Medigap is an optional supplemental insurance for Medicare beneficiaries enrolled in Original Medicare. It is meant to fill in the “gaps” in Medicare coverage, such as copayments, coinsurance, deductibles, and even medical care when traveling outside of the United States. Medigap is different than Medicare Advantage in that Medicare Advantage is primary insurance and Medigap works as a supplemental, or “secondary”, insurance. Once Medicare pays its share of covered health costs, Medigap kicks in and pays its share so that you will not have to pay as much (What is Medicare, 2011; What’s Medicare supplement, n.d.). Even though these plans are different, you are not allowed to have them simultaneously because Medicare Advantage has more coverage than Medigap and Medigap is only intended to cover gaps in Original Medicare (SSA, 2013). In fact, “if you have a Medicare Advantage plan, it is illegal for anyone to sell you a Medigap policy unless you are switching back to Original Medicare” (How Medicare supplement, n.d., para. 3).
Beneficiaries need to be aware that Medigap has many restrictions. First, you must have Medicare Part A and Part B to buy a Medigap policy (CMS/NAIC, 2014). Also, it does not cover all gaps in Medicare policies. For example, it does not include coverage for prescription drugs, long-term care, vision, dental, hearing aids, eyeglasses, and private nursing. In addition, not all types of insurance are considered “Medigap” coverage, such as Medicaid, employer or union plans (including the Federal Employees Health Benefits Program [FEHBP]), TRICARE, Veterans’ benefits, long-term care insurance policies, and Indian Health Service, Tribal, and Urban Indian Health plans. Beneficiaries also need to be aware that a monthly premium is required for Medigap policies in addition to Original Medicare Part B premiums. Furthermore, your Medigap policy only covers one person; therefore, your spouse needs to pay an additional premium if he/she also wants Medigap coverage (CMS/NAIC, 2014; What’s Medicare supplement, n.d.).
There are multiple Medigap policies, which are labeled “A” through “N”; however, each one of these policies must have the same benefits, regardless of which insurance company sells it. For example, Medigap A at one insurance company must have the same benefits as Medigap A at another insurance company; however, the costs may be different. One reason for this has to do with when you purchase your Medigap policy. If you purchase it during the Medigap open enrollment period, you have guaranteed issue rights meaning your costs cannot be based on your age, health, or other personal factors (see “Medicare Enrollment” for more information). If you do not purchase your policy during Medigap open enrollment, you are subject to medical underwriting, which could increase your costs. In addition, some insurance companies offer discounts for various situations, such as non-smokers, electronic payments, multiple policy discount, etc. That is why you should shop insurance companies even though the plan has to be the same (CMS/NAIC, 2014).
It is also noteworthy to mention that plans E, H, I and J are no longer being sold; however, if you currently have one of these Medigap policies, you can keep it. Something else to keep in mind is that you can only have one Medigap policy at a time. Therefore, if you buy a new Medigap policy, you have to cancel your old one. This is especially important to remember if you have E, H, I, or J, which is no longer sold but can be kept if you currently have it. If you give one of these up, you cannot get it back. However, you are entitled to a “free look period”. During your free look period, you will have 30 days to try a new Medigap policy without cancelling the old one. You will need to indicate on your application for the new Medigap policy that you promise you will cancel your first policy and then you will have 30 days to decide if you want to keep the new policy or not. However, during that 30 day free look period, you will be required to pay premiums for both Medigap policies (CMS/NAIC, 2014).
In regards to prescription drug coverage, Medigap stopped selling drug coverage as of January 1, 2006. However, just like other Medigap policies that are no longer being sold, if you currently have a Medigap policy that has drug coverage, you can keep it. If you are new to Medicare or do not have a Medigap policy with drug coverage and you want drug coverage, you should purchase Medicare Part D or a Medicare Advantage plan that has drug coverage (CMS/NAIC, 2014; DHHS, 2014). Just remember that you cannot have Medigap AND Medicare Advantage at the same time. Similarly, if you have had Medigap prescription drug coverage before 2006 and continue to keep it, you cannot purchase Medicare drug coverage. You can have one or the other, but not both at the same time (DHHS, 2014). If you do have Medigap drug coverage and you want to switch to Original Medicare Part D or Medicare Advantage with prescription drug coverage, you still may have to pay a late enrollment penalty for Part D because “most Medigap drug coverage is not creditable” (DHHS, 2014, p. 109). Contact your Medigap policy agent to find out about your particular coverage to avoid a late enrollment penalty, or an increased late enrollment penalty (see “Late Enrollment Penalties” for more information).