Medicare in 3 Easy Steps

As you approach the time of your Medicare Supplement open enrollment period, you may be wondering what the best plan is for you – or whether you should even sign up for coverage at all. After all, Medicare itself provides fairly comprehensive health care coverage, right?

The answer to that is, “sort of.”

Although Medicare Parts A and B do provide coverage for certain hospitalization and doctors’ services, there are many “gaps” in Medicare’s coverage that could still leave you with the responsibility for paying high out-of-pocket copayments and deductibles every year.

A good Medicare Supplement, or “Medigap,” insurance policy will cover many of those charges, shifting some – or all – of the cost to the insurance company. This can be an extremely cost effective way to manage health care expenses, especially for retirees who are living on a fixed income.

Because there are many choices when it comes to Medicare Supplement plans, deciding which option is best for you can at first seem overwhelming. The good news is, though, that you can narrow down your choices by going through just three simple steps.

Step 1: Determine the Benefits That You Want

The first step in choosing the best Medicare Supplement insurance policy is deciding which benefits will best serve your specific needs. There are currently 10 different Medicare Supplement policies on the market today, each named after a letter of the alphabet. Medicare Supplement Plan A offers the most basic set of benefits, and all corresponding plans provide more comprehensive coverage options.

When determining the best Medicare Supplement insurance plan for you, it is important to decide on a policy that covers the items that you are most likely to use. For example, if you do not plan to participate in foreign travel, you may not need a policy that covers foreign travel exchange benefits.

The chart below outlines which benefits are provided with each of the Medicare Supplement plans in 2014.

medicare-in-3-easy-steps-chart
Source: Medicare.gov

Regardless of which insurance company you purchase your plan from, the actual benefits within the policy will be the same. In other words, the features in Medicare Supplement Plan A will not differ from one insurer to another – however, the premium that you pay can differ quite a bit.

Step 2: Decide on Your Budget

The next step is to decide on your budget. This will help you to ensure that the premium for your policy will not create a financial hardship. In pricing Medicare Supplement insurance, there are actually three different ways in which an insurer may come up with its premium cost. These include:

  • Attained Age – If premium is determined based on one’s attained age, it means that the price is calculated by the current age of the applicant. In this case, the premium for your policy will likely rise over time as you get older.
  • Issue Age – With issue age, the premium for your plan will also be based on the age that you are when the policy is initially purchased. However, the price will not change as you age. (The premium may, however, rise based on inflation or other external factors).
  • Community Rated – If a premium is community rated, it will be the same amount for all insureds in the same “community” or demographic who have the same type of policy – even if they are different ages. Here, too, the premium may change based on inflation or other external factors.

Step 3: Locking in Your Coverage

Once you have determined the Medicare Supplement insurance plan and premium that are right for you, it is time to lock in your coverage. Provided that you apply during your Medicare Supplement open enrollment period, you cannot be turned down for coverage or charged a higher rate of premium – even if you have an adverse health condition.

It is important to apply for your plan during your open enrollment period, though, because once this period has expired, you may be subject to higher premium rates for the same plans and coverages.

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