Medicare Supplemental Insurance
Medicare supplemental insurance fills the “gaps” between Medicare benefits and what you must pay out-of-pocket for deductibles, coinsurance, and copayments. Therefore, it is often called Medigap insurance. Medigap policies only pay for services that Medicare deems medically necessary, and payments are generally based on the Medicare-approved charge. Some plans offer benefits that Medicare doesn’t, such as emergency care while in a foreign country.
There are 12 standardized Medigap plans, labeled A through L. Each insurance company must use these same identifying letters. All companies that sell Medigap insurance must offer Plan A, but do not have to offer the other 11 plans. If you bought a Medigap policy before standardized plans were first introduced in 1992, you may keep your existing policy. You do not have to switch to one of the 12 standardized plans.
Medigap policies are sold by private insurance companies that are licensed and regulated by the Texas Department of Insurance (TDI). Medigap benefits, however, are set by the federal government. The benefits provided by these plans are described in the appendix. Medigap policies are automatically renewed each year.
Medicare Select is a type of Medigap policy that generally requires you to use doctors and other providers in the plan’s network for your routine care. If you use out-of-network providers, you’ll have to pay more of the cost. Medicare Select coverage can be issued by an insurance company or a Medicare HMO. If you leave a Medicare Select plan, the company must make available any non-Medicare Select Medigap policy it has on the market with comparable or lesser benefits.
Alternatives to Medicare Supplement Insurance
Before you buy a Medigap policy, consider these other options:
Employee Group Plans
If you remain employed after your 65th birthday, you may continue your group health insurance with your employer and may not need Medicare Part B or Medigap insurance. Likewise, if you become eligible for Medicare but are covered by your working spouse’s group health insurance, you may not need a Medigap policy.
Retirees who remain on their employers’ health plans or who have health coverage through a union or fraternal organization may not need Medigap coverage. Some employers offer their retirees coverage through a Medigap company. These are considered group Medigap plans. Because health plans work differently, talk to your employer’s benefits coordinator before making a decision about Medigap insurance.
COBRA Coverage from an Employer Plan [COBRA Guidelines]
Federal and state law allows employees who leave their jobs to continue their employer-sponsored group health coverage for a period of time. In some cases, family coverage may also be continued. If you continue your employer-sponsored coverage, you may not need a Medigap policy. Be advised that COBRA coverage impacts the timeframes for enrolling in Medicare Part B without a penalty.
Additional information on employer coverage and COBRA is available in the CMS publication, Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare, which is available from TDI.
Medicare Advantage Plans
Depending on where you live, you may have the option to choose between Medicare or a Medicare Advantage plan. If you are in a Medicare Advantage plan, you don’t need a Medigap policy. Medicare Advantage plans provide at least the same benefits as Medicare. There are several types of Medicare Advantage plans:
- managed care plans, which include HMOs, PPOs, provider-sponsored organizations, and religious fraternal benefit society plans
- private fee-for-service plans
- special needs plans
- Medicare medical savings accounts.
Medicare pays a monthly premium to the Medicare Advantage plan to provide your health care. The plan may require you to pay an additional premium and may charge you a copayment each time you go to the doctor or get a prescription.
Medicare HMOs typically require you to use only physicians and hospitals in the HMO’s network. A Medicare HMO with a point-of-service option allows you to choose your own doctors, but you will have to pay extra. With a private fee-for-service plan, you can generally go to any doctor or provider and receive care anywhere in the United States. The doctor and provider, however, must agree to treat you and to accept the plan’s payment terms.
If your Medicare Advantage plan terminates its contract in your service area, you have the right to purchase Medigap plans A, B, C, F, K, or L offered in Texas without regard to your medical history or condition. If your Medicare Advantage plan ends services in your area, it must explain to you in writing your options and timeframes to buy a Medigap policy.
Medicaid and Medicare Savings Programs
If your income and assets are below a certain level, you might be eligible for Medicaid. Medicaid is a federal program administered by the states that pays for health coverage for people with low incomes. If you qualify for Medicaid, the state will pay your Medicare premiums and other Medicare out-of-pocket costs. Medicaid also will pay for some services not covered by Medicare. If you receive Medicaid, you generally do not need Medigap insurance.
Medicaid-sponsored Medicare Savings Programs may pay Medicare premiums, deductibles, and coinsurance amounts for eligible Medicare beneficiaries. These programs enable Medicare beneficiaries to apply their savings to cover other expenses or buy more coverage.
The Qualified Medicare Beneficiary (QMB) program, the Specified Low-Income Medicare Beneficiary (SLMB) program, the Qualified Individuals (QI), and the Qualified Disabled Working Individuals (QDWI) program are all Medicare Savings Programs.
The federal QMB program pays the Medicare Part B premium and covers all Medicare deductibles and copayments for people with incomes below a certain level. You do not need Medigap insurance if you are in the QMB Program. QDWI pays Medicare Part A premiums. The other plans pay all or part of your Medicare Part B premium. Medicaid and the Medicare Savings Programs are administered by the Texas Health and Human Services Commission.
Texas Health Insurance Risk Pool (Health Pool)
The Health Pool offers health insurance to Texans who can’t find coverage because of their medical condition and to certain individuals who have recently lost their employer-sponsored health coverage.
The Health Pool offers more comprehensive coverage than Medigap Plan A but is probably more expensive. If you have Medicare Part A and Part B and need more coverage than a Medigap Plan A offers, consider this option to supplement your Medicare coverage. The Health Pool does not include outpatient drug coverage for people on Medicare.
For more information, including eligibility requirements and benefits information, call the Texas Health Pool or visit its website
Medicare Supplement Insurance Resources