How Much Is Medigap Insurance?

Learn about Medicare supplement insurance costs, including premiums and out-of-pocket expenses, to better budget your healthcare needs.

How Much Does Medigap Cost?

The cost of healthcare is one of the biggest financial concerns for many seniors when planning for retirement. Medigap, or Supplemental Medicare Insurance, helps retirees manage these expenses by covering the gaps in Original Medicare, such as copayments, coinsurance, and deductibles. By reducing out-of-pocket costs, Medigap ensures that seniors can better protect their savings and budget for future medical needs with greater peace of mind.

While the Federal government standardizes Medigap coverage, premiums can vary significantly because private insurance companies determine the pricing. In this article, we’ll explore how Medigap works and what factors affect its cost so you can make an informed decision.

What Does Medigap Cover?

Medigap policies cover costs that would otherwise fall on Medicare recipients. Standard coverage includes:

Part B coinsurance: This helps cover the remaining 20% of Medicare-approved expenses not paid by Medicare Part B.
Blood: Medigap policies usually cover the cost of up to three pints of blood if you need it during a procedure.
Part A hospice care: Medigap helps pay for coinsurance or copayments for hospice care services.
Part A coinsurance and hospital costs: After Medicare benefits have been exhausted, Medigap provides an additional 365 days of hospital coverage.

Some plans go beyond these basic benefits. For instance, higher-level plans may cover skilled nursing care and provide out-of-pocket limits, so you don’t have to spend as much each year to seek a specific provider. Carefully compare each plan’s coverage to determine what fits your needs.

What Determines Medigap Premiums?

While Medigap policies are standardized, premiums vary widely. Understanding what influences your monthly cost can help you make a more informed decision about which plan to choose.

Insurance Provider Pricing Models

Medigap premiums can differ based on the pricing model an insurance company uses. There are three standard models:

Community-rated: Everyone who buys the policy pays the same premium, regardless of age.
Issue-age-rated: Premiums are based on your age when you first buy the policy. Your rate won’t increase because you get older.
Attained-age-rated: Premiums start low but increase as you age. Initially, this may seem like a good option, but costs can rise significantly over time.

Attained-age-rated policies may be cheaper initially but could become costly as you age. In contrast, community-rated and issue-age-rated policies tend to offer more stability in the long run. Talking with your loved ones, fellow Seniors, and, most importantly a trusted insurance professional who is familiar with plans offered in your area can help determine which model might best suit your needs and budget.

Types of Medigap Plans

There are several types of Medigap plans, each identified by a letter. Here’s a breakdown of the most common plans:

Plan F: Offers the most comprehensive coverage but was only offered to those who had Medicare before 2020.
Plan G: Covers everything Plan F does except for the Part B deductible.
Plan K: Covers 50% of most out-of-pocket costs but has a lower premium.
Plan N: Covers Part B coinsurance but requires copayments for doctor visits and emergency room trips.

While Plans like F and G offer more extensive benefits, other plans like K and N may provide lower premiums with cost-sharing benefits that work for those with fewer medical needs.

Benefits	A	B	C	D	F	G	K	L	M	N
Part A coinsurance & hospital costs
Part B copays/coinsurance							50%	75%
Blood (first 3 pints)							50%	75%
Part A hospice							50%	75%
Skilled nursing facility	X	X					50%	75%
Part A deductible	X	X					50%	75%	50%
Part B deductible	X	X		X		X	X	X	X	X
Part B excess charges	X	X	X	X			X	X	X	X
Foreign travel emergency	X	X	80%	80%	80%	80%	X	X	80%	80%
							$7,060	$3,530
							Out-of-pocket limit in 2024

Source: Medicare.gov

Notes:

Plan F & Plan G also offer a high deductible plan in some states.
Plan K & Plan L show how much they’ll pay for approved services before you meet your out-of-pocket yearly limit and Part B deductible. After you meet these amounts, the plan will pay 100% of your costs for approved services.
Plan N pays 100% of the costs of Part B services, except for copays for some office visits and some emergency room visits.

If you live in Massachusetts, Minnesota, or Wisconsin, your state offers different standardized plans.

Location

Medigap premiums will also vary depending on where you live. States have different healthcare regulations, cost of living, and population demographics, affecting how insurance companies set their rates. For example, retirees in states like Massachusetts, New York, and Connecticut may find their Medigap premiums higher due to stricter state insurance pricing regulations. Meanwhile, states with a lower cost of living, such as Iowa or Indiana, often offer more affordable premiums for the same level of coverage.

In addition to state-level differences, some states offer unique Medigap plan options or have specific rules regarding premium increases, further influencing your costs. It’s important to compare Medigap rates in your state and review any location-specific factors that could impact your premium before choosing a plan. We can connect you with an insurance agent who is licensed to sell Medicare plans in your state. Click here to find out more.

Discounts

While not technically discounts, certain demographics and behaviors often lead to lower Medigap rates. For example, women may receive discounts due to longer life expectancies. Similarly, non-smokers often receive reduced premiums because insurers consider them lower-risk.

In addition, some insurers offer savings based on payment methods. Opting to pay premiums annually or setting up automatic payments may slightly reduce your monthly costs. Moreover, living in the same household as someone with a Medigap policy can make you eligible for a household discount, depending on the provider.

These lower rates and payment incentives can meaningfully impact the cost of your Medigap coverage, so it’s wise to ask your provider and your insurance agent how your lifestyle and payment preferences might reduce your premium.

Medigap Out-of-Pocket Costs

While Medigap policies can reduce out-of-pocket costs by covering gaps in Original Medicare, there are some areas where you may still incur expenses. For instance, some Medigap plans do not cover extended hospital stays, emergency room visits for non-emergencies, or international medical care. If your policy lacks coverage for these services, you must pay for them out of pocket. This can lead to large bills if you require extended or specialized care.

However, some Medigap plans offer out-of-pocket limits, which cap the amount you will pay for covered services in a year. Plans K and L have specific limits to control out-of-pocket expenses, making them a helpful option for retirees concerned about managing healthcare costs.

Medigap vs. Medicare Advantage Costs

Medigap and Medicare Advantage serve similar purposes but provide coverage in different ways. Medigap policies often have higher premiums, but the overall costs are more predictable. This is because many Medigap plans have cost controls, including out-of-pocket limits. These limits can be advantageous if you anticipate needing extensive medical care, as they help avoid the risk of accumulating medical debt.

In contrast, Medicare Advantage plans may have lower premiums but higher out-of-pocket costs for hospital visits or specialist care costs. While the upfront costs may be lower, you could pay more in the long run, especially if you require intensive or frequent medical care.

Medigap is generally a better choice if you prefer more predictable, controlled costs and want to avoid out-of-pocket surprises, especially in cases where you expect to use more healthcare services. On the other hand, Medicare Advantage might be more suitable for those who are healthy, prefer lower premiums, and don’t anticipate needing extensive medical treatment. We recommend talking about all of your options in detail with an informed Medicare agent who is licensed to sell plans available in your state.

How To Budget for Medigap

Budgeting for Medigap as a retiree requires strategic planning to ensure the premiums will fit within your fixed income. Here are a few strategies to consider:

Assess your healthcare needs: Consider your current health status and expected medical care needs. This will help you choose a plan with the right balance of premiums and coverage. Because you can never predict the future, it is important to consider what level of coverage will fit your budget and give you the most peace of mind for any future scenario.
Factor in premium increases: Medigap premiums may increase over time, especially with attained-age-rated policies. Build this into your budget so you’re prepared for potential hikes.
Consider payment options: Pay your premiums annually or set up automatic payments, which may offer small savings and help you manage your budget more easily.

Ultimately, investing time in selecting the right plan will allow you to focus on enjoying retirement without the stress of uncertain medical expenses.

To make the most informed decision, compare your options, consider your healthcare needs, and plan your budget carefully.

FAQs about Medigap Costs

Do Medigap Premiums Increase Over Time?

Medigap premiums can increase over time, depending on your provider’s pricing model. Premiums may rise due to inflation, healthcare costs, or age-based rating systems, such as attained-age policies, which increase as you age. Widespread changes to the Federal Medicare program, such as The Inflation Reduction Act, have also impacted premiums and plans across the board in recent years.

Can I Switch Medigap Plans If My Premiums Increase?

Yes, you can switch Medigap plans, but there may be restrictions depending on your state’s regulations and when you purchased your policy. You may have to wait for an open enrollment period or obtain medical underwriting to change plans in certain states.

Are Medigap Premiums Tax-Deductible?

Medigap premiums are only tax-deductible if they’re more than 7.5% of your adjusted gross income. You can receive these deductions by listing them when you do your taxes and consult a tax advisor for specific details.

Does Medigap Cover Prescription Drugs?

No, Medigap plans do not cover prescription drugs. If you need drug coverage, you must enroll in a separate Medicare Part D plan to cover prescription medications.

How Can I Lower My Medigap Premiums?

You may be able to lower your premiums by taking advantage of discounts, such as household or non-smoker discounts, choosing a plan with higher deductibles, or switching to a different plan or provider that offers more affordable premiums. Shopping around during your initial enrollment period can also help.

What’s the Difference Between Medigap and Medicare Advantage Costs?

Although you may have to pay a higher monthly premium with Medigap, you will often have more predictable and limited out-of-pocket costs for special healthcare services in the event you need advanced or frequent medical care. In comparison, Medicare Advantage plans usually have lower premiums but higher out-of-pocket expenses when receiving care. Each option has different financial commitments, so comparing both can help you choose what’s best for your budget and your health needs.

Can I Be Denied Medigap Coverage If I Have Pre-Existing Conditions?

If you apply for Medigap during your initial enrollment period, the insurance provider cannot deny you coverage based on pre-existing conditions. However, if you apply outside this period, insurers could deny coverage or charge higher premiums based on your medical history.

Start Planning Today for a Secure and Healthy Retirement

For more guidance on navigating Medigap and other retirement healthcare options, visit My Guide To Retirement to learn more and get personalized advice tailored to your financial and health goals.