How Does a Medicare Supplement Plan Work?

A Medicare Supplement Insurance plan, also called Medigap, works alongside Original Medicare to help pay certain out-of-pocket costs that Medicare does not pay.

When you receive a Medicare-covered service, the medical provider generally submits the claim to Medicare first. Medicare processes the claim and pays its portion of the Medicare-approved amount. If your Medicare Supplement carrier participates in Medicare's automatic claims crossover system, the remaining claim information is then sent electronically to your Medigap insurance carrier.

For many Medicare Part B services, Medicare generally pays 80% of the Medicare-approved amount after the applicable Part B deductible has been met. Your Medicare Supplement plan may then pay some or all of the remaining Medicare-approved costs, depending on the standardized Medigap plan you selected.

Coverage varies by Medigap plan letter, so you should review the benefits of your specific plan to determine which deductibles, copayments and coinsurance amounts it covers.

Who Is Eligible to Purchase a Medicare Supplement Insurance Plan?

Generally, you must be enrolled in both Medicare Part A and Medicare Part B to purchase a Medicare Supplement Insurance plan. Medigap works with Original Medicare and cannot be used with a Medicare Advantage plan.

Depending on the insurance carrier and your circumstances, you may be able to submit an application before your requested coverage effective date. You will generally need your Medicare Beneficiary Identifier, also known as your Medicare number, when completing your application.

Eligibility rules for people under age 65 who qualify for Medicare because of disability or End-Stage Renal Disease can vary by state.

Is Acceptance Into a Medicare Supplement Plan Guaranteed?

It depends on when you apply and whether you qualify for a Medigap enrollment protection.

For most people age 65 or older, the best time to purchase a Medigap policy is during their six-month Medigap Open Enrollment Period. This period generally begins the first month you are enrolled in Medicare Part B and are age 65 or older. During this period, an insurance company cannot deny you a Medigap policy because of your health.

There are also certain situations known as guaranteed issue rights. When you have a guaranteed issue right, an insurance carrier generally must sell you certain Medigap policies regardless of your health history.

Outside of your Medigap Open Enrollment Period or another guaranteed issue situation, an insurance carrier may be permitted to use medical underwriting. Depending on your health history and state law, the carrier may charge a different premium or decline your application.

State laws may provide additional Medigap enrollment protections beyond federal requirements.

When Can I Enroll in a Medicare Supplement Plan?

Unlike Medicare Advantage and Medicare Part D plans, Medicare Supplement plans do not have an annual enrollment season. You can generally apply for a Medigap policy at any time of the year.

However, your ability to purchase a policy without medical underwriting depends on when you apply. During your Medigap Open Enrollment Period or when you have certain guaranteed issue rights, you have special enrollment protections.

If you apply outside of these protected periods, the insurance carrier may be permitted to ask health questions, review your medical history and determine whether you qualify for coverage.

Some states provide additional opportunities to enroll in or change Medicare Supplement plans without medical underwriting.

What Are Some of the Most Common Guaranteed Issue Situations?

Federal and state laws provide several situations in which a person may have special rights to purchase a Medicare Supplement plan without medical underwriting. The exact rules depend on your circumstances and the state in which you live.

Common situations that may provide Medigap enrollment protections include:

• Being within your six-month Medigap Open Enrollment Period after enrolling in Medicare Part B at age 65 or older.
• Losing certain employer or group health coverage that had been providing coverage after Medicare.
• Using a Medicare Advantage trial right after joining a Medicare Advantage plan for the first time and deciding to return to Original Medicare within the permitted trial period.
• Moving outside the service area of your Medicare Advantage plan.
• Having a Medicare Advantage plan, Medicare SELECT policy or other qualifying coverage terminate coverage or leave your service area.

Guaranteed issue rules can be complicated, and not every loss or voluntary termination of coverage automatically creates a guaranteed issue right. Your specific circumstances should be reviewed before changing or terminating existing coverage.

What Determines the Monthly Premium for My Medicare Supplement Plan?

Medicare Supplement premiums can be affected by several factors, including the insurance company, the Medigap plan you select, where you live and the pricing method the insurance carrier uses.

Medigap policies may be community-rated, issue-age-rated or attained-age-rated. With an attained-age-rated policy, your premium is based on your current age and may increase as you get older. With an issue-age-rated policy, the premium is based on your age when you first purchase the policy. Community-rated policies generally do not base your premium on your age.

Depending on the insurance company and state rules, factors such as tobacco use, gender, household discounts and medical underwriting may also affect your premium.

Insurance companies may also implement rate increases because of inflation, increased medical costs and the overall claims experience of policyholders. For this reason, your premium can increase even when the increase is not directly related to your birthday or personal health.

Can I Lose Coverage or Have to Pay Extra If I Get Sick?

A standard Medicare Supplement policy is generally guaranteed renewable. This means an insurance company cannot cancel your policy simply because you become sick, develop a medical condition or begin using more health care services.

Your insurance company also cannot individually increase your Medigap premium simply because you personally became sick or filed claims. However, premiums may increase because of the carrier's approved rate changes, the pricing method used for your policy, inflation, age-related increases where applicable or other factors permitted under state law.

It is important to pay your Medicare Supplement premium on time because failure to pay your premiums can eventually result in termination of coverage. Setting up automatic payments can help reduce the risk of accidentally missing a premium payment.

Do Medicare Supplement Plans Offer Coverage Outside of the United States?

Some Medicare Supplement plans provide limited emergency medical coverage when traveling outside the United States. Medicare itself generally provides very limited coverage outside the United States, so it is important to understand how your Medigap foreign travel benefit works before traveling internationally.

Certain standardized Medigap plans provide a foreign travel emergency benefit for medically necessary emergency care that begins during the first 60 days of a trip outside the United States.

Under the standardized foreign travel emergency benefit, you generally pay a $250 calendar-year deductible. After the deductible, the Medigap policy pays 80% of qualifying emergency medical expenses, while you are responsible for the remaining 20%. The benefit has a $50,000 lifetime maximum.

Because $50,000 may not be sufficient for a serious medical emergency overseas, Medicare beneficiaries who travel internationally should consider discussing separate travel medical insurance for seniors with an insurance professional before leaving the United States.