When can you change your Medicare supplement plan? To be able to answer this question we first need to understand the definition of a Medicare supplement plan.
The official government term for Medicare supplement plans is “Medigap”. Why do they call it Medigap? The reason they are called Medigap is because the plans are designed to cover the gaps in Medicare. This sounds elementary when I say it but the confusion comes about when people make the assumption that a supplement will cover expenses that are not covered by Medicare. This is not correct. The Medicare supplement/Medigap plan will only cover bills that have first been approved by Medicare and covered by Medicare. Calling it a supplement can be a bit misleading in a way because people sometimes think it covers expenses that are not covered by Medicare.
Another area of confusion is often people believe The Affordable Care Act did away with medical underwriting for health insurance policies. It did not. Once a person is out of their “open enrollment” period for Medicare, insurance companies are able to use medical underwriting to evaluate an applicant. The insurance carrier can deny coverage or charge a higher rate based on the person’s medical history or if they use tobacco.
People often believe that The Affordable Care Act did away with medical underwriting for health insurance policies. It did not.
That being said, any person with a Medicare Supplement policy is able to change policies any time during the year and are not confined to the Medicare Annual Enrollment Period. The caveat is that they will need to go through medical underwriting with the new company. Medicare underwriting for Medicare supplements is typically a pretty straight forward process and does not take a great deal of time. There are no physical exams and in many cases the agent will have a pretty good idea as to the outcome just by asking the medical questions on the application. The agent will then decide if they should submit the application to the insurer. Once the application is submitted, it is usually only a few days before the insurance company decides. Simple right?
So why would a person switch? That’s easy! To save money! The average rate increase of a Medicare supplement policy can be between 5-10% per year. For example, if the total yearly premium rate starts at $1500 and the rate increases 5% per year, after 5 years the rate will be close to $2000. At 10% the rate would be nearly $2500 per year after 5 years! There is a compounding effect that is not very desirable.
Medicare supplement policies are standardized plans meaning you could potentially get the same exact coverage with another company and save a tidy sum. I have seen people save between $300-$1000 on the policy premium, yet continue to enjoy the same coverage as before.
So really the question of when can a person switch becomes very important. The answer is, if you have had your Medicare supplement or Medigap plan for more than four or five years, it would be in your best interests to have it evaluated to see if you could save money.