How do I find cheaper medigap coverage?

October 20, 2013 

QUESTION: Does the new health care law prohibit medigap insurers from denying coverage or raising rates because of health?

ANSWER: No. Even though starting in 2014 most health insurers won’t be able to reject applicants or charge them more because of their health, the new law doesn’t apply to Medicare supplement policies (often called medigap). You can buy any medigap policy regardless of your health within six months of signing up for Medicare Part B. But after that initial enrollment period, insurers can reject you or charge higher rates because of a medical condition.

There are some exceptions. For example, you may qualify for medigap coverage without medical underwriting if you are in a Medicare Advantage plan that leaves the business, or if you move out of that plan’s service area. A few companies will let you switch from one version of medigap coverage to another without new medical underwriting, especially if you’re switching to a plan with more cost-sharing — such as to the high-deductible Plan F or Plan N.

If your medigap premiums increase significantly, try applying for a new medigap policy, even if you have minor health issues. It generally takes about 60 days for a medigap policy to go through medical underwriting, but some companies will process the policy in 15 to 30 days, says Eric Maddux, senior Medicare adviser for eHealthMedicare, which provides price quotes and sells policies from many companies.

If you can’t qualify for a new policy, another option is to switch from medigap to an all-in-one Medicare Advantage policy during open-enrollment season, which runs from Oct. 15 to Dec. 7. Any Medicare beneficiary can buy a Medicare Advantage plan during that time, regardless of his or her health. These policies provide both medical and prescription-drug coverage from a private insurer.

But keep in mind that Medicare Advantage policies tend to have restrictive provider networks (make sure your doctors, hospitals and pharmacies are included), and you could have a tough time finding in-network providers if you travel a lot. They also tend to have more cost-sharing than medigap plans, so your monthly premiums might be lower but you might have more out-of-pocket costs throughout the year. And if you change your mind later and decide to switch back from Medicare Advantage to a medigap plan, you could be rejected because of your health.

Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit www.Kiplinger.com.

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