The High Deductible
The Medicare landscape is dynamic and responsive to consumer needs. Private insurers create products designed to help people save money on their health care. While Medicare Supplement Insurance has been a bulwark of this strategy, some facets of these plans are relatively unknown. One example is the high deductible Medigap Plans currently available but somewhat rarely used. Are these good plans? Should you try a high deductible Medigap plan? In this informative guide, we’ll discuss all the details about these plans and help you make a decision based on your unique circumstances.
What Are High Deductible Medigap Plans?
These unique plans are a modification of standard Medicare Supplement Insurance plans. These are also known as Medigap plans. Medigap plans have been a common tool to help people save money on their health care since the Medicare program began in 1966. They are designed to work with Parts A and B of Original Medicare.
Since Medicare is designed for you to pay some of the costs of your care, people sometimes find their out-of-pocket spending to be uncomfortably high under Original Medicare. That’s where Medicare Supplement Insurance comes into play. These private health insurance companies offer these plans to help cover many of the costs you’re typically expected to pay. In other words, they cover the gaps in Original Medicare.
Medigap Plans are standardized across the United States, except Massachusetts, Michigan, and Wisconsin, with their own rules. The coverages vary by Plan, and there are ten standardized plans known by letter: A, B, C, D, F, G, K, L, M, and N. The fact that these plans are standardized means that the coverage for each project is the same regardless of which insurance company you use. This makes shopping for Medigap plans very easy; since the ranges are standard, you can compare programs based on price and the insurer’s financial strength rating.
What Are The High Deductible Medigap Plans?
Not all of the ten standardized Medigap plans have high deductible options. Only Medigap Plans F and G have a high deductible option. These plans are often referred to as HDF and HDG.
With these two Medigap plans, you must meet a deductible before the plan pays any benefits. The deductible is much higher than the standard Medicare Part B deductible. It’s even higher than the Part A deductible.
However, in exchange for having a high deductible, you can access significantly lower monthly premiums than you otherwise could with Medicare Supplement Insurance. The great thing about these high deductible Medigap plans is that once you meet the annual deductible, both high deductible Plan F and high deductible Plan G will cover 100% of your medical costs for the rest of the year (assuming they’re Medicare-covered items). In other words, they provide very comprehensive coverage once you’ve met the deductible.
Other Plans Similar To High Deductible Medigap Plans
Two other standardized Medigap plans have features similar to high deductible Plans F and G. These are Medigap Plan K and L. They are not technically high deductible plans. However, because they’re structured, they have some overlap in function. With Plans K and L, you receive only partial coverage throughout the year instead of having to meet a high deductible before the plan starts paying benefits. For instance, Plan K will cover 50% of your Part B costs (generally your highest expense under Medicare). Plan L will cover 75% of this gap. The same coverage applies to the Part A deductible and any co-insurance you have to pay for lengthy hospital stays.
Here’s where the similarity to high deductible Medigap plans comes in. Both Plans K and L have a maximum out-of-pocket amount. You will never pay more than this amount in one year. Since high deductible Plans F and G pay 100% of your Medicare-approved costs after you reach the deductible, this makes the deductible function like an out-of-pocket maximum. Also, because you’re paying a part of your costs throughout the year, the premiums are also on the low side for Plans K and L, just like high deductible plans.
How High Are The Deductibles On High Deductible Medigap Plans?
The deductibles on high deductible Plans F and G change each year and are set by Medicare (CMS). For 2022, the deductibles are $2,490. This is the amount that you’ll have to pay before your Medigap plan begins paying any claims. As high deductible health insurance plans go, this is a meager amount. There’s even better news, however. While you’re working to satisfy your deductible, you’re not paying the total cost of your medical bills. Medicare is still the primary payer of your claims. This means that Medicare is paying 80% of your Part B costs. You’ll only be paying the leftover 20% until you hit the deductible. Once you hit that deductible, remember that your plan will pay all of your Medicare-covered costs for you.
Who Is Eligible For High Deductible Medigap Plans?
High deductible Medigap plans are theoretically available to everyone eligible to enroll in the standardized Medigap plans. This generally means that all of these apply to you:
- You are enrolled in Part A and B of Original Medicare, and
- You are at least 65 years old
Some states have rules in place that allow you to get Medigap coverage if you’re younger than 65 years old. However, other states don’t have these rules, so if you’re in Medicare and younger than 65, you may not be able to get a high deductible Medigap plan until you reach 65 years old.
Besides these law-based restrictions on high deductible Medigap plans, it is also possible that insurers may decide not to offer the high deductible versions of Plan F or G in your state.
Should I Enroll In High Deductible Medigap Plans?
This is an excellent question, and the answer will, of course, vary from person to person. It is a fact that someone who wants to strictly limit their out-of-pocket costs while preserving all the flexibility of Medicare Supplement Insurance while keeping their premium cost as low as possible should consider one of the high deductible Medigap plans. They are an excellent blend of coverage and affordability.
There are at least two reasons why you might want to pass on them, however. The first reason is that you’re still exposed to a couple of thousand dollars of medical expenses each year. But, you don’t necessarily have a good idea of how much you’ll spend. You might only spend a few under dollars, or you might hit your deductible. The variable nature of these costs can make it hard to plan your cash flow in retirement. If you’re looking at a high deductible Medigap plan to keep costs down, you might struggle to handle the unpredictability of your health care costs.
A second reason to be wary of these high deductible plans is that getting “stuck” on a Medigap plan is possible. If your health declines, switching to a different, more comprehensive Medicare Supplement plan might not be possible. If that were to happen, you might not want to be stuck in a high deductible plan. For this reason, you may want to consider enrolling in a standard Medigap plan. You can “downgrade” to the high deductible version in many cases if you contact your insurance company and request this.
Finding the best Medigap plan for you can be difficult. If you’re intrigued by high deductible Medigap plans and want to see which ones are available in your area, reach out to one of our licensed agents. By working with an independent professional, you can compare benefits and quotes for all the plans available to you. Request a free, no-obligation to get started today.