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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 Still, people should get current quotes, since occasionally the state information is out of date.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, and New Mexico 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. The Mississippi and New Mexico links show 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. New Jersey’s web site has separate links for finding premiums for men, women, and for people under 65. Utah’s site has separate links to each insurance company’s Medigap premiums.

Managing Medicare’s Costs

  • All seems well with Advantage plans, but you still need to do your homework before enrolling

    Everything seems to be going right these days for the insurance companies that sponsor Medicare Advantage plans. Since 2016 they have seen their enrollment grow by 1.5 million people a year, to the point that almost 35% of Medicare beneficiaries belong to an Advantage plan. Some 42% of the Medicare population will be enrolled in Advantage plans by 2030, according to projections by the Congressional Budget Office.

    That’s good news for retirees because as plan enrollment rises, insurance companies can offer richer sets of benefits. Even better, Medicare this year is boosting its payments to the plans by an average of 3.4%, the largest percentage increase in recent memory and one that should further strengthen coverage. To top it off, this year almost one-half of plan contracts will divvy up more than $6 billion in quality bonuses, which the plans are required to invest in added benefits.

    The thriving Advantage plan market is attracting interest from firms that have not previously sponsored plans. This year 14 additional insurers, including one that’s funded by a venture capital firm, are introducing Advantage plans. Nationally there are 417 more plans this year than last year, an 18% increase. Meanwhile, only five insurers left the market at the end of 2018 according to the Kaiser Family Foundation’s 2019 Advantage plan spotlight.

    Advantage plans are popular because they are inexpensive compared to Medigap policies. Approximately one-half of plan enrollees do not pay any premiums or have deductibles for medical or prescription drug coverage. In contrast, Medigap policies have steep premiums ranging between $1,200 to $4,000 a year depending on the plan, the policyholder’s age, and the state the policy is issued in.

    Another reason that people find Advantage plans attractive is for their extra benefits — routine vision and dental care and hearing aids, none of which are covered by Medigap policies. And some Advantage plans provide benefits that include a health club membership, a 24-hour nurse hotline, and free van rides to doctors’ offices and physical therapy centers.

    Retirees also like the fact that Advantage plans have out-of-pocket limits to protect them from catastrophic spending – last year the average OOP limit was just over $5,200. Most Medigap plans, on the other hand, do not have out-of-pocket limits, the exceptions being the rarely sold Plans K and L.

    But there’s a tradeoff – Advantage plans manage care in ways that may seem restrictive. Enrollees must use their plans’ network providers or else pay substantially more. In Advantage HMO plans, people often need to get referrals from their primary care doctors before they can see specialists. And they may need to get prior approvals for various treatments and procedures, some of which will be denied if the plan does not consider them medically necessary.

    ***

    To find out whether you should enroll in an Advantage plan, start by answering the three questions below. These aren’t the only ones you should ask, but they are the most important ones.

    1. Can you afford a Medigap policy throughout retirement? The high costs of a Medigap policy often force people to change to Medicare Advantage plans midway through retirement. More than one-half of new Advantage plan enrollees are people switching from Medigap policies, according to the Medicare Payment Advisory Commission. They switch because Medigap policies have become too pricy for their budgets.

    Financial planners usually assume that a 65-year-old client in relatively good health could live another 30 years or more. Using that assumption, they develop a spending plan to make sure the client does not run out of money in late retirement. You can use a similar approach to estimate what a Medigap policy will cost over the course of your retirement. And if the price tag seems too high, you may want to enroll in an Advantage plan

    Here are some rough estimates: if you get a Medigap policy at age 65 and live to age 90, you can expect to pay between $75,000 and $100,000 in Medigap premiums. That’s not counting Part B premiums and prescription drug costs. Or if you want to be more precise, start by estimating your first year’s premiums, which will vary depending on your age and the state you live in. Many state insurance departments publish lists of Medigap premiums, which you can access at the bottom of this page.

    Once you’ve estimated your annual premiums, assume they will increase at a 3.5% rate. That is about one percent less than the Medicare trustees’ projected per capita cost increases for the coming decade.

    You can use a shortcut to do the math: multiply your first year’s premiums by the number 40 to estimate how much you’ll pay over 25 years — and by the number 50 to estimate what you’ll pay over 30 years. If the resulting cost will put a crimp in your later retirement spending plans, you may want to consider an Advantage plan.

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