What is a Medi-Gap Insurance Plan?

Dale Immekus |

In this installment of our Medicare series we will address Medi-Gap insurance plans. Going back to our Medicare basics, remember that Part A is a government insurance program offering limited coverage for hospitalization, skilled nursing, and hospice services; and Part B offers limited coverage for doctor visits and outpatient services. The Medicare program is run by the Center for Medicare & MediCaid Services (CMS).

If a beneficiary doesn’t add any additional coverage beyond Original Medicare (OM) there may be coverage gaps which could be quite adverse financially.  Therefore, once a beneficiary obtains OM one should determine the best option for additional coverage. In our last installment we discussed Part C or more commonly known as Medicare Advantage plans. A second and separate option is to add a Medicare Supplement which is sometimes referred to as a Medi-Gap insurance plan. A beneficiary cannot have both an Advantage plan and a Gap plan. It is one or the other.

These Gap plans are designed to fill the holes or gaps in coverage of OM. These plans are offered through private insurance carriers. Plans can vary greatly in the amount of out of pocket costs to beneficiaries and premiums, as there are multiple plans offering different levels of protection. What doesn’t vary are the benefits of these plans from year to year, or from carrier to carrier. Let’s look closer at the many different aspects of Gap plans.

When on a Gap plan Medicare is the primary insurer and will be billed first, then the Gap plan will be billed for any additional amounts. CMS sets prices for services for physicians and other providers and allows these medical providers to charge up 15% over the set prices. This is referred to as excess billing and some Gap plans cover these amounts and some do not. Providers must contract with CMS and maintain criteria to keep the contract in good standing.

While there are many different plans to choose from, the benefits of those plans are static and do not change from one year to the next. Plan F has been one of the more popular plans. This plan covers all deductibles, co-payments and co-insurance for CMS approved services. It doesn’t matter if you are with Acme insurance or ABC insurance, for the Plan F they will offer the same benefits from year to year. The premium may vary from insurance carrier to another but not the benefits.

Note for Plan F members, these plans will no longer be offered to new beneficiaries starting on January 1, 2020. Those members already enrolled in Plan F will be grandfathered in and will not be dropped from their current plan if premiums are kept up. Plan F has the highest premium because it offers the most coverage to beneficiaries. Plan G has essentially taken the place of Plan F with the only different in benefits being the beneficiary will be responsible for the Part B deductible annually.

Gap plans with a wide range of premiums and benefits are available. It would be much too complicated to describe the many differences between these plans. To oversimplify we can state that higher premiums allow for more coverage, and lower premiums, less coverage.  In helping make this decision consider how much services your health situation requires. The more often services are needed a plan with more coverage might be a better fit. For someone who rarely uses services then a lower premium with more of a pay as you go plan might be a better fit. Every situation is different.

Another popular feature of a Gap plan is that there are no networks and you may go to any physician or provider which contracts with CMS and will accept you as a patient. Advantage plans on the other hand will have a network to work within and referrals are needed. You do not need referrals with Gap plans. Just to clarify, if you know that you have a foot problem you can probably go to a podiatrist without a referral but it is unlikely that you could walk into an imaging facility and demand an MRI or CT Scan without a physician requesting it as medically necessary.  

Gap plans are also accepted throughout all fifty states. This means a Gap member can go to any physician or provider who contracts with CMS within all fifty states. This is where Advantage plans may lack as you do need referrals and prior approval before going outside of network. For people who travel out of their home area a lot this may be an important feature to consider. However, none of these effect emergency services as all Gap and Advantage must include coverage for such events.

Enrollment periods in a Gap plan also has some limitations which we talked about in a previous article. Here some things to remember. Medicare beneficiaries can enroll or apply to switch Gap plans at any time. However, beneficiaries only have a Guaranteed Issue (GI) under certain circumstances. When a beneficiary is new to Medicare, they have a seven-month window to enroll with a GI. In addition to that there is approximately twenty circumstances when a beneficiary may enroll with a GI.

If there is not a circumstance that allows for a GI, then the beneficiary can apply but will have to go through medical underwriting and could possibly be denied. This is a big difference between Advantage and Gap plans. Advantage plans only can deny a beneficiary if they have end-stage renal disease and in such a case, CMS has specific programs for those individuals.  

California has a special circumstance called the California Birthday Rule. This allows a beneficiary who is currently enrolled in a Gap plan to switch from insurance carrier to another without going through medical underwriting during their birthday month. The time frame may vary slightly from one carrier to another. Carriers do not let you trade up from a plan with less benefits to a plan with additional benefits. This rule might be used to reduce premium costs while maintaining the same level of benefits.

An important point is that Gap plans do not have any prescription drug coverage. CMS states that Part D prescription drug plans are optional but, if you do not keep credible coverage in place then you will incur a Late Enrollment Penalty beginning sixty-three days after you are eligible. Therefore, if you choose to add a Gap plan to your OM you will also need to add a Part D Prescription Drug Plan. We will cover Part D in our next installment.

There are many more considerations to make when choosing whether to go with a Gap plan and which plan. As always, I advise you to consult with your team of professionals to help make important decisions. Here are a few of the many resources available: MediCare.gov, Hicap.org. Until we talk again be well.   

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