Medicare Supplement Insurance: Medigap Policies Explained

Medicare Supplement insurance, commonly referred to as Medigap, is private health insurance designed to cover the expenses that Original Medicare (Part A and Part B) does not pay. These "gaps" in coverage include deductibles, coinsurance, and copayments. For those preparing for the practice Accident & Health questions, it is vital to understand that Medigap is not a standalone policy; an individual must already be enrolled in both Medicare Part A and Part B to be eligible for purchase.

Medigap policies are sold by private insurance companies but are strictly regulated by both state and federal laws. Unlike Medicare Advantage (Part C), which replaces the way a person receives Medicare benefits, a Medigap policy simply supplements the existing Original Medicare benefits. For a broader overview of how these fit into the wider insurance landscape, see our complete Accident & Health exam guide.

One of the most important concepts for the licensing exam is standardization. In most states, Medigap policies are standardized into different plans, labeled by letters (such as Plan A, Plan B, Plan G, etc.). Each plan with the same letter must offer the exact same benefits, regardless of which insurance company sells it. This allows consumers to compare policies based solely on price and company reputation.

• Plan A: The basic core benefit plan.
• Plan B-N: These plans include the core benefits plus various additional benefits.
• Uniformity: If a company sells Plan G, it must provide the same coverage as any other company selling Plan G.

Every insurance company that offers Medicare Supplement insurance must offer Plan A. This plan represents the foundation of Medigap coverage. If a company offers any other plans, they must also offer Plan A. The core benefits found in Plan A include:

• Part A Coinsurance: Coverage for the daily cost of hospital stays after Medicare benefits are exhausted, up to an additional duration of several hundred days over a lifetime.
• Part B Coinsurance: Coverage for the percentage of the Medicare-approved amount that the beneficiary normally pays after the deductible is met.
• Blood: The cost of the first three pints of blood each time a procedure is performed.
• Hospice Care: Coinsurance or copayments for Part A hospice care.

To protect seniors, specific marketing and sales standards are enforced for Medigap policies. These include:

• Guaranteed Renewability: An insurance company cannot cancel a Medigap policy because of the insured's health status. As long as premiums are paid, the policy must remain in force.
• Pre-existing Conditions: While companies can sometimes exclude coverage for pre-existing conditions for a limited timeframe, they cannot do so if the applicant had prior creditable coverage.
• No Duplication: It is illegal for an agent to sell a Medigap policy to someone who already has one, or to someone enrolled in a Medicare Advantage plan, unless the new policy is replacing the old one.
• Outline of Coverage: Agents must provide a clearly written outline of coverage to the applicant at the time of application, explaining the benefits and limitations.