Six Mistakes To Avoid When Buying Medigap Insurance

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Six Mistakes To Avoid When Buying Medigap Insurance

It may come as no surprise that Medicare is estimated to cover only 50% of your health care costs. Many Medicare beneficiaries supplement Medicare either with a 'Medigap' policy that pays for what Medicare doesn't cover, or they may enroll in a Medicare Health Maintenance Organization (HMO). Here's what to watch out for:

Enroll in Medicare during your individual enrollment period, even if you receive employer-provided insurance. The individual enrollment period is the time running three months prior to your 65th birthday and three months after, during which you can enroll in Part B (doctors' insurance) of Medicare. Make sure you are enrolled in both Medicare Part A (hospital insurance) and Part B. Why Part B? If you don't purchase the Part B during your initial enrollment period when you turn 65, you have to wait until the next general enrollment period, and you pay a additional 10% premium for every year you wait.
Don't settle for the first health plan you find. Certified Medigap insurance policies to supplement traditional fee-for-service Medicare are marketed in 10 standardized policies identified as Plans A through J. Shop around and compare prices because premiums vary tremendously. A study has found that a 65-year-old male living in Springfield Illinois, for example, would be charged $3,171 per year by a company in Missouri for its Plan J. He could get the same exact coverage from another company for only $1,699. You can compare certified policies on the basis of their premiums and select the one that offers the best value.
Don't buy a policy that excludes pre-existing conditions, if at all possible. If you do, make sure the exclusion is limited to a six month waiting period at the most.
Don't buy limited-purpose insurance such as cancer or accident insurance. Benefits in these polices are limited to certain diagnoses, and are generally full of other restrictions. Many are designed to never pay off.
Don't buy a policy that has dollar limits on the total annual payments you receive or payments over your lifetime unless those limits are reasonably high. Some insurance policies, but not certified Medigap policies, pay less than the Medicare-approved amounts for hospital out-patient services and services provided from the doctor.
Don't buy a policy without knowing exactly what your premium covers. For example, look carefully at the coverage offered for doctors' fees above the Medicare-approved charge. The policy may only cover your 20% copayment, but may leave you responsible for the rest of the fee. Ask for a complete schedule of benefits and then ask your salesperson to mark the benefits your premium covers.

Source: Medicare Made Easy, Charles Inlander & Michael A. Donio, 1999, Peopleís Medicare Society, MJF Books, New York, NY.

This article first appeared in Volume 4, Issue 7 of "The Social Security and Medicare Advisor" newsletter (June/1999). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.