Basics behind Medigap Insurance Plans

Medicare was designed in 1965 to make affordable and reliable health care available to senior citizens and those with disabilities living in the United States. Medicare currently covers around 45 million Americans and the plan has become such a large part of American society that it is the third largest portion of the U.S. government’s federal budget. When Medicare was initially introduced senior citizens and those with disabilities faced significant uphill struggles in trying to find affordable health insurance from the private sector due to rising costs. The government’s response was a program funded by the public through a tax collected on every employed individuals income.

However, as health care costs continued to skyrocket through the years and senior citizens with frail health needed greater attention from the health sector; beneficiaries began to face mounting out of pocket costs even though they had Medicare coverage. As a result, the program began to offer various plans known as Medicare Supplemental Insurance, or Medigap. The program became known as Medigap because it was designed to cover the “gaps” in Medicare provided insurance. It is important to be aware that Medicare does not administer the Medigap program. Medigap insurance plans are purchased through private insurance providers that are contracted through Medicare. While the providers must adhere to federal and state laws designed to protect beneficiaries, Medicare does not directly administer the program.

Medigap began with 12 plans labeled Medigap Plan A through Plan L. Recent changes have led to the cancellation of four plans, adjustments to two other plans, and the addition of a new Plan M and Plan N. As of June 1, 2010 Medigap providers will no longer offer Plans E, H, I, and J. Individuals who purchased those plans before May 31, 2010 may continue to use those plans, but they will not be available for purchase after June 1, 2010. Those who purchased Plans D and G before June 1, 2010 will have different benefits provided under the program than those who purchase those same plans after June 1, 2010. Finally, Medigap providers are now offering a Plan M and Plan N to eligible beneficiaries.

Medigap’s various plans all offers varying levels of coverage and come with premiums that are directly related to the amount of extra coverage the plan provides. Generally speaking, Plan A offers the most basic coverage and comes with the lowest monthly premium. Meanwhile, Plan L, M, or N offers a great deal of extra coverage but comes with a higher monthly premium.

There are four benefit areas that all Medigap plans cover. All Medigap plans will completely cover Medicare Part A co-insurance payments up to 365 days after Medicare benefits expire. Medigap Plans A through G and Plans M and N will also completely cover Medicare Part B co-insurance/co-payment, up to three pints of blood, and Part A hospice co-insurance/co-payments. Medigap Plans K and L only cover 50% and 75% (respectively) for those three benefits. The remainders of the benefits covered under Medigap vary based upon plans. It is worth noting that only one Medigap plan, Plan F, covers all the “gaps” in Medicare 100%. It is available in a standard version and a high deductible version that requires beneficiaries to pay $2000 (as of 2010) before Medigap begins to cover any expenses.

Medigap’s varying plans are not offered by all private insurance providers as each company is entitled to offer only the plans they wish to offer. Eligible individuals living in Massachusetts, Minnesota, and Wisconsin should contact their state government health offices for more information about Medigap because these three states have different standards for Medigap providers to meet in comparison to the other 47 states in the U.S.