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Ready to Retire: Medigap Issues for the New Year

Senior Couple at home discussing retirement options & Medigap issues

Medigap, also known as Medicare Supplement Insurance, is extra coverage you purchase from a private insurer to cover any gaps in Original Medicare. Such costs include deductibles, co-payments, and health care if you travel outside the country. It is important to note that Medigap plans don’t cover dental or vision care, nor do they cover eyeglasses or hearing aids. In addition, the majority of plans don’t cover prescription drugs.

You pay a monthly premium for your Medigap policy, which varies according to the scheme and insurer you choose. You can only purchase one of these supplement plans if you already have Original Medicare, and you can’t buy it if you have a Medicare Advantage plan. There are 10 plans available from A through N, although E, H, J, and I are not available to new subscribers.

What’s New in Medigap in 2017?

There are no significant changes to Medicare Supplement Insurance in 2017, but there may be substantial changes to your specific plan. Remember, private insurers sell these plans and are allowed to increase the price annually. Factors such as your age, rising inflation, increasing health costs, and even your location can result in an increase in the price of your Medigap plan.

The Importance of Shopping Around

Medigap plans are standardized. This means each one carries the same benefits no matter whom you purchase it from. In simple terms, Plan F from Aetna will have the same benefits as Plan F from Anthem Blue Cross. However, you could be paying a lot more for your Anthem Blue Cross plan for a variety of reasons. Insurers price their policies using the following primary factors.

Issue-Age Rated: You benefit from lower premiums if you purchase such a plan at a younger age. While the price won’t increase just because you get older, it will rise due to other issues such as inflation.

Attained-Age Rated: Unlike issue-age rated plans, your premium will go up as you age, although you also receive lower premiums if you purchase such a plan at a young age.

Community Rated: Your premium does not rely on your age at all but can rise due to inflation etc.

As mentioned above, the cost can vary dramatically depending on your insurer, even though the plan offers the same benefits. We performed a very quick search for a 65-year-old male in good health in Nebraska and found the cost of Plan F varied from $109 a month to $250 a month.

Then there is the matter of your location. A 65-year-old male living in metro New York pays on average $371 a month for Plan F. In contrast, the same man living in metro Florida would pay just $192 a month for Plan F, on average.

Companies can increase the cost of their plans several times a year, but most of them only issue a price rise once per year. If your existing plan is too expensive, it is worth shopping around on the official Medicare website.

Other Important Information

If you’re ready to retire and purchase a Medigap plan in 2017, here are a few things you should know:

  1. Private insurers don’t have to offer every option, but they must have Plans A, C, and F if they offer any Medigap policy.
  2. Plan F is the most popular (and expensive) option, although Plan N is increasing in popularity.
  3. Approximately half of Medigap enrollees have either Plan C or F. Neither plan will be available to new enrollees from 2020 onward.
  4. Plan F offers the highest level of coverage and even pays for your Part B deductible. Plan A provides basic coverage.
  5. You can cut costs by choosing a Medicare Select plan. The premium is lower, but you must see doctors within the network.
  6. Certain plans offer discounts. These could include discounts for being female, being a non-smoker, being married, or paying annually instead of monthly.
  7. There is an option to purchase Plan F with a high deductible. With this plan, you must pay the first $2,200 of copayments and coinsurance not paid by Medicare in 2017. Only then will your Medigap policy begin to offer you coverage.

Final Words

It is best to join or switch Medigap plans during the specified Enrollment Period. It lasts for six months and begins on the first day of the month in which you enrolled in Part B, assuming you are 65+ years of age. By doing this, you benefit from Guaranteed Issue Rights, which means insurers can’t refuse to sell you a plan or charge you more because of a preexisting health condition.

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