How to pick a Medicare supplement plan (also called Medigap)

Linda – Texas: I will begin Medicare soon and am having a difficult time selecting an insurance company that I feel comfortable with. I am leaning towards Medigap plan G or D. I have contacted the insurance companies on Medicare’s Plan Finder for my ZIP code and have researched them on the Texas Department of Insurance website. I have talked to insurance brokers, but they only push the companies that they represent and get the best commission to sell. What do you suggest?

Phil Moeller: Your question was about Medigap plans, so let’s stick to them. By law, the coverage of all letter D plans must be identical. Ditto with letter G plans. So the main variables are the initial cost of the policy, the quality of the service offered by different insurers and the ratings system they use to price their policies.

In terms of costs, Medicare’s online tool for Medigap plans provides a range of monthly premium costs for the plans offered in your ZIP code. Unfortunately, it does not list premiums for each plan. However, it does list estimated annual costs by plan. And because the plans must cover the same things, their estimated annual costs are a helpful comparison of what you’ll pay for the plan.

For starters, I’d pick the three or so plans with the lowest annual costs. Then, I’d go back to the Texas insurance department website and look for customer complaints on these companies. If you can’t find them, call the department to speak with a consumer representative and ask them about complaints.

The Medicare website also lists the ratings system used by each insurer and has an explanation of these differences. The three ratings are community rated, issue age rated and attained age rated. They can be important to you in terms of projecting future rate increases from the companies. Medicare’s consumer guide to Medigap has a helpful explanation of these ratings systems on page 18.

Changing Medigap policies in the future can be hard.

When you first enroll in Medicare, this triggers a six-month initial enrollment period for Medigap supplement plans. During this time, Medicare rules require insurers to sell you Medigap plans without being able to either deny you coverage or raise your premiums because of any pre-existing health conditions. This set of consumer safeguards is called guaranteed issue rights.

After this period expires, insurers may be free to either charge you more money or even decline to issue you a policy. Medigap is regulated at the state level, and some states have their own set of consumer protection rules that make it easier to get a Medigap plan when the guaranteed period has ended.

For this reason, you should be clear that you really want Medigap, that you’re purchasing the most appropriate letter plan and that you’ve selected a high quality insurer with a rating system that works for you.

I suggest you call the Texas office of the State Health Insurance Assistance Program (SHIP). This is a free consumer service staffed with trained counselors who should be familiar with state rules (Medigap policies are regulated by the individual states and not by Medicare).