What Is Medigap Insurance?

Also called Medicare Supplement Insurance, Medigap is health insurance coverage provided by private companies designed to pay for costs not covered by Original Medicare. Depending on which plan you get, these costs might include co-payments, coinsurance, and deductibles, as well as services Original Medicare doesn't cover, such as travel outside of the United States.

Key Takeaways

  • Medigap insurance is purchased from private insurance companies to pay for costs not covered by Original Medicare.
  • There are 11 standardized Medigap plans approved by the federal government.
  • Medigap plans do not cover the costs of prescription drugs; for that you need to get a Medicare Prescription Drug Plan (Part D).
  • Medigap can be bought during an open enrollment period after the individual turns 65.
  • The insurance company can't cancel the policy if premiums are paid, even if the policyholder experiences health problems.

Understanding Medigap Insurance

Original Medicare—defined as Part A and B—will not cover all expenses associated with an illness. Medigap policies are designed to cover all or a portion of those extra charges depending on the type of coverage, but generally don’t include long-term care, vision, dental care, hearing aids, eyeglasses, or private nursing. Although private insurance companies offer Medigap coverage, the federal government requires companies to offer standardized policies. Your 11 choices are plans A, B, C, D, F, F-High Deductible, G, K, L, M, and N.

However, for those who become newly eligible for Medicare in 2020 and after, plans C, F, and F-High Deductible are no longer available. That’s because these plans cover the Medicare Part B deductible, the amount you have to pay before coverage kicks in, which is $198 in 2020.

Medigap policies sold after Jan. 1, 2006 are not allowed to include prescription drug benefits, which are instead available under the Medicare Prescription Drug Plan (Part D).

Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015, which disallowed such coverage. The intention was to make people pay at least a little bit for health care to prevent them from running straight to the doctor for every scrape, scratch, or sniffle. Fortunately, those who are already enrolled in plans C, F, and F-High Deductible will be able to keep them going forward.

Requirements for Medigap Coverage

Monthly premiums for a Medigap policy are paid to a private insurance company that is licensed to sell such policies in your state and can be paid in addition to the monthly premium paid to Part B of Medicare. The policy only covers one person. So, if you and your spouse want coverage, you each need to buy two separate Medigap policies. 

Furthermore, according to Medicare.gov,

“The best time to buy a Medigap policy is during your six-month Medigap open enrollment period. During that time you can buy any Medigap policy sold in your state, even if you have health problems. This period automatically starts the month you’re 65 and are enrolled in Medicare Part B (Medical Insurance). After this enrollment period, you may not be able to buy a Medigap policy. If you’re able to buy one, it may cost more."

Shopping for Medigap coverage is straightforward because you merely compare prices and the suitability of the insurance company. Once you have a Medigap policy, it is guaranteed renewable, even if you have health problems. In other words, the insurance company cannot cancel the policy so long as premiums are paid.

Importantly, Medigap coverage does not work with a Medicare Advantage Plan (Part C). Indeed, if you have a Medicare Advantage Plan, it is illegal for someone to sell you Medigap coverage. However, if you have Medicare Advantage and are unhappy with the plan, you can switch to Original Medicare within the first 12 months, at which point you can buy Medigap coverage.