Understanding Medigap

When you’re deciding whether to choose Original Medicare or Medicare Advantage, understanding Medigap is critical. This supplemental insurance policy covers some or all of what Original Medicare Part B (medical insurance) doesn’t, making it an important piece of the puzzle to factor in.

Original Medicare and Medigap

When enrolling in Original Medicare, you’ll want to consider purchasing a supplemental insurance policy known as Medigap. Original Medicare Part B, which is the medical insurance, generally pays for 80% of the expenses covered, leaving a 20% copay.¹ Some or all of this 20% is usually covered by a Medigap policy.

Medigap policies are offered by private insurance companies separate from Original Medicare, which is offered by the federal government.

Purchasing Medigap

There are two main considerations around purchasing Medigap: When you can purchase it, and whether you have to go through medical underwriting.

Open Enrollment

Medigap Open Enrollment is tied to your initial Medicare enrollment period. These initial enrollment periods include:

• Being enrolled in Medicare automatically at age 65 if you’re taking Social Security or Railroad retirement benefits. 
• If you aren’t already enrolled in Social Security but you aren’t working or covered by a spouse’s employer’s health insurance plan, the initial enrollment period starts three months before the month you turn 65 and extends for three months after the month in which you turn age 65. It also includes the month of your birthday making it a seven month period.
• For those who are 65 or over and still working or covered by a spouse’s health insurance plan from their employer, there’s a similar eight-month special enrollment period for you once you or your spouse leave your employer or otherwise are no longer covered.

If you enroll in Original Medicare during one of these initial enrollment periods, your Medigap Open Enrollment period starts in the first month in which you are covered under Medicare Part B and extends through your sixth month of coverage.²

During this period, you can enroll in any Medigap policy offered in your state. There’s typically a better selection of Medigap policies available to you with more favorable pricing than there will be at any other time.

Medical underwriting

Private insurance companies want to make sure they’re balancing what they’re likely to spend with the premiums they take in. In order to do this, they do what’s called medical underwriting, where they gather health information and use that information to predict potential costs. They then translate those potential costs into a premium that accounts for those potential costs.

As you can imagine, the greater your health concerns, the larger your premium is likely to be. It’s also possible for an insurance company to decline your application for insurance if they believe your future health costs may be too high.

There are some key periods, however, when you can enroll in Medigap without any medical underwriting.²

• During the initial Medigap Open Enrollment period that is tied to your initial Original Medicare Open Enrollment period.
• If you move out of the geographic service area your Medigap policy covers. 
• If the insurance company that issued your original Medigap plan ceases to offer these policies due to the company filing for bankruptcy
• If you return to Original Medicare within 12 months of joining a Medicare Advantage plan.

During these periods and events, insurance companies cannot use medical underwriting to restrict your purchase of a Medigap policy, and they can’t deny coverage for a pre-existing condition.

Moving to Original Medicare from Medicare Advantage

Let’s say you opted for a Medicare Advantage plan during your initial enrollment period, but you’d like to switch to Original Medicare with Medigap coverage during one of the open enrollment periods, such as the annual Medicare open enrollment period or the annual Medicare Advantage open enrollment period.

In that case, you’ll likely encounter a medical underwriting requirement from the insurance company issuing the Medigap policy you’re interested in. This may limit or even eliminate your options for Medigap coverage.

To be clear, there’s no medical underwriting on Original Medicare itself when switching from Medicare Advantage to Original Medicare during an open enrollment period. The medical underwriting only pertains to the purchase of a Medigap supplemental coverage policy. 

If you’re considering making a switch from Medicare Advantage to Original Medicare, you’ll likely want to consider doing some homework upfront regarding Medigap coverage, especially true if you have underlying health issues that might trigger a higher premium or even denial of coverage. Working with an insurance agent who’s experienced in the ins and outs of Medigap might be worth considering.

Conclusion

There are lots of things to consider when you’re deciding whether to enroll in Original Medicare or Medicare Advantage, including the covered network of doctors and facilities, whether your coverage accounts for frequently traveling elsewhere, overall costs, and more.

Understanding how Medigap coverage works, when you’re subject to medical underwriting, and what kinds of costs you might be taking on is certainly one of them.