If you're about to turn 65, put your birthday party planning on hold: It's time to start shopping for insurance that will supplement your Medicare coverage.
Medigap, a type of health insurance coverage, fills out the areas where your Medicare policy falls short, including deductibles, copayments and coinsurance. Some of these policies cover extras, such as health-care expenses during travel abroad.
You would purchase Medigap to supplement Medicare A and B, which cover hospital and doctor's visits. Medigap plans are distinguished by letter (A, B, C, D, F, G, K, L, M and N) and each plan offers different benefits.
If you purchase a Medicare Advantage plan instead, you are not eligible for Medigap.
You have six months from when you first sign up for Medicare to buy a Medigap policy and do so without the insurance company pulling up your health-care record and possibly levying higher premiums due to your medical history.
This is known as the guaranteed issue period.
Federal law also includes guaranteed renewability on Medigap policies, meaning that as long as you pay your premiums, the insurer can't cancel your coverage.
If your group coverage at work has ended and you're past age 65, you can sign up for Medicare Part B as part of a special enrollment period. At that point, you can also sign up for supplemental coverage.
Because the sign-up window for Medigap is so time-sensitive, those who are turning 65 need to start thinking about which plan is right for them.
"As you're approaching eligibility, do you want to go with Medicare Advantage or a supplemental plan?" said Steve Vernon, an actuary and president of Rest-of-Life Communications.
"Later on, you might not pass medical underwriting, and you might be excluded," he said.
Here's what you need to know about shopping for Medigap coverage.
Click the image below to view the different attributes of Medigap plans.
Though the benefits themselves are largely standardized from one plan to the other, insurance companies set the rates for coverage. The difference between the cheapest and most costly plan can be steep.
For instance, in New York City, there's a 143 percent difference in premiums between the cheapest and most costly Plan F rate, according to the American Association for Medicare Supplement Insurance.
Prices can also vary from one state to the next. Click the image below for more details.
Whether any one plan is right for you will depend on your needs.
For example, Medicare Part B has an annual deductible of $183 per year, after which you must pay 20 percent of the Medicare-approved amount for your doctor services.
If you have Medigap C or F, these plans will cover your deductible. These two are the most popular Medigap plans, according to the Kaiser Family Foundation.
Note that Medigap C and F will no longer be available to new enrollees starting on January 1, 2020, as plans will no longer be permitted to cover Medicare B deductibles. However, if you're already covered by one of those plans by that date, you can keep it.
Other plans cover "excess charges" — the amount a doctor can legally charge that's higher than the Medicare-approved amount. Medigap plans F and G will cover that expense.
Premiums only tell part of the story. A plan that's cheap now isn't necessarily guaranteed to stay that way.
"Don't just look at what the premium is now, but how it may rise over time, since most people tend to hold onto their Medigap plans for many years," said Gretchen Jacobson, associate director, program on Medicare policy at the Kaiser Family Foundation.
Insurance companies determine premiums using one of three different rating systems. Community rating doesn't allow premiums to be based on the applicant's age or health status.
Issue-age rating allows premiums to vary based on your age when you buy the policy, but your premiums can't rise automatically just based on age. Finally, attained-age rating determines your premiums based on your age at purchase and prices will rise as you get older.
States determine which premium rating systems are allowed.
"Policies may start with the same premiums, but rise differently over time," said Jacobson. "Attained-age rated plans may see larger premium increases than the community-rated plans."
Start doing your research before you blow out the candles on your birthday cake. Here are a few questions to ask yourself.
What is the state law? Your local State Health Insurance Assistance Program can help you with questions about Medicare and Medigap. This is where you can find more about the different pricing practices and consumer protections in your locale.
What do I get for my premiums? Your monthly bill tells only part of the story. Know what you're getting in the way of deductibles, foreign travel health-care needs and coinsurance.
What services do I currently use, and what will I keep using? Be sure that your plan meets your present needs and what you may require in the future.
"Most people have only one period in which they're guaranteed issue for Medigap," said Jacobson. "Look at it as a long-term policy for your time in Medicare."
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