13.2 Medicare Supplement (Medigap) Policies

Medicare Supplement insurance, commonly called Medigap, is private coverage that pays some of the out-of-pocket costs Original Medicare leaves behind: the Part A and Part B deductibles, hospital coinsurance, and the open-ended Part B 20% coinsurance. Medigap supplements Original Medicare only; it cannot be used with a Medicare Advantage (Part C) plan, and it is illegal to sell a Medigap policy to someone enrolled in Part C.

To protect consumers, federal law standardizes Medigap into lettered plans. Within a state, a Plan G from one insurer must offer exactly the same core benefits as a Plan G from any other insurer — only price and service differ.

Standardized Medigap Plans

Medigap Open Enrollment and Guaranteed Issue

The single most-tested Medigap concept is the Open Enrollment Period (OEP): a one-time, 6-month window that begins on the first day of the month in which the individual is both age 65 or older AND enrolled in Medicare Part B. During this period the insurer must sell any Medigap plan it offers on a guaranteed-issue basis — it cannot deny coverage, charge more, or impose underwriting because of health status.

• Apply outside the OEP and the insurer may use medical underwriting and decline the applicant.
• A pre-existing condition exclusion of up to 6 months may apply if the applicant lacked prior creditable coverage.
• "Guaranteed-issue rights" also arise in certain situations, such as losing employer coverage or an Advantage plan leaving the service area.

Free Look and Replacement Rules

Medigap policies carry a 30-day free-look period. If the policyowner returns the policy within 30 days, the insurer must refund all premiums paid. When an agent replaces an existing Medigap policy, replacement disclosure forms must be provided, and the applicant must confirm intent to replace rather than duplicate coverage. Selling a consumer more than one Medigap policy, or knowingly selling duplicative coverage, is a prohibited practice.

What Medigap Does NOT Cover

Medigap generally does not pay for long-term custodial care, vision or dental, hearing aids, or private-duty nursing. Standalone Part D is required for prescription drug coverage; modern Medigap plans do not include drug benefits.

How Medigap Pays: A Worked Example

Medigap is most valuable because Part B coinsurance is open-ended. Suppose a beneficiary with a Plan G policy incurs $20,000 in Part-B-approved charges in a year. Medicare pays 80% = $16,000. The remaining 20% = $4,000 would normally fall entirely on the beneficiary, but Plan G pays that coinsurance. The beneficiary's only out-of-pocket cost is the annual Part B deductible (which Plan G does not cover). This open-ended exposure, eliminated by Medigap, is exactly why these policies sell.

Pricing Methods (Rating)

Medigap premiums are calculated using one of three rating methods, a tested distinction:

Attained-age policies start cheapest but rise the most over time, so a younger-looking quote can mislead a senior client.

Producers should also explain that Medigap premiums are separate from, and in addition to, the monthly Part B premium the client already pays. A complete Original Medicare package for a senior therefore involves three premiums: Part B, the standalone Part D drug plan, and the Medigap policy. Comparing this combined cost against a $0-premium Medicare Advantage plan is a routine suitability conversation.

Suitability and Standardization Rules

Producers selling Medigap must follow strict suitability standards: they must not knowingly sell duplicate coverage, must use the standardized 'outline of coverage,' and must compare benefits using the lettered-plan framework so consumers can shop on price. Massachusetts, Minnesota, and Wisconsin standardize plans differently from the rest of the country. Because Plans C and F cover the Part B deductible, they were closed to anyone newly eligible for Medicare on or after January 1, 2020; existing enrollees may keep them.