Medigap

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Medigap refers to various private supplemental health insurance plans sold to Medicare beneficiaries in the United States that provide coverage for medical expenses not or only partially covered by Medicare. Medigap's name is derived from the notion that it exists to cover the difference or "gap" between the expenses reimbursed by Medicare and the total amount charged. A person must be enrolled in part A and B of medicare before they can enroll in a Medigap plan. During the open enrollment period which begins 3 months before and ends 3 months after the month of an individual's 65th birthday, a person may obtain a Medigap plan on a guaranteed issue basis (i.e. no medical screening required). Outside of open enrollment, the issuing insurance company will require medical screening and may obtain an attending physician's statement if necessary. Medigap insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan.

Medigap offerings have been standardized by the Centers for Medicare and Medicaid Services (CMS) into twelve different plans, labeled A through L, sold and administered by private companies. Each Medigap plan offers a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medigap plans offering minimal benefits will cost more than current plans offering full benefits. The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group. Since Medigap is private insurance and not government sponsored, the rules governing the sale and offerings of a Medigap insurance policy can vary from state to state. Some states such as Massachusetts, Minnesota, and Wisconsin require Medigap insurance to provide additional coverage than what is defined in the standardized Medigap plans.

Some employers may provide Medigap coverage as a benefit to their retirees.

[edit] Drug coverage

Some Medigap policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medigap policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.

Medicare beneficiaries who enroll in a Standalone Part D plan may not retain the drug coverage portion of their Medigap policy. People with Medigap polices that include drug coverage who enrolled in Medicare Part D by May 15, 2006 had a guaranteed a right to switch to another Medigap policy that has no prescription drug coverage. Beneficiaries choosing to retain a Medigap policy with drug coverage after that date have no such right; in that case the opportunity to switch to a Medigap policy without drug coverage is solely at the discretion of the private insurance company issuing the replacement policy, but the beneficiary may choose to remove drug coverage from their current Medigap policy and retain all other benefits.

The vast majority of Medicare beneficiaries who hold a Medigap policy with drug coverage and then enroll in a Part D Plan after May 15, 2006 will have to pay a late enrollment penalty. The only exception is for the few beneficiaries holding a Medigap policy with a drug benefit that is considered "creditable coverage" (i.e. that it meets four criteria defined by the Centers for Medicare and Medicaid Services); a Medigap policy with prescription drug coverage bought before mid-1992 may pay out as much as or more than a Medicare Part D plan. Medigap policies sold in Massachusetts, Minnesota, and Wisconsin with prescription coverage may also pay out as much as or more than Part D.

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