What You Need to Know About Medigap Insurance

Your Original Medicare Coverage Isn't Enough

Medigap Insurance

Original Medicare is a great start for your retirement health insurance but if that’s all you have, you’re in for shock when your medical bills start arriving. Along with Original Medicare you need additional coverage to protect you from costs that could easily reach into the tens of thousands of dollars. There are a couple of options but a Medigap Insurance policy might be your best bet.

Medicare Has Gaps

Before we look at the solution, let’s define the problem. All of your working life you saw money disappear from your paycheck to cover Medicare. In fact, you paid 1.45 percent of your earnings to cover your Medicare later in life and your employer threw in another 1.45%. If you’re self-employed, you paid both parts. Over the course of your career, you paid about $61,000 if you earned a wage close to the national average but once you retire this health insurance you paid for is severely lacking.

Let’s look at Original Medicare—that’s Part A and Part B. If you don’t know much about the 4 parts, read more here.

Let’s say that you had a heart attack. Medical science has come a long way and a heart attack isn’t as catastrophic as it once was but it costs a lot of money. In fact, you could but a luxury car for what you and your insurance company will pay for the care you need.

When you went to the hospital and were admitted and your Part A coverage picked up a portion of the bill. You pay the first $1,316 and Medicare picks up the rest up to 60 days. Then you start paying a portion of the daily bill and after 90 days you pay a larger portion. If you go back to the hospital later that year, you may pay another $1,316. Each time you’re admitted, it could be another $1,316.

But what about all of the tests and procedures? That’s where Part B comes in. There’s a monthly premium for Part B but for any procedures, you pay the first $183 as your deductible and pick up 20 percent of the bill after that. If your total bill was $30,000 not counting the cost of staying in the hospital or your deductible, your portion is $6,000.

But if you have other procedures, tests, surgeries, and most other care, you’ll pick 20 percent of all of it for the year. That translates to a HUGE bill that most retirees often can’t pay. Sure, Medicare picked up 80 percent but that 20 percent hurts just as bad, right?

NOTE: Before you fire off some strongly worded emails to your Congressmen, that $61,000 you paid over your working years gets you an average of $180,000 in benefits so you’re getting a pretty good deal.

Medigap Insurance

Those gaps in coverage represent a terrifying financial burden to retirees. That’s why you have to get additional insurance to fill those gaps in your Original Medicare. There are 2 choices: A Medicare Advantage plan—known as Part C, or Medigap Insurance. You can learn about Medicare Advantage plans here. [[NOTE: Link to the article I just wrote on this topic]]

Medigap Insurance, also called Medicare Supplement Insurance, will fill the gaps we looked at above but there’s an additional premium on top of your Original Medicare you’re already receiving. (L4)

Medigap insurance has a bunch of letters just like Original Medicare—Plans A, B, C, D, F, G, K, L, M and N. That might seem overwhelming but there’s a bright side. Medicare standardizes these plans. When you’re shopping the various private insurance providers for Medigap insurance, Plan G has the same benefits regardless of the provider. All you have to compare is the price and the quality of the company. No need to dive into the benefits package because that’s set by Medicare unless you live in Massachusetts, Minnesota, or Wisconsin where plans are slightly different.

Quick Facts About Medigap Insurance

Medigap isn’t a replacement for Original Medicare. You still need Parts A and B and must continue paying any monthly premiums that come with those. You will pay a private insurance company a separate premium for your Medigap Insurance.

Next, there’s no family plan. A Medigap policy covers a single person. You need a separate policy for your spouse.

If you get sick while covered by a Medigap policy, your policy is guaranteed renewable. You don’t have to worry about the insurance company canceling your policy because of your health issues.

Medigap policies don’t cover prescription drugs. You would need Medicare Part D coverage, which comes with a separate premium. You may end up paying multiple premiums for Original Medicare, Medigap, and Part D coverage but it's essential if you want protection from all of the coverage gaps.

Finally, Medigap insurance doesn’t cover long-term care, vision and dental care, eyeglasses, hearing aids, or some types of nursing.

How to Enroll

Since Medigap insurance is sold through private insurers, you’ll have to go shopping but Medicare makes it easy with their “Medigap Policy Search” page. Here you can enter some basic information about yourself and Medicare will give you plenty of options to compare.

Joseph Graves, insurance agent and Founder of “I Hate Buying Insurance,” says that people often enroll in Plan F because it covers almost all coverage gaps. It’s the most expensive of the plans but will result in the person paying no or next to no out-of-pocket expenses. A person in good health living in Miami, Florida can expect to pay around $275 for Plan F coverage in 2017 while somebody in Orlando, Florida would pay $195.

If that’s a monthly bill you can’t afford there are cheaper plans but keep in mind that they will leave some coverage gaps that might cost you more money than what you saved on the premium.

Ask for Help

Identifying the coverage gaps in Original Medicare and knowing which plans offer the best value for your medical needs gets complicated and it’s something you can’t afford to get wrong. Talk to an insurance agent who specializes in Medicare for help.