Written by: James J. Karchner, CFP®, CPA/PFS
Medicare won’t cover all your health care costs during retirement, so you may want to consider buying a supplemental health insurance policy known as Medigap. Offered by private insurance companies, Medigap policies are designed to cover costs not paid by Medicare and help to fill the gaps in your health insurance coverage.
When’s the best time to buy a Medigap policy?
The best time to buy a Medigap policy is during open enrollment, when you can’t be turned down or charged more because you’re in poor health. The open enrollment period starts on the first day of the month in which you’re both 65 or older and enrolled in Medicare Part B. A few states require a limited open enrollment period be offered to Medicare beneficiaries under age 65.
If you don’t buy a Medigap policy during open enrollment, you may not be able to purchase the policy you want later and could find yourself having to settle for whatever type of policy an insurance company is willing to sell you. Insurers have greater freedom to deny applications or charge higher premiums for health reasons after the open enrollment period closes.
What’s covered in a Medigap policy?
Under federal law, only 10 standardized plans can be offered as Medigap plans (except in Massachusetts, Minnesota, and Wisconsin, which have their own standardized plans). The plans currently sold are Plans A-D, Plans F and G, and Plans K-N. Each Medigap plan offers a different set of benefits. All cover certain out-of-pocket costs, including Medicare coinsurance amounts. Some plans also cover other costs, such as all or part of Medicare Part A and Part B deductibles, foreign travel emergency costs, and Medicare Part B excess charges.
Medigap policies do not cover certain health care expenses, including long-term care, vision, dental, or prescription drugs. To obtain prescription drug coverage, you can purchase a separate Medicare Part D Prescription Drug Plan.
While you can buy the Medigap plan that best suits your needs, it’s important to note that not all Medigap plans are available in every state.
Are all Medigap policies created equal?
Generally, yes. Although Medigap policies are sold through private insurance companies, they’re standardized and regulated by state and federal law. A Plan B purchased through an insurance company in New York will offer the same coverage as a Plan B purchased through an insurance company in Texas.
However, even though the Medigap plans that insurance companies offer are identical, the quality of the companies that offer the plans may be different. Look closely at each company’s reputation, financial strength, and customer service standards. Also, Medigap premiums can vary widely, both from company to company and from state to state. By visiting the medicare.gov website, you can find more information on Medigap policies and compare costs. If you have questions or would like to discuss further, please reach out to a Domani Wealth advisor today.
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