Q: “I’m looking into Medigap insurance policies with very limited success. The information is very scarce. It is difficult to choose an insurance company. What criteria should I use to decide among carriers?” — Ray, Henderson, Nev.
A: Medigap, an insurance policy that supplements Medicare, helps pay for some of the medical costs that Medicare doesn’t cover, such as your co-payments, co-insurance, and deductible. Some policies even help with services Medicare doesn’t touch, like medical care outside the U.S.
You can choose from 10 standard Medigap policies, each named for a letter in the alphabet. The government mandates what features the 10 plans must offer, but the policies are sold through private insurers. (If you live in Massachusetts, Minnesota, or Wisconsin, the standard benefits on the Medigap policies sold in your state differ.)
Medigap Plan A is the most basic policy, while Plan F offers the most extensive coverage, picking up almost all of your out-of-pocket expenses. Plan F is also the most popular, accounting for 55% of plans sold, according to America’s Health Insurance Plans, the health insurance industry trade group.
The fastest growing Medigap policy, Plan N, is a newer option that has cost-sharing requirements but is typically less expensive than Plan F.
To shop for a Medigap plan, start with the Medigap policy search tool at the Medicare website. Enter your zip code, and you’ll see the standardized plans available to you, details about what they cover, the estimated costs, and a list of insurers selling those plans in your area. For price quotes, you’ll have to call each company directly.
Usually the only difference between same-letter policies is cost—and the price range can be shockingly large. According to a survey of rates by Weiss Ratings, the annual premium on a Medigap Plan F ranged from $162 to $5,674.
“I recommend that people get Plan F if they can afford it because it offers the most coverage,” says Fred Riccardi, client services director for the Medicare Rights Center. If you can’t swing a Plan F, pick the option that offers the most coverage within your budget.
Once you settle on a letter, you can shop on price alone. “Since the policy itself is standardized, premiums are really the only thing that will vary across insurance companies,” says Riccardi. “The only reason I see people go with a more expensive policy is if they prefer a certain insurance company.”
However, you do need to pay attention to the insurer’s pricing system too. Some plans are “issue age,” meaning the premiums rise with medical inflation. Others are “attained age” policies, with the price increasing each year with your age as well as medical inflation. You’ll also see “community rate” policies, which charge every policyholder the same premium regardless of age.
Attained age policies may appear to be the cheapest initially, but in the long run they could cost you more. “People should be aware that if they buy an attained age rated policy, their premiums will increase as they get older,” says Riccardi. “They may be better off considering a community rated or issue age rated policy if these options are available in their state.”
To get the lowest price and ensure that you won’t be denied, apply for a policy during the six-month open enrollment period that begins the month you turn 65, says Riccardi. Under federal law, insurers cannot deny you coverage during that window, and they must offer you the best available rates regardless of your health.
If you’re shopping for a Medigap plan outside of this window, you can be turned down or charged more for a pre-existing condition, unless you live in a state that offers extra consumer protections.