Understanding Medigap

Original Medicare covers many medical services, but it does not cover everything. The services that are not covered are known as "gaps," and it is the function of Medigap to cover these gaps.

Also called Medicare Supplement insurance, Medigap policies are sold by approved private insurers and they can assist with certain services that aren't covered, including your copayments and deductibles. If you purchase a Medigap policy in addition to your original Medicare cover, they will both pay the applicable portion up to the approved Medicare value when you incur health care expenses.

When you shop around for a Medigap policy, note that all Medigap plans must adhere to the governing legislation and should be clearly identifiable as Medicare Supplemental Insurance. In most states the Medigap plans are standardized and identified by letters A to N.

You should be able to choose between these plans since some of them offer additional benefits above the basic benefits offered by all plans. Plans M and N are new in 2010 and plans H, I, J and E are no longer available as of 1 June 2010. It is also important to note that different insurers are allowed to charge different premiums for the same plan. As an example, Insurer 1 and Insurer 2 both offer plan A, but Insurer 1 charges a premium of $2 a month while Insurer 2 charges a monthly premium of $20. Be sure that you are comparing premiums for the same plans when shopping around. For example, your comparison would be void if you compared Insurer 1's plan A to Insurer 2's plan B premium.

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Important Considerations

Only One

A Medigap policy only covers one individual, which means that your spouse needs to buy a separate policy if they also want Medigap coverage.

Premiums

Since you generally need Medicare Part A and Part B to qualify for a Medigap policy, you will have to pay premiums for Part B and for your Medigap policy every month. You pay the Medicare Part B premium as usual and pay the Medigap premium to your private insurer.

Enrollment

Medigap may also be subject to enrollment periods. Your initial enrollment period for Part B is the 6 months that starts on the first day of the month in which you turn 65, and your Medigap options may become limited after this period.

Legislation

If you are already a member of a Medicare Advantage plan, you are not allowed to purchase a Medigap policy and it is illegal for an insurer to sell one to you. You also cannot have prescription drug coverage under a Medigap policy and a Medicare Drug Plan at the same time.

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