What are Medicare Supplements (Medigap)?
Most Medicare-approved services today are covered primarily by original Medicare, which consists of Parts A and B. However, Medicare Parts A and B have “gaps” in coverage, leaving the burden of covering certain medical expenses to insured. These gaps include the Parts A and B deductibles and daily copayments for nursing home and hospital care. To make up for these gaps in Original Medicare coverage, the insurance industry created Medicare supplement policies, also known as Medigap policies.
Medigap insurance is another name for supplementary Medicare insurance. It is called Medigap because it makes up for the “gaps” in coverage left after normal Medicare has paid what it covers. The gaps are in the form of deductibles, copayments, and coinsurance and represent out-of-pocket expenses to insured. While Medicare supplement insurance pays for these charges, it is requires them to be medically necessary, just as Medicare does. In addition, the amounts paid are based on what Medicare would generally approve. Additional benefits, such as emergency care while overseas, are sometimes offered by certain plans.
Underwritten and sold by commercial insurance providers, Medicare supplement plans are designed exclusively to supplement Original Medicare. Medigap policies may provide coverage that Medicare considers medically unnecessary. For example, Medigap policies cannot cover cosmetic surgery. However, some Medigap policies offer benefits that Medicare doesn’t, such as emergency medical care in a foreign country.
Guaranteed Issue
“Guaranteed Issue” means an insurance company must issue you a policy, regardless of your health. When you first turn 65, by law you have a guaranteed issue right to a Medicare Supplement should you choose one. Federal law requires that people who qualify for Medicare are entitled to purchase a Medicare supplement policy without regard to health, as long as the applicant is at least age 65 and applies for a Medicare supplement policy within six months of enrolling in Medicare Part B. If the applicant meets these criteria, then he or she qualifies for the policy of their choice within their state. The insurance company cannot deny or condition the issue of a policy on the basis of medical history, health status, or claims experience. Furthermore, your coverage can never be changed or dropped for any reason other than non-payment of premium.
Your guaranteed issue right expires after this initial six month period, however, meaning you will have to pass any underwriting requirements set by the insurance carriers if you would like to sign up for a Medicare Supplement later.
No Prescription Drug Coverage
Medicare supplement plans (except grandfathered plans) cannot include prescription drug coverage, which is available now through Medicare Part D. Before Medicare Part D was initiated, some Medicare supplement plans did include prescription drug coverage. These pre-Part D plans were grandfathered, and today anyone who still owns one may either continue the policy’s drug coverage (without having to buy a Part D policy) or discontinue the prescription drug coverage (and see a corresponding decrease in premium). If the policyholder chooses the latter option, a Part D policy may be funded with the premium savings.
Guaranteed Renewable
All Medicare supplement policies must be issued as guaranteed renewable. A policy, once issued, cannot be canceled due to the insured’s health. The insurer may increase premiums, but only as long as premiums are increased for all such policies issued by the insurer.