Beware the Fine Print: A Guide to Switching Between Medicare Advantage and Medigap

January 31, 2016

Medigap-versus-MA-NEW-blog

by: Gail Shearer, Health Policy Specialist and member of the NCOA Consumer Advisory Panel

The 2015 Medicare Open Enrollment Period (OEP) has just come to an end–a respite from any immediate decision-making about Medicare coverage for current beneficiaries. However, it’s still a good time for all Medicare beneficiaries to be reminded of a lesson that too many of them learn the hard way, when it is too late to get the coverage they need.

Medigap versus Medicare Advantage.

New Medicare beneficiaries often confuse Medicare Advantage (MA) plans and Medigap plans (i.e. Medicare supplemental insurance). MA plans are sold by private insurance companies that contract with Medicare to offer the same benefits Original Medicare does but can add drug coverage, vision, dental or hearing. Consumers who enroll in MA plans must agree to use the doctors and other providers in the MA network. With many MA plans, limited choice of doctors is the price beneficiaries pay for lower costs and/or more benefits. Medigap plans are sold by private insurance companies too but are used only with Original Medicare (Parts A & B), because they pay the cost-sharing gaps in Parts A and B (like deductibles, coinsurance and copayments).

Regrettably, widely shared information about switching between an MA plan and Original Medicare-plus-Medigap can sometimes mislead and confuse beneficiaries. For example, Medicare recipients are told that “Anyone with MA can drop it and switch back to Original Medicare (Parts A and B) during the annual Medicare Open Enrollment period.” While this is true, it leaves out a key fact—in most states, if you have been enrolled in an MA plan for more than one year, you are not likely to be able to enroll in an all-important Medigap plan, which helps many people fill the gaps in coverage from Original Medicare.

When can you enroll in Medigap?

There are two time periods when federal law requires Medigap companies to sell you a policy regardless of your health: (1) during the Medigap Open Enrollment Period, and (2) during Guarantee Issue Periods.

Future Medicare beneficiaries who are new to Part B should pay attention to the 6-month Medigap Open Enrollment period (which is separate from the Medicare Open Enrollment Period) when you cannot be denied any standard Medigap plan at the best available rate. This means that the insurance company that sells you the Medigap policy cannot deny you a policy or charge you a higher price because of any pre-existing health problems you may have. The federal law requires this for beneficiaries age 65 and older just enrolling in Part B for the first time. Some state laws extended this protection to beneficiaries under age 65.

The second federal protection involves specific categories of events that grant a Guarantee Issue Period to beneficiaries within a 63 days time frame. Three are of significant importance to MA: (1) joining MA when you first start Medicare, (2) you leave Medigap to try an MA plan, and (3) if the MA plan is no longer available in your area.

If you join MA when you first start Medicare at age 65, then you have 12 months to change your mind, drop MA, get Medicare A & B instead, and buy a Medigap policy. Likewise, if you had Original Medicare-and-Medigap and tried an MA plan for the first time but then changed your mind, you can get your Medigap back within 12 months.

If you wait any longer than one year, your opportunity to buy Medigap coverage is limited to very narrow situations. These include moving to another state, or your Medicare Advantage plan withdrawing from the marketplace. If you’re lucky, you might live in one of the few states that provide greater access to Medigap policies–but it’s important to check before making any of these decisions.

Your Medigap enrollment opportunities are limited.

The key takeaway? Be aware of how limited your Medigap enrollment opportunities are, and how staying on Medicare Advantage for more than one year will affect that. Sure, you can technically drop your MA plan and return to Original Medicare each year during Open Enrollment. But you may not have a chance to return to your Medigap policy, and many people cannot afford the high out-of-pocket costs of Original Medicare without it.

Remember that Medigap provides the wrap-around coverage of the 20% doctor payments, the steep skilled nursing facility co-pays, the hospital cost-sharing, and many other costs not covered by Original Medicare. These costs can be very burdensome. Many people will not be able to pay these high out-of-pocket costs without Medigap—which could mean being stuck with Medicare Advantage (and its restricted provider networks) forever.

Gail Shearer worked with a coalition of consumer groups, Congress, and the NAIC in the 1980’s and 1990’s to create and implement standard Medigap policies and to fund SHIP programs in every state. She now serves on NCOA’s Consumer Advisory Panel and volunteers with the Montgomery County SHIP program.