Approaching 65? Time for Medigap Insurance Planning to Protect Your Future

As they approach 65, most Americans' thoughts start turning to more imminent retirement planning. As you find yourself in this position, your thoughts should include Medigap planning. What is Medigap planning and why does it need priority in retirement planning? Here are answers to some of the most important questions. 

What Is Medigap Insurance?

Commonly called Medigap, Medicare supplemental insurance is private insurance that aims to cover the gaps left by original Medicare. Once you are covered by original Medicare Parts A and B, you may then buy a private insurance policy that pays some or all of the out-of-pocket expenses left by Medicare's terms. This includes the infamous 'donut hole' in which the insured person pays a higher portion of prescription drug costs as their income rises. 

These Medigap plans are strictly regulated by Medicare and are standardized for easy comparison. Each plan is given a letter designation: A through D, F, G, and K through N in most areas. A few states regulate plans within their borders differently, but Illinois is not one of them.

All plans which fall under a letter provide the same coverage even though purchased through different insurers. The difference is the cost in premiums. So, you decide the level of coverage you need and then price out your options at that level. The intent is to make it easy to know what you're buying but still encourage people to shop around. 

Medigap coverage, as mentioned, is only offered alongside original Medicare coverage. You have the option of using Medicare Advantage plans which are completely provided by private insurers. If you do, though, Medigap plans do not apply. 

When Do You Buy Medigap?

One of the most important reasons to prioritize Medicare supplemental insurance planning now is that the window of opportunity is limited. The best time to buy this insurance is during the first six months after you turn 65 (or otherwise become eligible for Medicare coverage). During this period, insurers cannot deny you based on your health — current or preexisting conditions — and prices are at their cheapest for retirees. 

What If You Miss the Window?

Perhaps you don't need Medicare coverage until later due to other health care insurance or you don't think you need Medigap protection. If you fail to buy a policy during the guaranteed coverage window, what can you do later? The good news is that there are still some limited options. 

First, you may apply to enroll in Medigap insurance at just about any time outside the allowed windows. However, you will be asked health questions and your premiums may be significantly higher based on the answers. You can also be denied coverage in most circumstances. So this option is usually a backup plan if you can't qualify for any other options. 

What other options exist? Certain retirees may qualify for another guaranteed purchase period. One of the most common is when your employer-provided health insurance ends after you have already reached 65. You may also shop around if you bought a Medicare Advantage plan and moved out of its coverage area.

And finally, there are a few trial periods that allow you to change to or from Medicare Advantage plans and Medigap plans within the first year of enrollment. These are less common but important to know if you are seriously considering Medicare Advantage instead of original Medicare. 

Why Buy Higher Coverage?

Many retirees are still fairly financially secure at 65. Your health is often good. You may still be working, at least part-time. You have the bulk of your retirement savings intact. So it's easy to skimp on Medigap coverage because you can cover your health care out of pocket. You might only need a plan that covers fewer costs or has other limits. However, this may be a costly mistake. Why?

Illinois, like a growing handful of other states, allows each insured person to alter their Medigap coverage choice once per year. This is known as the birthday rule. In Illinois, you may change to a different Medigap plan by the same carrier during the 45 days after your birthday. However, the catch is that you can only switch to an equally beneficial or less beneficial insurance plan. You can't trade up, in other words. 

If you opted for a low-cost and low-coverage plan early on, you may not ever be able to buy better Medigap coverage when you need it. The financial burden rises as you age, and it could eventually be vastly more expensive than your younger self imagined. 

Where Should You Start?

Have you already begun planning your Medigap insurance needs? Are you still confused about the options? Do you need to get started in the first place? Learn more about this vital financial protection by meeting with Illinois Insurance Center. We specialize in the insurance needs of Illinois families, businesses, and retirees. Call today to make an appointment or get answers to more of your Medigap questions.