Medicare Supplement (Medigap) Article

What is the benefit of a Medicare Supplement in California? 

Many people are unaware that Medicare covers only about 80% of your Medicare Part B health care expenses. That leaves you responsible to pay for the additional 20%, which can be financially distressing if you are diagnosed with a serious and costly illness. Medicare Supplements are designed to help pay a part of or all of that extra 20% for you as well as some additional costs. By purchasing a Medicare Supplement plan in California you buy some peace of mind by minimizing your financial risk/responsibility.

Things to consider when choosing a Medicare Supplement (Medigap) plan in California

There are several things to consider when choosing a Medicare Supplement plan, also known as Medigap plans. Before you can select which Medicare Supplement plan is best for you it is important to understand how Medicare Supplement plans work and also that they are very different from Medicare Advantage plans.

Medicare Supplement plans are a type of health insurance you buy from a California Medicare Supplement insurance company. These plans work alongside Original Medicare to help pay for health care costs like co-payments, coinsurance, and deductibles that are not covered by Original Medicare. As mentioned earlier Medicare Supplement policies are very different than Medicare Advantage HMO or PPO Plans in several ways.

Medicare Advantage plans completely replace Original Medicare while Medicare Supplement policies work in tandem with your Original Medicare benefits. In California (and in all but three other states) Medicare Supplement plans have been standardized and given letter designations starting with A running through N. Each of these plans offers varying levels of coverage. The advantage of having standardized plans like these is the benefits provided in say a Medicare Supplement Plan G for example, are the same no matter which insurance company you purchase it from. 

Below is a chart that outlines the different Medicare Supplement plans in California in 2020. This will give you a high-level overview of the benefits covered but it is best to find an independent Medicare insurance advisor near you to help you decide which plan is the best Medicare supplement plan in California for you given your unique situation. You will note that Plans C and F are highlighted in red, this is because they are no longer available to people who are newly eligible for Medicare on or after January 1, 2020.

  * Plans F and G also offer a high-deductible plan in some states. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,340 in 2020 before your policy pays anything. 

** For Plans K and L, after you meet your out-of-pocket yearly limit and your yearly Part B deductible ($198 in 2020), the Medigap plan pays 100% of covered services for the rest of the calendar year.

*** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don't result in an inpatient admission.

If you purchase a Medicare Supplement plan it is important to ask your physician if they accept Medicare Assignment. When a health care professional accepts Medicare assignment, they agree:

• to be paid directly by Medicare
• to accept the payment amount Medicare approves and not bill you for excess charges (more on this below)
• not to bill you for more than the Medicare deductible and coinsurance

Let’s review a few of these plans in a little more detail.

Plan F

This plan provides the most comprehensive coverage of all the Medicare Supplement Plans by providing 100% coverage for everything that Medicare doesn’t pay. But remember as we stated before it is no longer available for people who are newly eligible for Medicare on or after January 1, 2020.

Plan G

With the elimination of Plan F, Medicare Supplement Plan G became the most popular plan available. Plan G provides coverage very similar to what Plan F covered but does not cover the Medicare Part B deductible. With Plan G you will be responsible for The Part B deductible which is $198 in 2020, but once you have paid the deductible, you will have full coverage. 

Plan N

Plan N has become more popular with the elimination of Plan F. It is similar coverage to Plan G but has office visit co-pays between $0-$20, a $50 emergency room co-payment (which is waived if you are admitted), and Part B Excess charges are not covered (more about what those are and why they are important later).

Other Medicare Supplement Plans Available

While we have reviewed the most popular plans F, G, and N, there are still several other Medicare Supplement Plans available in California. With lower levels of benefits and price differences that are not always significant, they are less popular.

High Deductible Medicare Supplement Plans

For those who are looking for a lower premium may with higher potential out-of-poked costs there are high deductible plan options available for Plan F and Plan G. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,340 in 2020 before your policy pays anything.

Innovative Medigap Offerings

There are several insurance companies now offering plans with additional benefits such as dental and vision. They are less common so ask your Medicare Supplement Insurance Advisor if they are available in your area.

Medicare SELECT policies 

These are Medicare Supplement plans that may require you to use certain providers within a network defined by the insurance company. If you purchase this type of Medicare Supplement policy, your premium could be less. These types of policies are not very common.

What are Medicare excess charges and why are they important to understand?
One of the biggest potential gaps in Original Medicare is the ability for healthcare providers to bill you for something called excess charges if they don’t accept Medicare Assignment. They may still accept you as a Medicare patient but by not accepting Medicare Assignment they are allowed to bill you for excess charges. So what are excess charges and why is it important to understand them? Medicare “Excess Charges” are related to Medicare Part B services. If you are on Medicare and go to a doctor who does not accept Medicare assignment (accept full payment by Medicare), they are allowed to bill you up to 15% above and beyond what Medicare approves for a specific procedure/doctor office visit. This amount is not covered by Medicare or all but one of Medicare Supplement plans. Plan G covers Excess Charges at 100%.

For example, if a doctor decided a $100 payment (Medicare-approved amount) for a service is not enough, the doctor is allowed to charge up to an additional 15% over and above the Medicare-approved amount and you would be responsible for paying that 15%. So for a $100 service, you could be responsible for a $15 Excess Charge. Doesn’t sound like much right? But what if you had a serious health issue and the charges were $10,000 or even $100,000? 15% of that might be a tough pill to swallow. The financial uncertainty caused by Excess Charges is why the Medicare Supplement Plan G is a popular one. Plan G covers 100% of Excess Charges, completely removing that potential financial liability.

This can be a complicated thing to understand which is why it is wise to enlist the help of a Medicare advisor to help further explain the pros and cons of various plans and answer any additional questions you may have.

What about prescription drugs?

It is important to understand that neither Original Medicare nor Medicare Supplement plans cover prescription drugs. To have prescription drug benefits you will also have to purchase a prescription drug plan in addition to your Medicare Supplement plan from an insurance company in California as well. These plans are commonly known as stand-alone Part D plans. There are a lot of things you will want to consider when choosing a stand-alone Part D plan to go with your Medicare Supplement plan but we will cover that in another post.

Why purchase a California Medicare Supplement plan over the other options out there?

• With standardized plans, you can easily compare products from different insurance companies and select the best Medicare supplement plan in California for you.
• Medicare Supplement policies usually have lower out-of-pocket expenses than Medicare Advantage plans.
• There is no provider network you must stay within. Medicare Supplement policyholders can see any provider in California or anywhere else who accepts Medicare. 
• You don’t need referrals like may be required if you purchase a Medicare Advantage plan. 
• Medicare Supplement policies are guaranteed renewable. This means that if you pay your premiums on time the insurance company is not allowed to cancel your policy.

When can you enroll in a Medicare Supplement Plan? 

When you turn 65 and sign up for Medicare Part B you are given a six month open enrollment period for Medicare Supplements in California that starts the first day of the month of your 65th birthday. During your open enrollment period, you can purchase any Medicare Supplement policy in California without medical underwriting this is called guaranteed issue (GI). If you buy a Medicare Supplement in California outside your open enrollment, guarantee issue window, you may be declined due to health reasons or pay a higher premium. There are exceptions to that rule which is why it is so important to work with a Medicare Insurance Advisor near you who will review your specific situation and help you choose the right plan for your unique situation. You may have heard of the Annual Election Period that happens each fall from October 15ththrough December 7th.  This does not apply to Medicare Supplement plans The Annual Election period only applies to Medicare Part D plans and Medicare Advantage Plans NOT Medicare Supplements. Your 6-month Guarantee Issue Open Enrollment period for Medicare Supplements happens only once when you turn 65.

If you are still working when you turn 65 you can defer enrollment in Medicare without any penalty. You simply keep the health insurance provided by your employer and enroll in Medicare at a later date when you retire and are no longer covered by an employer group health plan. At that time you will have something called a guaranteed issue window which allows you to enroll without any health questions. It is however a shorter period of time (63 days after the loss of your employer group health coverage) and you will have fewer plan choices. The insurance company also cannot deny your application for any health reasons during this enrollment window. 

Unique rules for Medicare Supplement Plans in California

There is a unique rule for switching plans in California. Medicare supplemental plans in California have what is called the “Birthday Rule”. This rule allows Medicare supplemental members to switch to a plan of equal or lessor-benefit within 60 days after your birthday and gives them Guarantee Issue rights which again means you cannot be turned down because of pre-existing health conditions. This means if you are enrolled in a standard Plan F, you can switch to Innovative F or F extra during the 60 days after your birthday. The guaranteed issue rules can be different from state to state, which is why it is especially important to work with a Medicare Insurance Advisor knowledgeable of the rules in California. 

What about pricing, can I expect premiums to go up over time?

When you purchase a Medicare Supplement plan in California the initial price can and in most cases will go up over time. There are several different ways an insurance company can price Medicare Insurance policies, these are also known as rating methods. 

Community Rated – Generally the same monthly premium is charged to everyone who has the Medicare Supplement policy, regardless of age, which means your premium isn’t based on your age. Premiums may go up because of inflation and other factors, but not because of your age.

Issue-age-rated (also called “entry age-rated”) - The premium is based on the age you are when you buy your Medicare Supplement policy. Premiums are lower for those who buy at a younger age and won’t change as you get older. Premiums may go up because of inflation and other factors, but not because of your age.

Attained-age-rated - The premium is based on your current age (the age you have "attained"), so as you get older your premium goes up. In this case, premiums may be the least expensive at first, but they can eventually become the most expensive. Premiums may also go up because of inflation and other factors.

These are important factors to evaluate and understand when you are looking to purchase a Medicare Supplement Plan in California and again why it is important to work with an independent Medicare advisor near you.

In California, there are many insurance carriers to choose from and your Medicare Insurance Advisor will help you with choose which companies Medicare supplement plan in California is right for you. Choosing a Medicare plan is an extremely personal decision and every person’s situation is different and unique. There is no right or wrong choice, just what’s right for you.