For many older folks, enrolling in Medicare leads to the conclusion that a supplemental plan — aka "Medigap" — is the best fit for their circumstances.
However, that decision generally isn't the end of the process. Although Medigap policies are standardized in most places, regardless of which insurance company offers them, premiums differ from insurer to insurer and among locations. And, say experts, this makes it important to understand the differences you could come across when looking at your options.
In general, you'd want to know "a carrier's premium rating system, its claims history and how good its customer service department is," said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.
"I don't recommend choosing a carrier solely based on premium," Gavino said.
Roughly 62.4 million people — the majority of whom are age 65 or older — are enrolled in Medicare. About one-third of beneficiaries choose to get their Part A (hospital coverage) and Part B (outpatient care) benefits through an Advantage Plan (Part C). Those plans offer out-of-pocket maximums and often include dental and vision coverage or other benefits. They also typically provide Part D prescription drug coverage.
The other two-thirds of recipients choose to go with original Medicare — Parts A and B — and, typically, pair it with a standalone Part D prescription plan. In that situation, unless you have some type of other coverage (i.e., employer-sponsored insurance or you get extra coverage from Medicaid), the option for mitigating your out-of-pocket costs is a Medigap policy.
These supplemental policies, which are sold by private insurers, either fully or partially some cover cost-sharing aspects of Parts A and B, including copays and coinsurance. They, too, limit what you'll pay out of pocket each year.
When you first enroll in Part B, you generally get six months to purchase a Medigap policy without an insurance company nosing through your health history and deciding whether to insure you. After that, depending on the specifics of your situation and the state you live in, you may have to go through medical underwriting.
"Know what your state law says," said David Lipschutz, associate director at the Center for Medicare Advocacy.
While a number of companies offer Medigap insurance, they can only offer policies from a list of about 10 standardized plans. Each is simply assigned a letter: A, B, C, D, F, G, K, L, M and N. Some states also offer high-deductible versions of Plan F and G. (There also are Medicare Select plans, which are Medigap plans that are network-based and are available in some places.)
This Medigap standardization means that, say, Plan A at one insurance company is the same as Plan A at another. However, not every plan is available in all states. They also do not cover any costs associated with Part D prescription drug coverage (unless, perhaps, the policy was issued prior to 2006).
The plans differ in what is covered. The Centers for Medicare and Medicaid Services has a chart on its website that shows the differences. You also can use the agency's search tool to find available plans in your ZIP code. (Be aware that Plans C and F aren't available to people who are newly eligible for Medicare as of 2020.)
The reasons to go with a Medigap plan differ from person to person, Gavino said. For example, someone's doctors (or other preferred providers) may not participate in a locally available Advantage Plan, or, with some Medigap plans, the person likes to know with certainty what their costs will be.
One difference in premiums can come from how they are "rated." If you know this, it may help you anticipate what may or may not happen to your premium down the road. Some insurers' Medigap policies are "community-rated," which means everyone who buys a particular one pays the same rate regardless of their age.
Others are based on "attained age," which means the rate you get at purchase is based on your age and will increase as you get older. Still others use "issue age": The rate won't change as you age, but it's based on your age at the time you purchase the policy (so younger folks may pay less).
Premiums also may go up from year to year due to other factors, such as inflation and insurer increases.
The American Association for Medicare Supplement Insurance recently looked at the highest- and lowest-cost Plan G policies in various markets — and the differences can be stark. For instance, it found that in one Dallas ZIP code, the lowest cost was $99 per month for a 65-year-old female and the highest was $381 monthly for that same consumer.
The association offers tips, as well: If you work with an agent, ask how many insurance companies they work with (or are "appointed with"). They may not recommend a particular insurer's policies if they don't get a commission to do so.
Also ask if there's a household discount. Many insurers offer this, the association said, and it can mean savings of 3% to 14%.
You also can call your State Health Insurance Assistance Program, or SHIP, to see if it can give you free help choosing a policy.