Medicare Supplemental Insurance
The purpose of Medicare supplemental insurance is to pay the costs for medical and hospital care that Medicare doesn't pay. In other words, a Medicare supplemental policy would, in general, pay the out-of-pocket costs of Medicare. The out of pocket costs are the coinsurance and deductibles for Medicare Part A (hospital inapatient care) and Part B (medical coverage).
Medicare supplemental policies, in the parlance of insurance, are known as medigap policies. Medigap insurance is written and sold by private insurance companies, and the policies work only with Original Medicare. This point is very important to understand. Insurance law forbids medigap isurance from paying any of the cost sharing incurred in a Medicare health plan, or managed care plans. Medicare health plans are also known as Advantage Plans and are not supplemental insurance. Again, Medicare supplement policies do not work at all with Medicare Advantage Plans.
In order to buy a medigap insurance policy you must have both Medicare Part A and Part B, and you will continue to pay the Part B premium after you purchase a plan. Unlike an Advantage Plan, medigap insurance does not assume repsonsibility for the management of your Medicare doctor and hospital benefits. The single purpose of the policy is to pay after Medicare. As soon as Medicare approves charges and determines how much you owe in coinsurance and/or deductible, payment from the medigap insurer is automatic.
There are currently 12 medigap policies labeled A through L available in all states except Massachusettes, Minnesota, and Wisconsin. Massachusettes, Minnesota, and Wisconsin have different kinds of policies. All the medigap policies are standardized, and that means that each policy, A through L, is the same no matter what insurance company you purchase from. So, for example, a medigap policy F would be the exact same policy whether you buy it from United Healthcare, Aetna, Humana, Banker's Life, or any other insurer. Medigap policie A is the leanest policy, providing only the most basic benefits. However, policies B through J provide all the basic benefits plus additional coverage benefits. Medigap policies K and L are high deductible policies and have higher out-of-pocket amounts and lower premiums than policies A through J.
If you are considering the purchase of a Medicare supplemental plan, it is important to understand how the enrollment period for medigap policies works. The Medicare law was written to provide what is called an Open Enrollment Period for medigap insurance. Please be aware that this Open Enrollment Period (OEP) has nothing to do with the Medicare drug plans, or Part D of Medicare. The Medigap OEP is a completely different enrollment period. The OEP for medigap begins the first day of the month in which you are both age 65 or older and also enrolled in Part B. Take the time to read that last sentence again because it is important. Once the medigap OEP starts, it cannot be stopped and it runs for 6 months. During the Open Enrollment Period, an insurance company, by order of law,
- must sell you a policy if you want to buy one regardless of pre-existing conditions.
- cannot impose conditions on a policy, such as making you wait for coverage to start.
- cannot charge you higher prices for policies dues to current or past health condition.
However, if you are under the age of 65 and enrolled in Medicare due to disability or End Stage Renal Disease, you might not be able to purchase a medigap policy until you turn 65 because insurance law doesn't require the insurance companies to do so. That doesn't mean that you can't buy a policy, but insurance law doesn't apply to the insurance companies in the same way as it does for individuals in the the OEP. Therefore, the policies available may be limited, medical underwriting may apply, and prices may be higher. You may not know it, but your State Department of Insurance is one the best sources of information on the insurance companies operating in your state. For up-to-date information on the medigap insurers and the policies available in your area, contact your State Department of Insurance.
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