Medicare Supplement Insurance plans, often called Medigap policies, work alongside Original Medicare (Part A and Part B) to cover costs that Medicare does not fully pay, such as copayments, coinsurance, and deductibles. These policies are offered by private insurance companies to help reduce a policyholder’s out-of-pocket expenses. While the core benefits of Medigap plans are standardized by letter (e.g., Plan G from one insurer offers the same benefits as Plan G from another), the monthly premiums can differ significantly between carriers and geographic areas. Policyholders are generally permitted to change their Medigap plan or switch insurance companies, but the process requires careful consideration of timing and eligibility rules to avoid complications.
Common Motivations for Changing Plans
The primary driver for changing Medigap policies is often the rising cost of the monthly premium. Insurance carriers may increase rates each year, leading policyholders to seek a cheaper plan with comparable or identical benefits from a different insurer. Since the standardized plan benefits are identical regardless of the company selling them, switching carriers is a common method for maintaining the same coverage level while lowering the expense.
Another frequent motivation for a switch is a change in the policyholder’s location, as Medigap premiums are based on the state and sometimes the region where the person lives. A move to a new state requires the purchase of a new plan because Medigap policies are not portable across state lines. Dissatisfaction with a current insurer’s administrative services, such as customer support or claims processing speed, can also prompt a search for a new company. Finally, a policyholder may choose to move to a plan with different features, such as switching from the older Plan F to the popular Plan G.
Switching Plans Under Guaranteed Issue Rights
One of the most favorable ways to change Medigap coverage is by qualifying for Guaranteed Issue (GI) rights, which are special protections that bypass the normal health screening process. When a person has GI rights, an insurance company must accept their application for specific Medigap plans, cannot deny coverage based on pre-existing health conditions, and cannot charge a higher premium due to health status. These rights are triggered by specific life events, which are generally outside the policyholder’s control.
A common GI situation involves the involuntary loss of other health coverage, such as when an employer-sponsored group health plan that paid secondary to Medicare terminates. Another is losing coverage under a Medicare Advantage Plan because the plan leaves the service area or the policyholder moves out of the plan’s area. Policyholders who drop a Medigap policy to enroll in a Medicare Advantage Plan for the first time have a “trial right” to switch back to a Medigap policy within the first twelve months.
In most cases, the time frame for exercising these federal GI rights is limited to a 63-day window following the loss of the prior coverage. Many states have additional, often more generous, GI protections, such as “Birthday Rules” that allow an annual switch to a plan of equal or lesser benefits without underwriting near the policyholder’s birthday. Understanding the specific event that triggers the right and the associated application deadline is crucial for utilizing this protection.
The Standard Application and Health Underwriting Process
Outside of the initial six-month Medigap Open Enrollment Period or a specific Guaranteed Issue situation, an individual must go through the standard application and health underwriting process to change plans. Underwriting is the process insurance companies use to evaluate the health risk of an applicant before deciding whether to issue a policy and at what price. This process is required for a voluntary switch when a person wants to move to a cheaper plan or a plan offered by a different carrier.
The underwriting application usually involves an extensive health questionnaire about the applicant’s medical history, current medications, and pre-existing conditions. The insurer may also request access to medical records or require a follow-up phone interview. Based on this review, the insurance company has the right to deny the application, approve it but charge a higher premium, or approve it with a potential waiting period before pre-existing conditions are covered.
The risk of denial or receiving a much higher premium makes a voluntary switch difficult for individuals who have developed serious health issues since their initial enrollment. Medigap policyholders are advised to consider the potential inability to switch back if they drop their current coverage and the new application is rejected. The underwriting process is designed to manage the insurer’s financial risk, meaning any significant health change can make a move to a more affordable policy impossible.
Coordinating Effective Dates to Maintain Coverage
The logistics of switching Medigap plans require careful coordination of the effective dates to ensure there is no gap in coverage. A person should never cancel their existing Medigap policy until they have received a formal approval letter for the new policy and the effective date has been confirmed. If the new application is denied during underwriting, prematurely canceling the old policy would leave the policyholder responsible for 100% of the Original Medicare cost-sharing amounts.
A short period of overlapping coverage, where a policyholder is paying premiums for both the old and the new Medigap plan, is a necessary safety measure. This overlap mitigates the financial danger of a coverage lapse should there be any administrative delay in processing the new policy.
Once the new policy’s effective date is finalized, the policyholder can then inform the former carrier of the cancellation date, ensuring the old policy terminates on the day the new one begins. This procedural step guarantees continuous protection against the out-of-pocket expenses associated with Original Medicare.