Two New Medigap Plans to Consider

I understand that two new types of Medicare-supplement policies will be introduced on June 1 and that other changes will be made to policies then. Do I need to do anything to keep my current medigap coverage?

No. Starting June 1, two new medigap plans, M and N, will be introduced, and insurers will no longer sell plans E, H, I and J. If you currently have a policy, even if it’s Plan E, H, I or J, you can keep it and your coverage won’t change.

But no matter what plan you have, it may be worthwhile to consider the new plans, which add some cost-sharing in return for lower premiums.

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Both of the new plans are similar to the most popular medigap policy, Plan F. However, Plan M provides only 50% of the Medicare Part A deductible (which is $1,100 in 2010) and none of the Part B deductible ($155). Also, Plan M does not provide coverage for Part B “excess charges,” which helps pay the difference if your doctor charges more than Medicare allows.

Plan N is the same as Plan M, except that it covers the $1,100 Part A deductible in full, and it charges a $20 co-payment for doctors’ office visits and a $50 co-payment for emergency-room visits. Plan N, which is being offered by more insurers than Plan M, tends to cost 25% to 35% less than Plan F, says Chris Hakim, of eHealthMedicare.com, a marketplace for medigap policies run by eHealthInsurance.com.

When determining whether to switch plans, look at savings on premiums as well as potential out-of-pocket costs. Plan N may cost a lot less than Plan F, for example, but you’d have to pay the $155 Part B deductible with Plan N plus the $20 co-payment for doctors' office visits and a $50 co-payment for emergency room visits. Add up the potential co-pays and calculate how many times you could visit the doctor or emergency room and still come out ahead. Also, keep in mind that Plan F covers Part B “excess charges” but Plan M and Plan N do not, which could make a big difference if your doctors charge more than Medicare allows.

If you’re within six months of signing up for Medicare Part B for the first time, you can qualify for any medigap policy regardless of your health. If you don’t sign up during that open-enrollment period (or switch plans), you could be rejected because of your health. Some insurers are offering Plan M and Plan N regardless of health, especially to people who have plans E, H, I or J.

For more information about medigap policies and the changes taking effect on June 1, see the 2010 Choosing a Medigap Policy guide at Medicare.gov.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.