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Medicare open enrollment: What's the best Medigap policy?

Consumer Reports News: October 16, 2012 09:53 AM

Q. No matter where I look, I find an overwhelming amount of data about Medicare Advantage but very little about Medigap. Where can I find ratings on Medigap policies?

A. Unfortunately, nowhere. Although a lot of people confuse Medicare supplemental (Medigap) plans with Medicare Advantage plans, they're nothing alike. Medigap plans essentially begin where original Medicare leaves off, picking up some or all of out-of-pocket expenses such as the $1,156 deductible for hospitalization under Part A or the 20 percent coinsurance for outpatient and physician care under Part B. With most Medigap policies, this coordination is automatic: after Medicare has paid its share of the bill, it forwards the claim to your Medigap carrier to pay its share.

In all but three states, Medigap is sold in 10 standardized flavors designated with letters. Plan F, which picks up pretty much every out-of-pocket expense for Parts A and B, is by far the most popular choice among the nearly 10 million Americans who buy Medigap plans, with 51 percent of the market, according to the most recent data from America's Health Insurance Plans, the major health insurance industry trade group. The runner-up, Plan C, which is slightly less generous, has 14 percent of the market.

The difficulty for consumers is that the nature of Medigap makes it a lot harder to shop for than Medicare Advantage. Here's why. Medicare Advantage plans are regulated and overseen on a national level. Medicare routinely collects all kinds of information on them about customer satisfaction and quality of care. In addition, the premium of a specific Medicare Advantage plan is the same for each customer. As a result, it's possible (as I explained yesterday) to go to Medicare.gov and compare Medicare Advantage plans in detail, including quality ratings and price. It's also why we can publish rankings of Medicare Advantage HMOs and PPOs through our partnership with the National Committee on Quality Assurance.

None of this is true for Medigap plans. While the federal government does set minimum standards for how the plans are priced and sold, the plans themselves are licensed and regulated state by state. Some states don't go beyond the bare minimum of regulation, while others have extensive consumer protections. Also, because Medigap plans don't have provider networks or get directly involved in whether to cover a treatment or test, there's little to rate them on. To top things off, the cost of a plan can vary greatly depending on which company you buy it from, the premium pricing method the company uses, how old you are when you buy it, and whether you have any pre-existing conditions.

So how do you go about buying a Medigap plan? Start at this Medigap policy search page on Medicare.gov. When you enter your zip code you'll see a list of the standardized lettered plans. Click on the one you want and you'll get a list of companies that sell it in your location.

Sadly, what you won't see are prices. For that, you'll need to contact the companies one by one. Or you can work with a trusted independent health insurance broker who can get that information for you. Be aware that in states without extra consumer protections there are only specific times when you're entitled to buy a Medigap policy with no questions asked about your health history. At other times, you can be turned down or charged more for a pre-existing condition.

It's complicated, for sure, and we've only scratched the surface here. I recommend downloading Medicare's excellent brochure, Choosing a Medigap Policy, to learn more.

For more information, see our Health Insurance Buying Guide as well as rankings of health insurance plans.
Got a question for me? Ask it here.

Nancy Metcalf

   

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