FA Playbook

There are times to consider switching or ditching your Medigap plan. What to know

Key Points
  • Roughly 23% of Medicare's 63.8 million beneficiaries use Medigap plans alongside basic Medicare.
  • These policies, sold by private insurers, generally come with annual increases, which sometimes can be steep, experts say.
  • You may be able to find a more affordable option within the Medigap world, although it may involve medical underwriting.
  • Another option is an Advantage Plan, although there might be tradeoffs if you go this route.
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If you have a Medicare supplement plan — aka, Medigap — there may be times when it's worth making sure it's still the best fit for you.

Medigap policies are standardized — same-named plans offer identical benefits no matter which private insurance company sells it — but the premiums vary among plans, insurers and locations. And while some beneficiaries face modest annual increases in price, others can experience steeper jumps.

"For some beneficiaries on fixed income, a high premium increase can disrupt their budget," said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

Roughly 14.6 million, or 23%, of Medicare's 63.8 million beneficiaries use Medigap plans alongside basic Medicare, which consists of Part A (hospital coverage) and Part B (outpatient care). These policies at least partially cover the associated cost-sharing aspects — deductibles, copays and coinsurance — and generally allow you see any doctor (or other health-care provider) who accepts Medicare.

They are separate from — and cannot be used in conjunction with — private Advantage Plans. About 40% of Medicare's beneficiaries choose to get Parts A and B delivered through these plans, which typically include Part D prescription drug coverage. They also come with their own copays, deductibles and other cost-sharing.

Available Medigap policies are designated A, B, C, D, F, G, K, L, M and N and each offers a different level of coverage. For instance, they may pay the full Part A deductible ($1,556 in 2022 for each benefit period), while others don't. The Centers for Medicare & Medicaid Services has a chart on its website that shows the differences.

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However, not every plan is available in all states. And, Plans C and F aren't available to anyone newly eligible for Medicare in 2020 or later.

Medigap plans also don't cover costs associated with prescription drug coverage (unless, perhaps, the policy was issued prior to 2006), which means purchasing a standalone Part D plan if you want your medications covered. Nor do they help you pay for services that are excluded from Medicare's coverage, generally speaking, such as dental or vision.

As for the cost of premiums, it depends on a variety of factors, including the insurer and where you live. A 65-year-old woman in Dallas might pay under $100 monthly for Plan G, while in New York that same person would pay $278, according to the American Association for Medicare Supplement Insurance. And, generally speaking, those premiums rise over time.

Sometimes, they may be paying for Cadillac coverage they're not using when they may be better-suited for a high-deductible supplement or an [Advantage Plan].
Elizabeth Gavino
Founder of Lewin & Gavino

For anyone who experiences an increase that is unmanageable or otherwise finds their policy's cost more than they can handle, there may be a more suitable option. 

You can buy a Medigap policy any time of the year. Be aware, however, that while you get six months when you first sign up for Part B to get a Medigap plan without medical underwriting, that's not always the case outside that window.

Depending on your state's laws for Medigap enrollment, "applying with a new carrier can mean answering health questions and going through medical underwriting," said Danielle Roberts, co-founder of insurance firm Boomer Benefits. "Therefore, in many states, your approval for the new policy is dependent on your ability to pass underwriting."

If that's not a barrier, you could see if another insurer offers the same Medigap plan for less, Roberts said.

You also may want to see if a different Medigap policy altogether would be better, or if a switch to an Advantage Plan is warranted.

"Sometimes, they may be paying for Cadillac coverage they're not using when they may be better-suited for a high-deductible supplement or an [Advantage Plan]," Gavino said.

Advantage Plans

If  you do consider an Advantage Plan to replace Medigap, be aware that you generally would need to sign up during fall open enrollment (Oct. 15 to Dec. 7), with coverage effective Jan. 1.

Also, if it's your first time trying an Advantage Plan, you get a trial period of 12 months. This means if it's not a good fit, you can generally return to your Medigap policy within that year without worrying about medical underwriting.

Although Advantage Plans often come with no monthly charge — though you'd still pay your Part B premium, which is $170.10 for 2022 — they, too, have some limitations.

These plans generally have much lower premiums, but the tradeoff is that there are things like networks and prior authorizations to deal with.
Danielle Roberts
Co-founder of Boomer Benefits

"These plans generally have much lower premiums, but the tradeoff is that there are things like networks and prior authorizations to deal with," Roberts said.

And, you'll be paying things like copays and coinsurance as you go.

This means that in years when you don't use health-care services a lot, you could end up spending less than you would have with a Medigap plan.

"But in years where you are treated regularly … you could potentially spend more out of pocket with an Advantage Plan than you might have with your former Medigap plan," Roberts said.

"We see many people who love their Advantage Plans while they're healthy, but later are less happy when they encounter more frequent doctor visits for a new health condition or start treatment for something chronic and/or expensive," Roberts said.

"So read the fine print and make sure you understand your share of medical costs before you enroll," she said.