13.2 Medicare Supplement (Medigap) Policies

Purpose of Medigap

Medicare Supplement insurance — commonly called Medigap — is private coverage that pays the deductibles, coinsurance, and copayments left by Original Medicare (Parts A and B). It does not work with Medicare Advantage; a person enrolled in Part C cannot use a Medigap policy and it is illegal to sell one to them. Medigap also does not add prescription drug, dental, vision, hearing, or long-term-care benefits — its job is strictly to fill the 'gaps' in Original Medicare cost sharing.

Medigap plans are standardized by federal law into lettered plans (A, B, C, D, F, G, K, L, M, N). Plan A is the core benefit package every insurer offering Medigap must make available. Because plans are standardized, a Plan G from one carrier covers exactly the same benefits as a Plan G from another — carriers compete on price and service, not benefits.

Open enrollment and guaranteed issue

The single most-tested provision is the Medigap Open Enrollment Period: a 6-month window that begins the first month the applicant is age 65 or older AND enrolled in Part B. During this window the insurer must issue any plan it sells on a guaranteed-issue basis — no medical underwriting, no health-based denial, and no premium loading for health status. Once the 6 months pass, carriers may underwrite and may decline applicants.

Other consumer protections

• Free-look period: at least 30 days to return a Medigap policy for a full refund.
• Pre-existing condition limitation: may not exceed 6 months, and prior creditable coverage reduces or eliminates it.
• Guaranteed renewable: the insurer cannot cancel except for nonpayment or material misrepresentation.

Worked Open-Enrollment and Guaranteed-Issue Rule

The Medigap Open Enrollment Period is a 6-month window beginning the month the beneficiary is both age 65 or older AND enrolled in Part B. During it, insurers must sell any offered standardized plan on a guaranteed-issue basis — no medical underwriting, no rate-up for health.

Worked example: A beneficiary turns 65 in June and enrolls in Part B that month. Her Medigap open-enrollment window runs June through November. If she applies in October she cannot be underwritten or declined. If she waits until the following March, the insurer may medically underwrite and charge more or decline — the lapse of guaranteed issue is the tested consequence of delay.

Standardized Plans and the Anti-Duplication Rules

Medigap plans are standardized by letter (A–N); a Plan G sold by any insurer covers the same benefits — only price and service differ. Federal rules prohibit selling a Medigap policy that duplicates coverage the consumer already has, ban selling Medigap to someone on Medicaid (which already covers cost sharing), and require a 30-day free look.

Medigap does not work with Medicare Advantage — you cannot use a Medigap policy to pay Medicare Advantage cost sharing, a frequent suitability trap. The exam stresses that standardization means benefits are identical across insurers, so price and service are the only differentiators.

What the lettered plans cover

Every standardized plan must include certain basic benefits, including the Part A coinsurance plus 365 additional lifetime hospital days and the Part B coinsurance. Plans differ in how much of the deductibles and excess charges they cover.

Trap: Plans C and F (which cover the Part B deductible) are closed to people who became Medicare-eligible on or after January 1, 2020. Newly eligible beneficiaries gravitate to Plan G, which is identical to F except the insured pays the Part B deductible. Plans K and L are cost-sharing plans with annual out-of-pocket limits rather than first-dollar coverage.

Marketing and replacement rules

Medigap sales are tightly regulated to protect seniors. Producers must:

• Deliver the 'Guide to Health Insurance for People with Medicare' (the Buyer's Guide) and an Outline of Coverage at or before application.
• Avoid twisting and high-pressure tactics; a producer may not knowingly sell a duplicate Medigap policy when the applicant already has adequate coverage.
• Complete a replacement form when replacing existing Medigap, comparing benefits and noting any new pre-existing waiting period.

Selling a Medigap policy to someone enrolled in Medicaid or Medicare Advantage is generally prohibited because it duplicates coverage. Violations expose the producer to fines and license action under federal Medicare marketing rules and state unfair-trade-practice statutes.

SELECT plans, suitability, and rating

Some carriers sell Medicare SELECT policies — standardized Medigap plans that require the insured to use network hospitals and providers for full benefits in exchange for a lower premium. They are still standardized by letter; only the network restriction differs. A Medicare SELECT buyer who later moves out of the network area has a right to switch to a comparable standard Medigap policy.

How Medigap premiums are rated

Carriers price standardized plans using one of three methods, and producers should be able to explain the long-term cost difference to seniors:

• Issue-age rated: premium is based on your age when you buy; it does not rise simply because you grow older.
• Attained-age rated: premium is based on your current age and increases as you age — cheapest at first, most expensive long-term.
• Community rated (no-age): everyone pays the same premium regardless of age.

Because attained-age policies look cheapest at purchase but escalate, regulators require clear disclosure of the rating method so a senior on a fixed income is not surprised by steep future increases. Suitability and the duty to recommend appropriate coverage apply throughout.