Medicare supplements, also called Medigap plans, are supplemental insurance policies for people with Original Medicare. Unlike Medicare Advantage plans, which completely replace your traditional Medicare benefits, no insurance companies offer Medigap plans with no premiums. Here’s why.
Original Medicare and Medicare Advantage are both government health insurance products. These products are broken up into four parts:
- Part A: Original Medicare Hospital Insurance
- Part B: Original Medicare Medical Insurance
- Part C: Private Health Insurance (Medicare Advantage)
- Part D: Private Prescription Drug Insurance
Medigap plans work with Part A, Part B, and Part D of Medicare only. They are not compatible with Part C, which completely replaces the other parts.
How Plans with No Premiums Work
In 2003, Medicare created the Medicare Advantage system to give people more options. When you choose a Medicare Advantage plan the government pays the plan a set amount each month to provide your care.
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The so-called advantage of private health plans is that they can offer benefits and services that Original Medicare doesn’t cover. A good example is prescription drugs, which are included with most Medicare Advantage plans. Other popular options include dental, vision, and hearing benefits.
In many cases, mostly with basic plans, a Medicare Advantage plan can cover the cost of care at no additional cost. What this means is that what the government pays the plans, plus what you pay each month for your Medicare Part B premium, fully covers the cost. As a result, there’s no additional premium.
However, it does not work this way with Medicare supplement insurance.
How Premiums Work with Medigap Plans
Unlike Medicare Advantage plans, when you keep your Original Medicare benefits you are not restricted to using a healthcare provider network. That means you can use any doctor or specialist you want, so long as they are contracted with Medicare. As more than 900,000 healthcare providers are contracted with Medicare, you have a lot of options.
Both Medicare Advantage and Original Medicare have shared costs. These come in the form of deductibles, copayments, and coinsurance. The big difference is that Medicare Advantage plan shared-costs are capped at a maximum of $6,700 per year, whereas Original Medicare has no out-of-pocket limit. With Original Medicare, you pay about 20% and the government pays 80%. This is where Medigap comes. A Medigap plan helps pay your costs in the 20% gap.
Medigap plan premiums are based on where you live, your age, gender, and the amount of coverage you want. The King of the Hill of Medigap plans is Medicare Plan F. This plan covers all of the gaps in traditional Medicare, including:
- Medicare Part A Coinsurance & Hospital Costs
- Medicare Part A Skilled Nursing Facility Coinsurance
- Medicare Part A Deductible (per benefit period)
- Medicare Part A Hospice Care Coinsurance or Copayment
- Medicare Part B Deductible (annual)
- Medicare Part B Coinsurance or Copayment
- Medicare Part B Excess Charges
- Blood (first 3 pints)
- Foreign Travel Emergency
Plan F offers the most extensive coverage you can get. It’s also the most expensive, starting at about $120 to $160 per month. In some high-cost-of-living areas premiums are a bit more.
Related Reading: Is Medicare Plan G Better than Plan F?
If that seems a bit pricy, don’t worry, because there are plans for just about every budget. For example, there are high deductible versions of Medicare Plan F and Plan G that start at around $50 to $60 per month. And, the good news is that the deductible (out-of-pocket limit) is much lower than the $6,700 baked into most Advantage plans.
Here’s How Savvy Seniors Save Money with Medicare
If you’re healthy and getting ready to get your Medicare benefits for the first time, you have a six-month window that allows you to buy the Medicare supplement plan of your choice without any questions. This is your guaranteed issue right and you can’t be turned down. This individual open enrollment period starts on the day that your Medicare Part B benefits begin.
Savvy seniors turning age 65, particularly those in good health, realize that the extensive coverage provided by Medicare Plan F and Medicare Plan G is a huge benefit. They have also figured out that paying $150 or more per month, when they only see their doctor for regular checkups and minor illnesses, costs a lot in annual premiums. So, these seniors take the high deductible option and cover the minor costs out-of-pocket.
By putting $100 or more per month into savings, and paying around $50 to $60 per month for their supplemental Medicare policy, savvy seniors can put away $1,000 or more per year into a health savings account. Then, when a big illness or injury happens, that requires more healthcare services, they’re ready to pay the high deductible ($2,340 in 2020).
Ready to explore your options? Call 1-855-266-4865 and let a HealthPlanOne agent assist you. There’s no obligation, and they’re contracted with all of the top insurance carriers nationwide.