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Basics of Medigap Insurance

By John J. Campbell, Esq., CELA

             To supplement Medicare A and B, federal law now requires that all medigap policies conform to one of 10 standardized policies, referred to by the letters “A” through “J”.  Each policy offers different combinations of supplemental coverage that can range from the fairly basic (A) to the fairly comprehensive (J).  The 10 Medigap policies each insurance company can offer are exactly the same as every other company offers.

             All Medigap policies must at least offer the following basic benefits: 1) Medicare Part A coinsurance plus 90% coverage for 365 additional days during the beneficiary’s lifetime after Medicare benefits end; 2) Medicare Part B coinsurance, which is generally 20% of Medicare approved expenses; and 3) full coverage for the first 3 pints of blood each year.  The Medigap A policy includes only these basic benefits.  Medigap policies B-J offer increased benefits in different packages, as illustrated below:

 (The above chart is based upon the chart on page 14 of the 1999 Guide to Health Insurance for People with Medicare, published by the Health Care Financing Administration.)

             The prescription drug benefits available under Medigap policies H-I are for basic coverage only.  After the beneficiary pays an annual deductible of $250, the Medigap plan pays 50% up to a maximum of $1,250 per year.  The extended prescription drug coverage under the Medigap J policy pays 50% up to a maximum of $3,000 per year, after the annual deductible of $250.  (Once the Medicare prescription drug plan provided in the Medicare Prescription Drug, Modernization and Improvement Act of 2003 becomes fully implemented on January 1, 2006, Medigap policies with prescription drug provisions may no longer be sold.)

             The different policies generally become more expensive as the coverage package becomes more comprehensive.  Also, while the policies are standardized by law, the amount the issuing company can charge for premiums is not.  In other words, a Medigap J policy through one insurer may be more expensive than the same policy through another insurer.     Once the particular type of policy (A-J) is decided upon, compare price and service in order to choose a company.

             Federal law permits anyone who enrolls in Medicare Part B to purchase a Medigap policy  (42 U.S.C. § 1395ss).  However, federal law does not require that fee-for-service Medigap  policies be offered to Medicare Part B enrollees under disability.  Also, companies offering  Medigap policies can refuse to issue policies for medical reasons, except when the person applies  for the Medigap policy within six months of enrolling under Medicare Part B.

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