Do I Need a Medigap Policy?

Medigap supplemental policies are sold by private insurance companies and either fully or partially cover cost-sharing aspects of Medicare Part A (hospital coverage) and Part B (outpatient care). However, one thing that feeds into the premium cost is how the insurer “rates” its Medigap policies, explains  CNBC’s recent article entitled “A ‘Medigap’ policy picks up some costs that Medicare won’t. Here are tips for choosing one.”

In fact, some insurers will provide discounts for two policies in the same household. Therefore, you would want to understand a carrier’s premium rating system, its claims history and the caliber of its customer service department. Don’t buy a policy just based on the cost.

About 62.3 million people, most of whom are 65 or older, are enrolled in Medicare. About a third of beneficiaries opt to get their Part A (hospital coverage) and Part B (outpatient care) benefits through an Advantage Plan (Part C). Those plans offer out-of-pocket limits and frequently will have dental and vision coverage or other benefits. They also typically provide Part D prescription drug coverage. The rest use original Medicare — Parts A and B — and, typically, add a standalone Part D prescription plan. In that scenario, unless you have some other type of coverage (i.e., employer-sponsored insurance or you get extra coverage from Medicaid), the option for lowering your out-of-pocket costs is a Medigap policy.

When you initially enroll in Part B, you have six months to buy a Medigap policy without an insurance company reviewing your health history and deciding whether to insure you. After this period ends, depending on the specifics of your situation and the state in which you reside, you may have to go through underwriting.

The reasons to buy a Medigap plan are different for each individual. A big difference in premiums can come from how they are “rated.” If you know this, it may help you to appreciate what may happen to your premium in the future. There are some insurers’ Medigap policies that are “community-rated.” This means everyone who buys a particular policy pays the same rate, no matter what their age. Other plans are based on “attained age.” That means the rate you receive at purchase, is based upon your age and will go up as you get older. A few others use “issue age,” where the rate will stay the same as you age, but it’s based on your age at the time you purchase the policy.

Your premiums also may jump from year to year due to other factors, like inflation and insurer increases.

Remember to see if there’s a household discount. Many insurers have this, and it can save 3% to 14%.

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Reference: CNBC (June 15, 2020) “A ‘Medigap’ policy picks up some costs that Medicare won’t. Here are tips for choosing one”

How Does Traveling While on Medicare Work?

CNBC’s recent article, “Planning to travel while on Medicare? Make sure you have coverage at your destination” explains that basic Medicare—which includes Part A (hospital coverage) and Part B (outpatient care)—typically doesn’t cover any medical costs outside of the U.S. and its territories. There are a few Medicare Advantage Plans that cover emergency services overseas, as well as some Medigap plans that also offer protection.

If you’re on Medicare, your coverage away from home depends partly on your destination and if you’re on basic Medicare or receive your benefits through an Advantage Plan. This also can depend on whether the health care you get is routine or due to an emergency.

Travel medical insurance can be the solution to gaps in coverage, but it’s good to first determine whether you need it. Remember that original Medicare consists of Part A and Part B. Retirees who opt to stay with just this coverage—instead of going with an Advantage Plan—typically pair their coverage with a stand-alone prescription-drug plan (Part D). If you fit in this situation, your coverage while traveling in the U.S. and its territories is fairly simple. You can go to any physician or hospital that accepts Medicare, regardless of the type of visit.

However, when you journey beyond U.S. borders, things get more complex.

Generally, Medicare doesn’t provide any coverage when you’re not in the U.S, with a couple of exceptions. These include if you’re on a ship within the territorial waters adjoining the country within six hours of a U.S. port or you’re traveling from state to state but the closest hospital to treat you is in a foreign country. As an example, think a trip to Alaska via Canada from the 48 contiguous states.

Roughly a third of retirees on original Medicare also buy supplemental coverage through a Medigap policy (but you can’t pair Medigap with an Advantage Plan). Those policies, which are standardized in every state, vary in price and offer coverage for the cost-sharing parts of Medicare, like copays and co-insurance. There are some Medigap policies—Plans C, D, F, G, M and N—that offer coverage for travel. You pay a $250 annual deductible and then 20% of costs up to a lifetime maximum of $50,000. However, that may not go very far, depending on the type of medical services you need.

There’s also no overseas coverage through a Part D prescription drug plan, and Medigap policies don’t cover any costs related to Part D, whether you’re in the U.S. or not. For seniors who get their Medicare benefits—Parts A, B and typically D—through an Advantage Plan, it’s a good idea to review your coverage, even if you’re not leaving the U.S. any time soon. These plans must cover your emergency care anywhere in the U.S., but you may have to pay for routine care outside of their service area or you’ll pay more.

Some Advantage Plans may also have coverage for emergencies overseas, so review your policy. Whether you have an Advantage Plan or original Medicare, travel medical insurance might be a good move if you think your existing coverage isn’t enough. The options are priced based on your age, the length of the coverage and the amount. In addition to providing coverage for necessary health services, a policy usually includes coverage for non-medical required evacuation, lost luggage and dental care required due to an injury.

There’s coverage for a single trip of a couple weeks or several months, or you can buy a multi-trip policy, which could cover a longer time period.

It’s also important to know if your policy covers pre-existing conditions, since some don’t. You should also be aware that some Advantage Plans might disenroll you, if you stay outside of their service area for a certain time, usually six months. In that situation, you’d be switched to original Medicare. If you are disenrolled, you’d have to wait for a special enrollment period to get another Advantage Plan.

Reference: CNBC (July 14, 2019) “Planning to travel while on Medicare? Make sure you have coverage at your destination”