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Medigap policies offer 10 levels of coverage

Posted online

by Eddie C. Marmouget

for the Business Journal

Medigap insurance is private health insurance designed to supplement Medicare coverage by picking up some of the expenses that Medicare doesn't cover.

This would include Medicare Part A and Part B deductibles, coinsurance and noncovered services, such as eyeglasses and dental coverage.

Although federal law has created 10 standardized plans, it's important that those in the market for Medigap insurance carefully shop for a policy that meets their needs and keep in mind that while the policies are standardized, the costs can vary greatly.

The 10 standardized plans are labeled "A" through "J." All "A" plans offer the exact same coverage, as do all "B's," "C's" and so on.

In fact, Medigap insurers must use the same wording and the same format in delineating the benefits of each plan.

The basic plan, Plan A, must be offered by all insurers. Among other things, it provides coverage of Medicare Part A coinsurance expenses for hospitalization to the extent not covered by Medicare from the 61st day through the 90th day in any Medicare benefit period.

It also offers additional hospitalization coverage subject to a lifetime maximum benefit of 365 inpatient hospital days.

Each subsequent letter adds additional coverage and increases premium costs up to Plan J, the most comprehensive. Unfortunately, none of the plans covers long-term health care, the most significant health care expense for older Americans.

Potential purchasers should carefully study the 10 standard plans to determine which policy meets their medical needs and financial circumstances.

For example, if you have a serious health problem that requires extensive treatment, a maximum coverage plan may be worth the additional monthly cost.

On the other hand, if you use little in the way of medication, it may not be worthwhile to select a plan that provides maximum coverage for prescription drugs and adds hundreds of dollars to your premium cost.

Keep in mind, too, that generally it makes no sense to insure for the up-front deductibles of Medicare policies. The extra premium for such a benefit could cost as much or more than the $100 deductible itself.

Policy costs vary not only from company to company, but also within the same company from state to state, so it's important to give your state of residence when requesting price quotes. You'll also want to check the insurer's policy on price increases.

Policies based on community rates charge all policyholders the same rates; policies with "attained age" premiums may cost more as you get older. Insurance companies are required to have a policy for holding public hearings prior to the company approving a premium increase.

Also, insurance companies are generally required to maintain loss ratios of 65 percent for individual policies and 75 percent for group policies.

If loss ratios are below these amounts, then they are required to give refunds or provide additional benefits. Check to see what your insurance company's loss ratio is and what its policy is regarding refunds.

For planning purposes, be aware that all Medigap policies sold today are guaranteed renewable. That means the insurance company must renew your policy as long as you continue to pay your premiums.

Before finalizing your decision, it's a good idea to check on the insurer's reputation.

Talk to other policyholders, contact your state's insurance office or check with a senior citizen advocacy group.

Also, if you are enrolled in a Medicare health maintenance organization (HMO) you may not need Medigap coverage, depending on the benefits the plan offers.

Keep in mind, too, that insurance companies are required to give you at least 30 days to review your Medigap policy. If you are not satisfied, you may return the policy and receive a full refund of your premiums.

(Eddie Marmouget is a CPA and manager with the Springfield office of Baird, Kurtz & Dobson, certified public accountants.)

INSET CAPTION:

Policy costs vary not only from company to company, but also within the same company from state to state, so give your state of residence when requesting price quotes.[[In-content Ad]]

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