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Medigap policies allow you to see any doctor who accepts Medicare

Medigap policies are very good supplemental coverage, but they are also expensive.
One of their chief benefits is that they do not have any network restrictions. That means policyholders have coverage if they go to any doctor or hospital that accepts Medicare (as long as they are going for a Medicare-covered treatment).

Another strong feature of Medigap policies is that they are convenient, since the doctor sends Medicare the bill and it forwards the balance to the insurance company. In addition, the four comprehensive plans have little or no cost-sharing. Medigap policies do not include prescription drug benefits, and people who choose them must also enroll in stand-alone drug plans.

There are ten Medigap plans, all of them are standardized. That means that a particular plan (Plan F, for example) has the same benefits regardless of the insurance company selling it. Three states — Massachusetts, Minnesota, and Wisconsin — do not have the nationally standardized plans, but have plans that are standardized within their states.

The ten plans are designated by letters of the alphabet – Plans A, B, C, etc. There are some gaps in the lettering since Plans E, H, I, and J are no longer sold. This chart shows the Medigap plans that are currently sold, and they are grouped according to the comprehensiveness of their benefits.

Medigap chart

When people decide they want to purchase a Medigap policy, they should first choose the plan they want (A, B, etc.). Then they should look for insurance companies that have low premiums for that plan. Most state insurance websites lists the companies that sell Medigap policies in their states as well as each company’s premiums.

These online comparisons are good places for people to begin their search to find a company that has lower premiums. Still, people should get current quotes, since occasionally the state information is out of date. Shoppers should call three or more insurance companies with low premiums, according to the website. Then they can choose the company they want to buy their policy from. A few states do not list premiums online, but do list names and phone numbers of the companies that sell Medigap policies in those states.

State Medigap Premium Comparisons

Click on a state’s link to see its Medigap premium comparisons.

Massachusetts, Minnesota, and Wisconsin do not have nationally standardized plans, but have plans that are standardized statewide.

*Georgia, Hawaii, Mississippi, New Mexico, and Wisconsin do not have online premium comparisons for Medigap policies. Click on this Medicare web site link and enter your zip code to get a list of Medigap insurers in your area as well as their phone numbers. Hawaii does list the insurance companies that sell Medigap policies in the state.

**Illinois has separate comparison lists for three areas in the state. Select the link to the area you’re interested in.

***These states list the names and phone numbers of companies that sell Medigap policies in the state. Also, New Jersey and Utah have links to each insurance company’s Medigap premiums.

Managing Medicare’s Costs

  • Finding ways to save money on Medigap policies (2 of 2)

    Medigap policies are the easiest-to-understand type of Medicare supplemental coverage. That’s because they almost never change their benefits. Six of the ten Medigap plans have the same benefit designs that they had 25 years ago — other than for a few tweaks that resulted from changes in Medicare’s benefits. And the coverage of the other four Medigap plans has not changed since they first came on the market in 2010.

    While their coverage is easy to understand, Medigap policies’ pricing is confusing. Here’s an example: if you are a 65-year-old San Francisco resident enrolling in Medigap Plan N, for instance, you may pay as little as $1,117 a year or as much as $1,807 a year, according to quotes from CSG Actuarial.

    Thus if you buy your policy from the most expensive insurer, you’ll pay 62% more than if you choose the least expensive company – even though the coverage is identical.

    Why do premiums vary so much? One answer is that insurance companies know that some retirees do not shop around before buying a policy. A handful of insurers may intentionally overprice their Medigap policies because they are willing to sell fewer policies so long as the ones they do sell have hefty profit margins.

    Another reason is that smaller, less well-known companies may have to offer larger commissions to entice insurance agents to sell their policies, and that added cost is reflected in steeper premiums. Still another reason is that when insurance companies are losing money on their Medigap policies, perhaps because of past underwriting errors, they have no choice but to hike premiums.

    Companies use one of three different rating methods when they set premiums. The most common one is the attained-age rating, which raises your premiums by about 3% for each additional year of age in addition to an annual increase to account for for health care inflation. Attained-age policies are usually the best deals for young retirees but can be pricey for older people.

    The issue-age rating method, on the other hand, raises premiums to stay even with medical inflation but does not adjust them for age except when the policy is initially sold. Issue-age policies usually have higher premiums for younger retirees since future age increases have already been priced in. But issue age-policies should be less expensive for older retirees who purchased their policies years earlier. Six states require insurance companies to use issue-age ratings – Arizona, Florida, Georgia, and Idaho. Missouri, and New Hampshire.

    The third method uses a community rating approach in which everyone pays the same premiums regardless of age or health. Like the issue-age approach, community ratings result in premiums that are expensive for younger retirees but relatively affordable for older people. The popular UnitedHealthcare (UHC) policies endorsed by AARP use a modified community rating in most states, although they will sometimes set their premiums higher or deny coverage to people who want to acquire a Medigap policy after their initial enrollment period has passed.

    So that their premiums will be competitively priced for younger retirees, UHC modifies its community rating by offering discounts of 3% a year for each year that the policyholder is younger than 75. This results in a 65-year-old getting a 30% discount, a 66-year-old a 27% discount, and so on until at age 75 the discount has vanished. Eight states require Medigap policies to be community-rated – Arkansas, Connecticut, Maine, Massachusetts, Minnesota, New York, Vermont, and Washington.

    In trying to protect yourself from sharp increases in premiums, it can helpful to know which ratings method an insurer uses. As an example, if you find an issue-rated policy that has lower premiums than an attained-age policy, it is expected to have lower premium increases over the long term than will the attained-age policy.

    But there are other factors which also play key roles in future premium increases. Companies that have conservative underwriting rules and low sales costs will have lower premium increases regardless of which ratings method they use. And state insurance regulators also play a role. The Florida Office of Insurance Regulation, for example, places caps on Medigap policies’ yearly premium increases.

    Here are suggestions about ways you may be able to save money when you are buying a Medigap policy:

    Compare premiums from at least three insurance companies. But which three companies do you call, since in many states 30 or more insurance companies sell Medigap policies? As a start, you can look at your state insurance department’s online premium comparisons for Medigap policies, which can be found at the bottom of this page.

    Most states list each company’s premiums for individuals of various ages (age 65, age 70, etc.) as well as its toll-free number. Even though some states do not regularly update their premium comparisons, they will give you an idea of the companies most likely to have lower premiums.

    The objective is not necessarily to buy your policy from the company that has the lowest premiums, but to buy from a company that has reasonably low premiums and that meets your other criteria, e.g., it is a large, well-known insurer.

    If you live in one of the few states that do not have the online comparisons, you can go to the Medicare web site to find a list of companies selling Medigap policies in your state. you might use the Medicare web site’s list of companies here. The Medicare web site does not show insurance companies’ premiums but it does list their toll-free numbers.

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