Key things to know if you’re looking to get a Medigap policy with Basic Medicare

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If you are signing up for MedicareYou’ve likely discovered that there are a lot of out-of-pocket costs that come with your coverage.

for about 23% of the 65.1 million Medicare beneficiariesThe solution to cover these expenses is what is called a Medigap Plan.

These policies, sold by private insurance companies, generally capture part or most of the cost-sharing—that is, deductibles, co-expenses, and coinsurance—that come with basic Medicare (Part A hospital coverage and Part B outpatient care).

However, they do have limitations, and the monthly premiums can be very expensive.

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However, some beneficiaries decide that pairing basic Medicare with a Medigap policy is a better fit than choosing to get Part A and Part B benefits through a benefits plan (or no supplemental insurance at all). These plans, whose coverage can be limited to in-network providers, also typically include Part D prescription drug coverageoften comes without a premium and may offer extras such as teeth and vision.

The reasons why some beneficiaries choose Medigap along with basic Medicare vary from person to person, according to Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and agent-general for Medicare plans.

For example, she said, they may want more freedom in choosing doctors and other providers or need coverage while away from home — that is, they travel a lot, sometimes for extended stays. (Benefit plans may deenroll you if you remain outside their service area for a certain period—usually six months.)

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Here’s what you should know about Medigap policies if you’re considering purchasing one.

Medigap policies are standardized

Many states allow doctors to overcharge 15%.

Also, be aware that in many states, some doctors or other providers may charge you the difference between the approved Medicare Part B amount and their full fee, with a cap of 15% on this “excess fee.”

If your state allows overcharges of up to 15%, consider this [a plan] Gavino said.

Also, be aware that Medigap plans do not cover costs associated with prescription drug coverage (unless the policy was issued before 2006.) This means that you will need to purchase a separate Part D plan if you want that coverage.

Medigap also does not cover services that are excluded from Medicare coverage, in general, such as dental or vision.

There are rules that go along with signing up for Medigap

When you first sign up for Part B, you generally get six months to buy a Medigap policy without Insurance company Check your health history and decide on your insurance.

Then, depending on your case details and the state you live in, you may have to undergo medical underwriting.

There is a wide variation in cost

Although Medigap policies are standardized, premiums can vary widely.

For example, in New York, the lowest monthly premium for Plan G is $278 and the highest is $476, according to the American Medicare Supplemental Insurance Association. In Iowa, the lowest cost under a Part G policy is $79 and the most expensive is $192.

There are several reasons for the wide variation in rates, said Danielle Roberts, co-founder of insurance company Boomer Benefits. That includes the cost of health care in your area, your state’s open enrollment rules and the actual loss percentage experienced by the insurer across all policyholders with the same plan, she said.

“For example, Medigap plans cost more in New York because they have open enrollment year-round,” Roberts said.

If the carrier cannot afford to insure health, it must raise prices for everyone.

Daniel Roberts

Co-founder of Boomer Benefits

“It means that residents there can literally wait until they get sick to buy the insurance policy,” she said. “If a carrier can’t insure health, it has to raise prices for everyone.”

In addition, insurance companies routinely roll out new plans, Roberts said. So, if an insurance company starts offering a plan and takes on new policyholders for it, over time premiums go up a little bit each year due to inflation and claims, making that plan less competitive when another insurer opens a new plan that hasn’t made any losses yet, she said.

“The healthy people who can pass the IPO start switching their plans to a cheaper company and then the first company is left with a lot of people who can’t pass the IPO to switch,” Roberts said. “This is an aging business block with many policyholders suffering from costly health conditions, driving up rates.”

The way a Medigap plan is “rated” is also important

Another difference in Medigap premiums can come from How plans are “categorized”. If you know this, it can help you anticipate what may or may not happen to your insurance premium in the future.

Some plans are “community rated,” which means that everyone who buys a particular one pays the same price regardless of their age.

Others are “age attained,” which means that the price you get when you buy is based on your age and will increase as you get older. Still others use “age of issue”: the price won’t change as you age, but is based on your age at the time the policy is purchased (so younger people may pay less).

These are some other things to consider

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If you work with an agent, ask how many insurance companies they work with (or are “designated” with), according to the American Medicare Supplemental Insurance Association. They may not recommend a particular insurance company’s policies if they do not receive a commission for doing so.

There may also be a home discount on offer.

“One of the trends we’re seeing is carriers are becoming more lenient with this and not requiring the spouse to be on a qualifying policy,” Roberts said. “Many will give you a discount just because someone else lives in the same apartment.”

Also, be aware that some insurance companies offer deep discounts for new registrants, but the price drop may wear off in a year or two.

“You’ll want to know that up front,” said Roberts.

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