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By Philip Moeller
October 27, 2015

Medicare’s annual open enrollment period is underway—it began Oct. 15 and runs through Dec. 7. This is your opportunity to change policies at will, generally with no adverse consequences. But there’s one major exception: Medigap, also known as Medicare supplemental insurance. Changing in your Medigap coverage can be difficult and extremely expensive, so it’s essential to buy it right the first time.

I’ll explain what to watch out for and when it’s possible to avoid penalties for switching policies. First, for those new to Medicare, here’s some background on Medigap. These supplemental plans, which are sold by private insurance companies, help pay some costs that Medicare doesn’t cover, including co-pays, co-insurance and deductibles.

When they sign up, many people with original Medicare also buy a Medigap policy, along with a Part D prescription drug plan. (Another option is to enroll in Medicare Advantage, also known as Medicare Part C, which offers comprehensive coverage if you stay in-network.) When shopping for a Medigap policy, people often make the mistake of focusing on the premium costs, without fully considering whether they’re buying a policy at the right time, how those prices may rise, or if they will be able to change plans later.

Getting Guaranteed Rights

With original Medicare plans—Part A for hospital insurance, Part B for doctors and medical services, as well as Parts C and D—you can generally move back and forth between plans without penalty during open enrollment. You won’t be charged higher rates or denied coverage because of your age or pre-existing health conditions.

Not so with Medigap. The insurers who sell these plans may raise your rates if you switch—or even refuse to sell you a policy at all if you miss the enrollment window.

The key issue here is whether you are entitled at the time you buy Medigap policy to what are called “guaranteed issue rights.” If you have these rights, an insurance company must sell you a Medigap policy and cover all your pre-existing health conditions. In addition, the insurer cannot charge you more for a Medigap policy because of your age.

Guaranteed issue rights are available after you first become eligible for Medicare and sign up for Part B coverage. If you buy a Medigap policy during this six-month window, you will get these rights for whatever policy you choose. If for some reason, the insurer denies you these rights, even though you met the enrollment conditions, you can appeal to Medicare.

If you don’t qualify for those rights during the six-month enrollment period, it can be extremely difficult, if not impossible to change your Medigap coverage later on. But there are two limited opportunities when guaranteed issue rights exist:

  • If you’re on original Medicare with Medigap, and opt to buy a Medicare Advantage plan during open enrollment, you will have to drop your Medigap policy. But you can change your mind within a year and retain a guaranteed issue right to your old Medigap plan.
  • If you joined a Medicare Advantage plan when you were first eligible for Medicare, you can change your mind within a year and switch to original Medicare. If you want to buy a Medigap policy at that time, you will have guaranteed issue rights.

Researching Your Plan

Guaranteed issue rights do not guarantee you will pay the same premium price for Medigap the rest of your life. So before you enroll, check out the insurer’s underwriting rules. If this information isn’t shown in the policy documents, ask the insurer. These standards may also drive future premium hikes for all policyholders. Here are the three types of underwriting:

*Issue-rated. Premiums are lower for younger purchasers and higher for older buyers, but they won’t change as you age. These policies are best for people who buy a Medigap plan when they first become eligible for Medicare and intend to keep it.

*Community-rated. Generally these policies are the most affordable option if you wish to change coverage, especially if you’re older. Premiums are not based on age, so everyone pays the same price.

*Attained-age-rated. Premiums for attained-age-rated policies are based on how old you are when you buy the policy. They also permit insurers to raise rates as you age. If you lose guaranteed access rights, you probably can find a policy from one of these insurers, but it may be expensive.

With all three of these underwriting systems, premiums can change because of inflation and other factors. And unlike some other parts of Medicare, Medigap policies are regulated by the states, which can sometimes act to protect residents in the event of premium hikes. For details about the different policies, go to page 11 of Medicare’s annual “Choosing a Medigap Policy” guide.

If you want to switch Medigap policies, don’t cancel your old coverage right away. You will have a 30-day “free look period” to decide whether to keep the new policy. Check with your state insurance department about the consequences of changing Medigap plans. You can also call the free Medicare counseling service offered by the State Health Insurance Assistance Program (SHIP) and find a counselor in your state who knows the local rules.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and is working on a companion book about Medicare. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

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