Medigap Health Insurance

The Social Security Act of 1965 created the first major, publicly-funded health insurance program in the United States. By collecting taxes on the income of all employed individuals in the country, the federal government sought to provide senior citizens with an affordable alternative to private health insurance coverage. Over the years however, medical expenses have skyrocketed and made medical coverage expensive for everyone. Medicare was not immune to these price increases, leaving seniors vulnerable to high out of pocket costs for expenses not covered fully (or at all) by their Medicare health insurance.

As a result of these higher prices, individuals began to enroll in Medicare Supplemental Insurance programs. These programs, also referred to as Medigap health insurance plans, are designed to help Medicare beneficiaries pay for the extra costs that their Part A and Part B services may not cover fully or at all. Eligibility for a Medigap health insurance plan works as follows:

  • Anyone eligible for Medicare Part A and Part B is eligible for a Medigap plan
  • Within six months of turning 65, individuals can enroll in a guaranteed Medigap plan regardless of current health
  • After the open enrollment period, individuals must pass a medical exam to obtain Medigap health insurance

Those individuals who collect their Medicare Part A and B benefits through a Medicare Part C, or Medicare Advantage Plan, are not eligible for Medigap health insurance. These individuals are excluded from Medigap eligibility because their Medicare Advantage Plans generally provide supplemental insurance of their own, or have greater protection for the insured.

Medigap health insurance is overseen by the Centers for Medicare and Medicaid Services (CMS). The CMS has developed and segmented the Medigap plans available, offering 10 different plans labeled A through N. Recently some plans have been adjusted and others have been dropped. While the plans are developed and overseen by the CMS, they are directly administered by private insurance companies that are working under contract with the CMS. The current Medigap health insurance plans offered include:

  1. Plan A
  2. Plan B
  3. Plan C
  4. Plan D
  5. Plan F
  6. Plan G
  7. Plan K
  8. Plan L
  9. Plan M
  10. Plan N

As mentioned earlier, the Medigap program underwent a series of changes that took effect on June 1, 2010. These alterations had an effect on some basic benefits as well as eliminating some plans, while adding other new plans. The following changes took effect June 1, 2010:

  • Medicare Part A Hospice Coinsurance: Plan K now covers 50% of these costs and Plan L covers 75% of costs
  • Part B Coinsurance and Copayments: These costs are now covered by 100% by all plans but K, L, and N. Those three plans will now have lower premiums each month as a result.
  • Plans M and N have been added to the Medigap health insurance program
  • Plans D and G now have different benefits than those purchased on or before May 31, 2010
  • Plans E, H, I, and J are no longer for sale. Those who already have these plans can continue to use them however.

Medigap health insurance rates are determined by the amount of coverage an individual requires. Generally speaking the plans are ranked from least to most services provided with Plan A offering the least and Plan N offering the most. That being said, Plan A typically has the lowest premium compared to Plan N which has a much higher premium. It is worth noting that some states, notably Massachusetts, Minnesota, and Wisconsin, have separate guidelines for Medigap policies that affect citizens of those states only.

The Medigap program was designed to help individuals cover the extra expenses that their Medicare policies were not covering. Out of pocket costs are difficult for many senior citizens to cover, and as such a large number of those with Medigap policies make less than $30,000 annually. As of 2006 18% of those enrolled in Medicare also had a Medigap health insurance policy. A large portion of these individuals, 31%, lived in rural areas. Of those 31%, 66% reported having incomes well below $30,000 annually.