Facts About Medigap: Q&A on Medicare Supplement Insurance

With Medicare open enrollment ongoing from October 15 – December 17, 2024, the International Myeloma Foundation (IMF) aims to provide education and guidance on Medicare policies and issues that are relevant to the myeloma community.

In a previous Living Well with Myeloma webinar, we discussed the upcoming changes related to the Inflation Reduction Act and the new out-of-pocket cap along with the Medicare Prescription Payment Plan (MPPP) in the past. Now, we want to ensure that the myeloma community has information about Medicare Supplement Insurance (also known as Medigap), which can play an essential role in managing healthcare costs not covered by traditional Medicare.

The information provided in this Q&A were gathered from the KFF report, “Key Facts About Medigap Enrollment and Premiums for Medicare Beneficiaries, published on October 18, 2024, and from insights given by members of the IMF Advocacy and InfoLine teams.

1. What is Medigap?

Medigap is private supplemental insurance that helps cover the cost-sharing requirements of Medicare Part A and Part B, such as deductibles, copayments, and coinsurance. It is designed for people in traditional Medicare who do not have other coverage like employer-sponsored retiree benefits or Medicaid. Medigap does not work with Medicare Advantage plans.
Medigap helps reduce out-of-pocket costs, providing financial protection against high medical expenses and making healthcare costs more predictable by spreading costs through monthly premiums. It also reduces the paperwork burden for beneficiaries.
Beneficiaries with Medigap report fewer cost-related problems compared to those without supplemental coverage or those enrolled in Medicare Advantage plans.
However, Medigap plans do not cover prescription medications, which means you will need a separate Part D plan.

Medigap is an important option for traditional Medicare beneficiaries, offering financial protection and simplifying healthcare costs.

2. Why could there be a need for Medigap or Medicare Supplement Insurance?

Medicare beneficiaries often face significant cost-sharing with no cap on out-of-pocket expenses, which can create financial strain, particularly for those with limited incomes. Over 22% of older adults experience medical debt.
Medigap (Medicare Supplemental Insurance) helps beneficiaries manage these costs by covering deductibles, copayments, and coinsurance, offering financial protection and more predictable healthcare costs through monthly premiums. It also reduces the administrative burden of dealing with medical bills.
In 2022, about 50% of the nearly 60 million Medicare enrollees were in traditional Medicare, with many having additional coverage like Medigap, employer-sponsored retiree benefits, or Medicaid.
Medigap is crucial for those in traditional Medicare without other coverage (e.g., employer benefits or Medicaid). It covers gaps like deductibles and copayments, providing protection against high out-of-pocket expenses.
In 2022, 12.5 million traditional Medicare beneficiaries (42%) had Medigap policies, which help limit financial exposure to catastrophic costs. Beneficiaries with Medigap report fewer cost-related issues compared to those without supplemental coverage or those in Medicare Advantage plans.
Medigap plans allow policyholders to see any doctor or specialist who accepts Medicare.

Medigap is essential for managing Medicare's cost-sharing, reducing financial strain, and improving predictability for beneficiaries.

3. What are the characteristics of people with Medigap?

Demographic Trends

Medigap beneficiaries tend to be more likely to be White (94% vs. 86%), have higher incomes (54% have incomes over $40,000 vs. 47%), and report better health (88% rate their health as excellent, very good, or good vs. 82%) compared to the broader group of traditional Medicare beneficiaries.

Challenges for Younger Beneficiaries and Those with Pre-Existing Conditions

People under age 65, especially those with long-term disabilities, have difficulty purchasing Medigap because federal law limits guaranteed issue protections for this group.
Unlike beneficiaries aged 65 and older, people under 65 are less likely to have Medigap (7% vs. 46%) and are more likely to rely on Medicaid for supplemental coverage (65% vs. 10%).

Access to Medigap for Younger Beneficiaries

While 36 states offer some protections for beneficiaries under 65 (requiring insurers to offer at least one Medigap policy during the initial enrollment period), premiums in these states can still be higher for this group.

Affordability Issues for Lower-Income Groups

Medigap premiums can be costly, which is a barrier for lower-income beneficiaries, especially rural, Black, and Hispanic Medicare recipients who often have lower incomes and are more likely to have chronic conditions or pre-existing medical conditions. These factors make it harder for people to afford Medigap and qualify for it outside the guaranteed issue period.
Medicare Advantage plans may be more accessible for these groups due to lower costs and fewer underwriting restrictions. However, while initial premiums may be lower, there may be higher out-of-pocket costs for services. Medicare Advantage plans (Part C) may also require you to use a network of doctors and hospitals as not all clinics accept Medicare Advantage plans.

People with Medigap are typically wealthier, healthier, and older, while younger beneficiaries and those with lower incomes, especially Black and Hispanic beneficiaries, face challenges in obtaining Medigap due to cost and underwriting barriers.

4. What are the different types of Medigap policies and what are the benefits they cover?

Medigap Plans

There are 10 standardized Medigap plans (labeled A through N), each offering different sets of benefits.

5. Who can get a Medigap policy and when?

One-Time Open Enrollment

Federal law guarantees a one-time, six-month Medigap open enrollment period for beneficiaries aged 65 and older, starting the first month they have Medicare Part B.
During this period, beneficiaries cannot be denied a Medigap policy based on age, gender, or health. Insurers also cannot impose medical underwriting or exclude coverage for pre-existing conditions.

Qualifying Events

Certain events, like losing employer-sponsored retiree coverage or when a Medicare Advantage plan ends in a person’s area, can trigger guaranteed issue rights, allowing beneficiaries to purchase Medigap without restrictions.

Trial Periods

Beneficiaries can also try Medicare Advantage during their first year in the program. If they disenroll within that year, they are granted guaranteed issue rights to buy any Medigap policy in their state.

Waiting Period for Pre-Existing Conditions

Medigap insurers may impose a waiting period of up to six months for coverage of pre-existing conditions if the applicant didn’t have six months of continuous creditable coverage before applying.

State Protections

Some states have stronger protections than federal law.
Connecticut, Massachusetts, Maine, and New York require Medigap insurers to offer policies year-round to beneficiaries aged 65 and older, regardless of health conditions.
Other states may also allow Medigap to be purchased on a guaranteed issue basis after certain qualifying events or for beneficiaries under 65 with disabilities.

Federal law ensures certain guaranteed issue protections during key periods, but some states offer even broader protections for Medigap access, especially for those with pre-existing conditions or disabilities.

6. How do premiums vary across Medigap policies?

Premium Variation

Medigap premiums can vary based on factors like age, smoking status, gender, and residential area, even during open enrollment or guaranteed issue periods.

Premium Concerns

While many Medigap beneficiaries are satisfied with their coverage, some find the premiums expensive or higher than expected, even though they appreciate the comprehensive coverage and flexibility it provides.

Three Premium Rating Systems

Community Rating: Premiums are the same for everyone, regardless of age or gender, though they may increase due to inflation or other factors like smoking status or location.
Issue-Age Rating: Premiums are based on the beneficiary’s age at the time of purchase. Premiums are lower when bought at a younger age and do not increase as the person gets older, but may rise due to inflation or other factors.
Attained-Age Rating: Premiums are based on the beneficiary’s current age and increase as they get older. These premiums start lower but can eventually become the most expensive as the beneficiary ages.

State Regulations

States can regulate which premium rating systems are allowed.
Nine states (including AR, CT, MA, NY, and WA) require community rating for beneficiaries aged 65 and older.
Four states (Arizona, Florida, Georgia, and Missouri) allow issue-age rating but prohibit attained-age rating.
The majority of states (37 states and D.C.) permit all three rating systems.

Medigap premiums can vary widely based on the rating system used and state regulations, with some states offering more consumer-friendly options like community rating.

7. Do premium policies vary across states that require insurers to offer at least one Medigap policy type to beneficiaries under age 65?

Guaranteed Issue for Under-65 Beneficiaries

36 states require insurers to offer at least one guaranteed-issue Medigap policy during an initial open enrollment period for beneficiaries under age 65. This is not a federal requirement.

Premium Rules

21 states limit how much insurers can charge in premiums for beneficiaries under 65.
The remaining 15 states have no specific rules regulating premium costs for under-65 beneficiaries.

While 36 states ensure guaranteed issue for younger beneficiaries, the rules on premium costs vary, with some states limiting premiums and others leaving them unregulated.

8. What is the average Medigap premium among current policyholders?

The average monthly Medigap premium for all policyholders in 2023 was $217.
Premiums ranged from a low of $191 in Alaska to a high of $267 in New York.
In short, the average premium is $217, with significant variation across states, from $191 to $267.

9. What is the average premium by Medigap plan type?

Plan G (the most popular and comprehensive plan available to new enrollees):

- Average monthly premium in 2023: $164.

- Ranges from $140 in Washington D.C., $141 in Hawaii and New Mexico, to $236 in New York.

Plan F (second most popular, but unavailable to new enrollees since 2020):

- Average monthly premium: $274

- Ranges from $214 in Vermont to $313 in New York.

The higher premium for Plan F may be due to its coverage of the Part B deductible, which Plan G does not cover, along with other potential factors.

10. What are “new or innovative benefits” in Medigap policies?

Innovative Benefits

Federal guidelines allow Medigap insurers to offer additional benefits beyond the standard coverage, such as vision, dental, hearing, 24/7 nurse hotlines, and Silver Sneakers fitness programs.
These added benefits often result in slightly higher premiums compared to standard Medigap policies.

Scope of Benefits

The scope of additional benefits varies by insurer and policy type:

Some policies may cover specific dental services (e.g., diagnostic evaluations, preventive care, x-rays, and some restorative services), but not more comprehensive dental procedures.
Other policies may offer discounts on dental services (e.g., cleanings, fillings) through nationally contracted networks.

Competition with Medicare Advantage

Medigap policies offering extra benefits are designed to compete with Medicare Advantage plans, which also typically include these types of benefits. However, these benefits often come with higher premiums.

11. Can I buy a Medigap policy when I enroll for Medicare?

Yes, you can buy a Medigap policy when you enroll for Medicare. The best time to get a Medigap policy is during the Medigap Open Enrollment Period, which is a six-month period that begins the first month you are 65 or older and sign up for Part B of Medicare.

During the Open Enrollment Period, you can:

Enroll in any Medigap policy available in your state
Expect to find better prices and more policy options
Avoid or shorten waiting periods for pre-existing conditions if you replace creditable coverage

Medigap is an insurance policy that supplements Original Medicare coverage by helping to lower your share of certain costs. You can't have both a Medigap policy and a Medicare Advantage Plan, unless you switch back to Original Medicare.

Please note that this Q&A is for informational purposes only. The IMF does not endorse nor prefer any Medicare plan over another. To know your options, contact your local State Health Insurance Assistance Program (SHIP) regarding choosing the best Medigap policy suited for your needs.

For details on eligibility and getting a Medigap policy, please visit Medicare.gov.

If you have any questions related to Medicare, the IMF is always ready to help. Please feel free to reach out to our world-renowned IMF InfoLine team by emailing [email protected] or by calling 1-800-452 CURE (2873) (U.S. and Canada), or 1 (818) 487-7455 (Worldwide).