Are High Deductible Medigap Plans Worth It? † Smart Change: Personal Finance

Alex Rosenberg

Medicare Supplement Insurance, or Medigap, covers “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 the coverage to kick in.

Whether a high deductible plan is worth it depends on the difference between your premiums for each version (high deductible and standard).

Here’s what you need to know about the highly deductible Medigap Plan F and Plan G.

How do Medigap High Deductible Plans work?

There are 10 types of standardized letter-name Medigap plans 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 buy a Medigap plan either.

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Remark: 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 comparable option available to all Medicare beneficiaries, and it 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 that coverage kicks in. Standard plans cover their benefits from the get-go, but high-deductible plans don’t start paying for covered services until you’ve met the annual deductible.

How much do Medigap plans with a high deductible cost?

You are responsible for two types of expenses 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 the cost-sharing you pay out of pocket apply to the high deductible.

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

Because Medigap plans with high deductibles require you to meet the deductible before the plan pays for covered services, their premiums are lower than the standard versions. For example, a company might charge a new 65-year-old 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 Insurance Company Quotes. Selling Medigap.

The difference in premium between standard and high deductible can grow as you get older. For example, an 85-year-old Medicare beneficiary can 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 one if the amount you spend to meet the deductible and premiums is less expensive than standard insurance premiums.

If you meet the deductible

If you spend 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 the most cost-effective is.

In order for the high deductible version to cost less than the standard option, the lower premiums must outweigh the additional cost of meeting the deductible.

Benefits for high-deductible Medigap plans take effect after a deductible of $2,490 in 2022. Spread over 12 months, that’s $207.50 per month. A high deductible plan should have a premium of at least $207.50 per month less than the standard version, so you 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 confident you won’t meet the deductible.

If you spend less than the deductible, the plan won’t pay for services. In fact, you get nothing back for your premium payments.

If you are not sure whether you meet the deductible

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

  • If you don’t meet the deductible, you’ll lose the premiums — which are generally quite low — and also risk losing the coverage available with a standard Medigap plan.
  • If you do meet the deductible, you are covered afterwards, so that you limit your potential out-of-pocket expenses in the event of unexpectedly high medical costs.

Find the Right Medicare Supplement Insurance Plan

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

  • Is your preferred plan available? Health insurers don’t always sell every plan, so check who sells the plan you want to buy in your area.
  • What are the premiums? Prices for the same plan may vary by company, so look for the most competitive rates.
  • Does your premium change over time? Most policies cost more as you get older, but some companies offer policies that allow you to lock in a price when you sign up.
  • Are there any extras? The core benefits of Medigap plans are standardized, but in certain cases, some companies offer 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).

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