What is the Average Cost of Supplemental Insurance for Seniors?

According to MedicareWire research, the average Medicare Supplement premium in 2020 was $154.50 per month. We evaluated over 100 Medicare Supplement plans to find out how much does it cost for Medicare supplemental insurance? Here’s what we learned:

1. The amount of coverage the policy offers is the #1 factor.
2. Your zip code and age significantly influence Medicare supplement plan cost.
3. Costs vary by carrier and rating method (attained-age, issue-age, community).
4. Gender and use of tobacco influence costs.
5. Several other factors influence Medicare supplement insurance cost, too, so read on.

In this article we’ll answer the following top questions most people have about supplemental health insurance for seniors (and many more):

How Much Does It Cost For Medicare Supplemental Insurance?

One of the most frequent questions we get is, “What is the average cost of supplemental health insurance for seniors?”

Medigap, also known as Medicare supplement insurance, is a group of standardized plans that help cover the gaps in Original Medicare health insurance. And, unfortunately, stating an average cost of Medicare supplemental insurance wouldn’t do much good. Plans average anywhere from $50 to $300 or more per month, depending on where you live and the amount of coverage you need. So, if your question is, “how much is Medigap per month?“, you will need to get a quote.

Before you ask for rates, let’s explore questions about the price of Medicare supplemental insurance in a couple of different ways. Like, how much coverage can I get that I can afford? And, how can I save money on a Medigap plan and still be covered for my major medical costs? And, what is the best Medigap plan for me?

Those are the questions we’ll help answer and offer additional resources.

Do I Really Need Supplemental Insurance With Medicare?

Let’s start our discussion by addressing the elephant in the room. Is a Medicare supplement plan really necessary, and, if so, why?

As you may already be aware, Original Medicare only covers about 80% of your major medical costs. The remaining 20% of all Medicare-approved costs are the beneficiary’s responsibility. These costs, which include deductibles, copayments, and coinsurance on the healthcare services you use can be paid in several different ways, including:

1. Medicaid (if you qualify)
2. Medicare Savings Programs (QMB, SLMB, QI)
3. Employer Group Health Coverage
4. VA Benefits
5. TRICARE for Life (for military retirees)

These are the most common ways people cover their major medical costs when they have Medicare. If you don’t qualify for one of the benefits listed above, then you self-pay out of pocket, or you buy a Medigap plan.

If you’re thinking about the self-pay option, think twice. This is a very risky proposition. While you can probably swing the cost of regular doctor visits, the cost of advanced diagnostic (e.g., an MRI scan) or hospitalization due to a critical illness or injury, is enough to send most people bankruptcy court. Compare how much is Medigap per month vs. self-pay and it won’t be difficult to see which costs less.

Think about it. Could you afford to pay 20% of the cost of cancer treatment or a hip replacement? A 2013 cost-effectiveness study reported a total cost of $40,102 for first-line mesothelioma treatment. That’s just the treatment, which does not include your inpatient care.  The average cost of a hip replacement in the United States is almost as costly at $32,000.

Most of us simply can’t afford to pay 20% of those kinds of costs out-of-pocket. That’s what makes it necessary to buy supplemental Medicare insurance. As with car insurance, we really don’t have a choice.

How Much Coverage Can I Get with a Medigap Plan?

Now that we’ve talked about the need for supplemental insurance, let’s discuss how Medigap plan coverage works. As its name implies, Medigap covers the gaps in Original Medicare. These gaps include deductibles, copayments, coinsurance, blood, and foreign travel. Medigap covers these gaps through 10 different plans. Each plan is standardized and given a letter code (A through N). This makes Medigap super easy. Simply pick the plan with the outpatient, inpatient, nursing facility, and travel coverage you want and go shopping here or on Medicare.gov to find an insurer in your area that offers the plan.

The plan with the most coverage is Medicare Plan F. This plan offers full coverage on all of the gaps in Medicare. So, if you have a Plan F policy, and the health services you use are all Medicare-approved, you pay nothing out of pocket. However, be aware that this plan is only available to people who turned age 65 before 1 January 2020. The same is true with Plan C (not to be confused with Part C, which is what Medicare.gov calls Medicare Advantage plans).

After Plan F, Medicare Plan G offers the most coverage, and it’s available to everyone turning age 65 with guaranteed issue. This plan is identical to Plan F, with one exception, it does not cover the Medicare Part B (medical insurance) annual deductible. But, most people save enough on their annual premium payments to pay the deductible themselves and pocket some savings.

Another Medigap plan that’s growing in popularity, because it offers good savings, is Medicare Plan N. This Medigap policy is great for healthy people aging into Medicare because it allows you to pay some of the minor costs, but it offers full-coverage on the major costs.

For example, with a Medigap Plan N policy, you pay up to $20 to see your doctor (copay) and up to $50 to use the emergency room. You also pay any excess charges. These are costs above and beyond Medicare’s standard reimbursement rates that your doctor can charge (up to 15%) if they don’t accept Medicare Assignment. Other than that, Plan N covers what Plan G covers, and you pocket the savings.

Here’s something else to know about Plan N. If you are healthy (i.e., no underlying health conditions), and typically only see your doctor for your annual exam, your out of pocket expenses could be very low with this health plan. The reason is that preventative health care costs are covered 100% by Medicare. That means, some years, you may never even pay your annual Part B deductible. Why pay for a higher premium plan if you don’t need it?

How can I save money on a Medigap plan and still be covered for all major medical costs?

We just talked about how a Plan N Medicare supplement can save you money, but it’s not the only plan with cost-sharing. Plan K and Plan L are also options. With these two plans, you share a percentage of your Part A and Part B costs, but they protect you from catastrophic costs with a maximum out-of-pocket limit.

Shared cost plans, like K and L, work for healthy people who can afford to take a little financial risk and for people who are good at saving for their healthcare costs. For example, if you rarely see a doctor and can absorb Plan K’s $5,880 annual deductible in your budget before the plan starts paying, then it could be an option. Likewise, if you put $100 per month or more into a savings account specifically for your healthcare costs, then a shared-cost plan could work for you because you’re basically putting the money you save on premiums into savings.

Saving on a Medigap plan comes down to understanding both your health and financial needs. Many people, especially the good savers, like the high deductible plan options on Plan F and Plan G. If you choose one of the high-deductible options, you pay all Medicare-covered costs (coinsurance, copayments, deductibles) up to the deductible amount ($2,370 in 2021)  before your policy kicks in and starts paying 100%.

For healthy people who know how to put money away, the $2,370 isn’t scary because they know that they can save that amount of money by putting just $100 away each month. And, by the way, that’s about how much you’ll save each month on a high deductible policy.

If you are not a healthy individual, and you’ve had one or more hospital stays over the past few years, a shared cost plan could end up costing you a lot more in the long run. The difference in $50 or even $100 per month in premiums might seem like a lot, but that $600 to $1,200 per year will look like a good deal when you’re reaching into your pocket for $2,370.

Understanding the Cost of Medicare Supplement Plans

Now that you know Medicare supplement plans are standardized, and that you can choose the coverage you want, it’s time to learn about the cost of Medicare supplement plans (i.e., how the monthly premium is determined).

Many people ask questions like, “How much does Medicare Supplement Plan G cost?” It makes sense that Plan F and Plan G are the most expensive plans because they have the most coverage, and people want to know the cost of medicare supplement plans. But, the cost is different for everyone.

Insurance carriers have more than one way to rate their plans for an initial premium and rate increases. Also, insurance companies must factor in the number of people in their insurance pool, including their demographics. As a result, rates can differ wildly even when the same coverage is offered in the same local area. That’s why it is difficult to give the average cost of supplemental Medicare insurance.

When a private insurance company (e.g., AARP, UnitedHeathcare, Aetna, Cigna, etc.) has more members it generally has better financial stability, rates are lower, and rate increases don’t come as frequently in comparison to smaller companies with a smaller member pool.

Rate increases are a delicate balance for insurance companies. As premiums increase, healthy people shop around for better rates to reduce their costs.  As a result, the pool of healthy people shrinks and the insurance company has to raise their rates even more to cover costs.

As mentioned above, insurance companies have different ways of rating their policies. The rating methods basically determine when a rate will increase. These rating methods include issue age, attained age, or community rating. So, if you are still wondering what is the average cost of supplemental insurance for Medicare, the best thing to do is to get a quote and look at the rates on the plan you want. Here at MedicareWire, we offer a complimentary service that shows you rates from all carriers that offer policies in your area.

To speak with a licensed insurance agent to get the insurance policy you want, call 855-266-4865 Mon-Fri, 8:30 am to 8:00 pm ET.

Medigap Plans Don’t Include Prescription Drug Coverage

There’s a simple rule to follow with Medicare supplement insurance plans. If Original Medicare doesn’t cover it, your supplemental insurance can’t cover it either. One of the strengths of Original Medicare is that it covers your major medical, allowing you to choose additional coverage ala carte style. To get a prescription drug plan, you use the Medicare Part D plan option.

Medicare Supplement Enrollment

Contrary to popular belief, Medicare supplements are not part of Medicare’s Annual Election Period (AEP), which happens each Fall. You can enroll in a Medigap policy anytime you have both Medicare Part A and Part B. This is the only eligibility requirement for Medicare beneficiaries to apply for coverage. However, there are some important rules to know about, specifically your guaranteed-issue period.  We have an entire article related to Medicare supplement enrollment.

A Final Thought About The Cost Of Supplemental Insurance For Medicare

Enrolling in the best Medicare supplement plan for you is all about balancing risk vs. reward. The risk is those big 20 percent gaps that Medicare does not cover. The biggest being the 20 percent gap in your inpatient care in a hospital setting and a nursing facility.  Plans F, G, and N cover these out of pocket costs completely. If your health isn’t excellent, playing around with these costs can get very expensive.

If you have a chronic condition that is not prone to hospitalization or frequent visits to a specialist, and you need to save some money, then you should explore cost-saving options with your insurance agent.

The reward in choosing the best Medigap plan for you is that you get to keep a little more money in your pocket. But, please consider this simple advice. Is saving a few dollars now worth the potential risk of being denied a plan with more coverage later? You see, unlike Medicare Advantage plans, which can’t turn you down, Medigap insurance carriers can. If you don’t pass their medical underwriting process, they will not issue you a policy.

Get the most coverage you can without being wasteful.

This article was written by David Bynon and was last updated on April 15, 2021.

Citations & References

medicare.gov

• How to compare Medigap policies | Medicare
  https://www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-p…
• Talk to someone | Medicare
  https://www.medicare.gov/Contacts/
• Medicare.gov: the official U.S. government site for Medicare | Medicare
  https://www.medicare.gov/

cms.gov

• https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coor…
• MACRA: MIPS & APMs | CMS
  https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instrumen…
• 2020 Medicare Parts A & B Premiums and Deductibles | CMS
  https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-d…

tricare.mil

• TRICARE For Life | TRICARE
  https://www.tricare.mil/tfl

va.gov

• VA Health Care And Other Insurance | Veterans Affairs
  https://www.va.gov/health-care/about-va-health-benefits/va-health-care-and-ot…

shiptacenter.org

• Home | State Health Insurance Assistance Programs
  https://www.shiptacenter.org/