Are High Deductible Medigap Plans Worth It? | Smart Switch: Personal Finance

alex rosenberg

Medicare Supplement Insurance, or Medigap, covers the “gaps” in Original Medicare coverage, including certain copays, coinsurance, and deductibles.

Some Medigap plans have a high deductible option. High-deductible Medigap plans have lower premiums than the standard versions, but you must pay the higher deductible for coverage to take effect.

Whether or not a high deductible plan is worth it depends on the difference between your premiums for each version (high and standard deductible).

Here’s what you need to know about High Deductible Medigap Plan F and Plan G.

How do high-deductible Medigap plans work?

There are 10 types of standardized Medigap plans named after letters in most states. The benefits for each type of plan are regulated by the government. Only two types have high-deductible versions: Plan F and Plan G. If you have a Medicare Advantage plan, you can’t also buy a Medigap plan.

People are also reading…

Note: Medigap Plan F is not available to Medicare beneficiaries who became eligible for Medicare on or after January 1, 2020. Medigap Plan G is the most similar option that is available to all Medicare beneficiaries, and is also available as a high deductible plan.

The standard and high-deductible versions of these Medigap plans cover the same benefits; the difference is when the coverage takes effect. Standard plans cover your benefits up front, but high-deductible plans start paying for covered services only after you meet your annual deductible.

How much do high-deductible Medigap plans cost?

You are responsible for two types of costs with a high deductible Medigap plan: the premiums and the deductible. The deductible is set by law and is the same for everyone: $2,490 in 2022. The Part B deductible and your out-of-pocket cost-sharing apply to the high deductible amount.

Premiums are not the same for everyone. Private health insurance companies that sell Medigap plans set their prices based on factors that may include your age, gender, location, tobacco use and health information, according to Medicare.gov.

Because high-deductible Medigap plans require you to meet your deductible before the plan will pay for covered services, your premiums are lower than the standard versions. For example, a company might charge a 65-year-old new Medicare beneficiary $105 per month for the standard version of Medigap Plan G, but $35 per month for the high-deductible version, according to NerdWallet’s 2022 analysis of quotes. prices of insurance companies. who sell Medigap.

The difference in premiums between the standard and high-deductible versions can grow as you age. For example, an 85-year-old Medicare beneficiary might pay $195 per month for standard Medigap Plan G or $60 per month for high-deductible Plan G.

When is a high-deductible Medigap plan worth it?

A high-deductible Medigap plan makes more sense than a standard version if the amount you spend to meet the deductible and the premiums are less expensive than the premiums for a standard insurance policy.

If you will meet the deductible

If you’ll be spending enough on coinsurance, copayments, and deductibles to meet the Medigap deductible for a high-deductible Medigap plan, it’s worth comparing quotes to see which version is more cost-effective.

For the high-deductible version to cost less than the standard option, the lower premiums should offset the additional cost of meeting the deductible.

Benefits for high-deductible Medigap plans start after a $2,490 deductible in 2022. Split over 12 months, that’s $207.50 per month. A high-deductible plan would need to have premiums at least $207.50 per month less than the standard version for you to spend less on it overall.

If you do not meet the deductible

A high-deductible Medigap plan isn’t a good choice if you’re pretty sure you won’t meet your deductible.

If you spend less than the deductible, the plan does not pay for any services. Effectively, you get nothing in return for your premium payments.

If you’re not sure if you’ll meet your deductible

In this case, you may want to consider your financial situation and how much you may spend on out-of-pocket medical expenses to determine if a high-deductible Medigap plan is right for you:

  • If you ultimately don’t meet your deductible, you won’t have to pay premiums, which are usually quite low, and you also risk losing the coverage that’s available with a standard Medigap plan.
  • If you meet the deductible, you’re covered after that point, limiting your potential out-of-pocket costs in the event of unexpectedly high medical costs.

Find the Right Medicare Supplement Insurance Plan

Because Medigap plans are standardized, you can get exactly the same Medicare benefits from any company that offers the plan. So when you shop, keep these considerations in mind to find the best policy for your needs:

  • Is your preferred plan available? Health insurance companies don’t always sell all plans, so check who sells the plan you want to buy in your area.
  • What are premiums? Prices for the same plan can vary between companies, so check to find the most competitive rates.
  • Will your premiums change over time? Most policies cost more as you get older, but some companies offer policies that let you lock in a price when you sign up.
  • Are there extras? The main benefits of Medigap plans are standardized, but in certain cases, some companies include benefits such as discount programs or gym memberships.

If you have additional questions about Medicare, visit Medicare.gov or call 800-MEDICARE (800-633-4227, TTY 877-486-2048).

Add Comment