How to Choose a Medigap Plan

So, you’ve decided that Medigap is the right path for you. Great! Now you just have to decide which Medigap plans you’re eligible for, compare premiums, choose a carrier, and enroll. Piece of cake, right? Well, maybe not just yet, but today we’re going to take you through the six steps you should follow when choosing a Medigap plan.

Step 1: Enlist the Help of an Independent Broker

If you want to remove a ton of stress from the process of enrolling in Medicare, start by finding an independent broker to help you. A broker will help you every step of the way. They’ll start by providing education and resources to make Medicare a little less confusing. They’ll teach you the ins and outs of all your choices and help you pick one that’s right for you.

We’ll talk more about why having an independent broker is helpful during the next few steps.

Step 2: Learn How Medigap Plans Work

The next step is learning how Medigap plans work. You can chat with your Medicare advisor about this, but we’re going to review the basics here.

Medigap plans act as your secondary insurance payor. All medical claims you have will first go through Parts A and B and then will be sent to your Medigap plan, which will pay most of the remaining costs. This is why they’re called Medigap plans - they fill in the “gaps” of Original Medicare. How much of the gap they cover will depend on which plan you choose. There are about ten different plans available, each identified by a letter of the alphabet.

Medigap plans are sold by private insurance companies, not the federal government. In turn, each state’s department of insurance regulates the insurance carriers. Possibly the most important thing to understand about Medigap plans is that they are standardized. That means each letter plan will remain the same, regardless of the carrier. Plan G from Company Y in Michigan offers the same benefits as Plan G from Company X in California.

You can find a full list of every Medigap plan available and the benefits they include by turning to page 76 of the Medicare and You Handbook. Not every plan is available in every state, and not all carriers offer every plan.

Step 3: Determine Your Eligibility

To enroll in a Medigap plan, you must first be enrolled in Medicare Part A and Medicare Part B. In addition, two of the Medigap plans have more specific eligibility requirements. You must have turned 65 prior to January 2020 to enroll in Plans C or F.

When you are first eligible for Medicare, around your 65th birthday, you can choose any Medigap plan you’d like. Insurance carriers cannot deny you coverage due to your past medical history. This is called guaranteed issue rights. If you’ve been enrolled in Part B for six or more months, you may not enjoy these same rights.

There’s quite a bit that goes into guaranteed issue time frames, and some states have their own rules. If you don’t have guaranteed access to a Medigap plan, you’ll need to pass medical underwriting to be admitted.

Step 4: Compare Premiums

Remember that friendly independent broker you hired early? They’re going to come in very handy from this point forward.

In every part of the country, there are dozens of insurance carriers offering Medigap plans. Remember, we said the benefits between letter plans are always the same. Premiums, however, are not. Carriers can choose to offer different rates and can choose to offer discounts for various reasons.

It would take you a very long time to call each company and inquire about rates. Fortunately, your Medicare advisor can do all that for you - usually just with a click of a button. If you would like to look into rates yourself, you don’t have to look at all ten Medigap plans. Most of our clients choose Plan G or Plan N. Start by looking at those rates first. On average, Plan N premiums are about $20 less per month.

You may be wondering why we don’t often recommend Plans C or F. As we mentioned, not everyone is eligible for those plans. However, we don’t typically recommend them even for the beneficiaries who are eligible. What we find is that the increased premiums do not justify the extra benefit. Even in the worst-case scenario, you’ll save money by enrolling in the lesser-benefit plans.

Insurance companies use two different pricing methods: issue-age and attained-age. Some also utilize community pricing, but these are far less common. Issue-age pricing means the company will set the premium based on your age when you join the plan. Attained-age pricing means the premium will increase with your age. However, it’s important to know that regardless of the pricing method used, your Medigap premiums will go up over time.

Step 5: Choose a Carrier

Let’s start with talking about what you don’t need to worry about when comparing insurance carriers. You won’t need to worry about insurance networks. If a provider accepts Medicare, they’ll accept your Medigap plan. It does not matter which carrier your plan is with. You can travel all over the country and still enjoy the same benefits. You also don’t have to worry about claims being denied. The insurance carrier is not who determines if a service is covered or not. If Medicare approves it, your Medigap plan carrier must also pay.

Now let’s talk about a few things you should look at. You don’t always want to pick the insurance carrier that has the cheapest ratings. That might sound surprising, especially since we harped on the fact that Medigap benefits are standardized across companies. There are five other things you should consider.

Reputation and Longevity

You should choose a large, established company with a long track record of Medigap success. An independent broker is especially useful for this since they’ve had plenty of experience working with different companies.

Small companies often dabble in the senior market to expand their customer base. They’ll offer a competitive price initially, only to completely leave the market in a few years. This may mean you have to apply to a new carrier. In addition, if they haven’t allocated many resources to their Medigap branch, they may use third parties to handle their claims, customer support service, etc.

Next, check their history of rate increases. They might be the cheapest carrier now, but do they regularly have higher premium increases than other carriers? Of course, past performance is not indicative of the future, but you’ll at least know what you might be getting into.

This last tip is a little harder to track, but again, if you’ve got that trusted broker in your back pocket, it’ll be a lot easier. You want to avoid companies that often open and close business under new names. The carrier could be large and financially stable, but getting stuck in a closed book of business usually means you’ll experience higher premium increases.

Household Discounts

Most carriers offer some sort of household discount. Some require that you and your spouse join a plan with the same company, while others are happy to give you a discount just for living with someone over a certain age. Still others offer discounts if you pay your premium in bigger chunks (like quarterly or annual payments), and some even give discounts to people who wear an activity tracker (and share their information).

Financial Ratings

The A.M. Best rating system is the one most people use to inquire about the financial strength of an insurance carrier. It bases ratings on the carrier’s ability to pay claims and the credit quality of its obligations. It also provides either a positive, negative, or stable outlook so you can see where the company might be headed in the future.

Customer Service

If you’re working with a broker, you shouldn’t have to worry too much about customer service. That broker should be acting as your liaison between you and the insurance carrier. (They can’t do everything for you, but they can take care of a lot of things without you having to spend hours on hold!)

Many of us rely on online reviews when choosing where to spend our money, but this isn’t always a good resource when it comes to insurance carriers. First, an insurance carrier will offer more than just Medigap plans. You might read a really negative review, but it only applied to an employer-based plan. Second, it’s pretty rare that someone goes online to write a positive review about their insurance!

Extra Benefits

Outside of the standard benefits, some Medigap plan carriers do allow you to add on extra benefits. Sometimes this is at no additional cost, and at other times there are extra premiums for those services. It may offer dental, vision, and hearing services, gym memberships, or other perks. You should not base your decision on this, but it can be a nice benefit if you’ve already chosen that carrier.

Step 6: Enroll!

Hey, guess what? Your independent agent will do this part for you, too! Almost everyone submits Medigap enrollments online. Your agent will fill out all the necessary information, grab your signature (usually by some electronic form), and submit the application.

After you’ve completed your Medigap enrollment, it’ll be time to choose your Part D prescription drug plan. The fun never ends, does it? Fortunately, by this point, you’ve already enlisted the help of a friendly Medicare advisor, so the next part will be just as simple. Check out our tutorial on choosing a Part D plan.

If you’d like to learn more about choosing a Medigap plan, Medicare.gov has a great resource. Or, you can call us at Giardini Medicare! We’ll be sure to answer all your questions about Medigap plans, help you choose the one that makes the most sense for you, and then begin the process of shopping your options. Make Medicare easier by calling Giardini Medicare.