a Medigap Policy

Once you become eligible for Medicare, you will be inundated with offers from insurance companies for Medigap (supplemental insurance) policies. Sorting through these offers can be confusing. Not only are there 12 standardized plans, but there can be huge differences in premiums between companies.

What are Medigap or Medicare Supplement Insurance Policies?

Medicare plans A and B cover only a portion of medical costs. Medigap policies are designed to fill in the gaps in coverage. The first step is to figure out what coverage you will need. The government currently has eight standardized plans, each represented by a letter. There used to be 10 plans, but plans C and F are no longer available if you became eligible for Medicare after January 1, 2020).

Medigap Resources and Tips

Find more information about what each plan covers or read Medicare's guide called Choosing a Medigap Policy, which explains the differences in plan coverage. The following are some other things to consider when looking at plans:

• Plans in Massachusetts, Minnesota, and Wisconsin have some extra options, so if you live in those states, check with the state department of insurance to find out the differences.
• If you regularly see doctors who charge above what Medicare pays, Plan G, which covers excess charges, may be the right plan for you.
• If you regularly travel outside the United States, plans D, F, G, M, and N include coverage for this.
• If you have a chronic condition with high medical bills, plan K or L may work best. Both pay only a portion of covered expenses, but have a yearly out-of-pocket cap on medical expenses. Once you reach the cap, the policy pays 100 percent of all further medical services.

Note that Medigap plans that cover the Medicare Part B deductible (plans C and F in most states) are longer able to be sold to most people who turn 65 or who become eligible for Medicare after January 1, 2020. If you bought a Medigap plan C or F before January 1, 2020, you can keep that plan, and your benefits won’t change. 

Once you've decided what type of coverage you need, the next step is to decide which company to buy from. To find a list of companies that sell plans in your state, go to Medigap Policy Finder.

How Medigap Insurance Providers Determine Premiums

Each plan covers the same medical services, but premiums can vary significantly from company to company, depending on which method they use to set premiums: 

• Attained-age policies set the premium based on your age, so the premium automatically increases as you get older. Before buying an attained age policy, check with the insurance company to get the premium costs for the next age increments, so you'll know the level of increases to expect each year.
• Issue-age policies set the premium at the age you first buy the policy. The premium will never be higher than the amount the company is charging new buyers at the same age. For example, suppose you buy the policy at age 65. In five years, the premium will be the amount the company is charging new 65-year-old buyers. While your premiums may increase, the increases may not be large because the company will keep premiums lower to attract new buyers.
• Community policies charge the same price to everyone in your area, regardless of your age. The premiums go up only when the insurance company raises premiums on all policies of the same type. These increases are regulated by state insurance departments.

While the premiums on an attained-age policy may be lower at first, it is generally better to buy an issue-age or community policy, which may be more expensive at first but doesn't increase as much over time.

Choosing the Right Insurance Company

Look for a company that files Medigap claims automatically. Companies that offer automatic filing of claims with Medicare can save time and effort. It's also a good idea to purchase from a financially sound company. Make certain that the insurer is rated well by companies such as A.M. Best or Weiss. You can contact your state insurance department to find out if the insurance company has any complaints filed against it.

For help understanding Medigap insurance coverage, be sure to contact a licensed insurance agent. To figure out how your health care expenses fit into your future long-term care plan, find an elder law attorney near you.