13.2 Medicare Supplement (Medigap) Policies

Purpose of Medigap

Medicare Supplement (Medigap) policies are sold by private insurers to fill the gaps in Original Medicare — the deductibles, coinsurance, and copayments that Parts A and B leave to the beneficiary. Because Original Medicare has no out-of-pocket maximum, a single serious illness can expose a beneficiary to large coinsurance. Medigap converts that open-ended exposure into a predictable premium.

Critical rule: Medigap works only with Original Medicare. A person cannot have both a Medigap policy and a Medicare Advantage (Part C) plan at the same time — it is illegal to sell Medigap to an MA enrollee unless they are disenrolling.

Standardized Plans

Medigap policies are standardized by the federal government and identified by letters (A, B, C, D, F, G, K, L, M, N). Within a given letter, benefits are identical from company to company — only the premium and service differ. This standardization lets consumers compare plans on price alone.

• Plan A is the core/basic benefit package every insurer offering Medigap must make available.
• Plans C and F (which cover the Part B deductible) are no longer sold to people newly eligible on or after January 1, 2020; those eligible before that date may keep or buy them.
• Plans G and N are the most popular for new enrollees; Plans K and L are cost-sharing plans with annual out-of-pocket limits.

Open Enrollment and Guaranteed Issue

The Medigap Open Enrollment Period is the 6-month window beginning the month the person is age 65 or older AND enrolled in Part B. During this window, the insurer must sell any Medigap plan it offers on a guaranteed-issue basis — no medical underwriting, no denial, no premium surcharge for health conditions. Outside this window, insurers may medically underwrite and decline applicants.

Guaranteed-issue rights also arise in specific situations, such as when an MA plan leaves the area, the insurer goes bankrupt, or a person tries MA for the first time and disenrolls within 12 months (the trial right).

Required Provisions and Consumer Protections

Trap: It is illegal for a producer to knowingly sell a Medigap policy that duplicates the applicant's existing coverage. Each beneficiary should hold only one Medigap policy.

What Medigap Does NOT Cover

Medigap policies generally do not cover long-term custodial care, vision or dental, hearing aids, eyeglasses, or private-duty nursing. They also do not include prescription drug coverage for plans sold after 2006 — beneficiaries need a separate Part D plan for drugs. A Medigap policy covers only one person; spouses each need their own policy.

Worked Example — How Medigap Pays

Assume a Plan G holder is hospitalized and incurs the Part A inpatient deductible plus Part B coinsurance.

• Part A deductible for the benefit period: Plan G pays it in full.
• Part B services with a $4,000 approved amount: Medicare pays $3,200 (80%); the $800 coinsurance is paid by Plan G.
• Part B annual deductible: Plan G does not pay this (only the closed Plans C and F do); the beneficiary pays it.

So a Plan G holder's predictable out-of-pocket is essentially the Part B deductible plus the Plan G premium — the unlimited coinsurance risk of Original Medicare is eliminated. This is why Plan G is the most popular choice for those newly eligible since the high-deductible exposure is converted into a fixed premium.

Producer Conduct Rules

Medigap sales are heavily regulated to protect seniors:

• Twisting and churning — misrepresenting facts to induce a replacement, or repeatedly replacing policies to generate commissions — are prohibited.
• A producer must give a Guide to Health Insurance for People with Medicare and an outline of coverage.
• The producer must complete a replacement notice and a statement that the new policy is needed when replacing existing Medigap coverage.
• High-pressure tactics and cold-lead advertising that disguises a sales purpose are prohibited.

Trap: Selling a second Medigap policy that duplicates existing coverage is illegal even if the beneficiary agrees to buy it.

Open Enrollment and Guaranteed Issue

The most-tested Medigap timing rule is the six-month open enrollment period that begins the month a beneficiary is both age 65 or older and enrolled in Part B. During this window the insurer must issue any Medigap plan it offers on a guaranteed-issue basis, cannot apply medical underwriting, and cannot charge more for health status.

Outside this window, an applicant may face underwriting and denial unless a separate guaranteed-issue right applies — for example, when an employer plan ends or a Medicare Advantage plan leaves the service area. Standardization matters too: Medigap plans are standardized by letter (A through N), so a Plan G from one insurer carries the identical benefits as a Plan G from another; insurers compete only on price and service, not on benefit design.