Why do about 1 in 4 Americans choose to purchase Medicare Supplemental insurance? Well, Original Medicare only covers about 80% of medical expenses, leaving enrollees vulnerable to large, unexpected out-of-pocket expenses. Medicare Supplement plans are designed to reduce these risks. They help cover expenses—such as copays and deductibles—that basic Medicare doesn’t, limiting exposure to potentially catastrophic medical bills. Supplementing your basic 

Medicare coverage is a sound financial decision that can help promote peace of mind, while protecting your financial future. Follow our guide to make sure you make the most cost-effective choice that includes the benefits that matter the most to you.

Getting started: evaluate your budget and coverage needs

Choosing a Medicare Supplement plan involves balancing monthly premiums versus long term financial risk. Plans with more comprehensive coverage generally have higher monthly premiums, while plans with lower monthly costs usually offer less coverage. Keep in mind that’s not always the case, because very popular plans with more benefits may have  lower monthly premiums, since they have more enrollees to help spread the costs. When researching rates it’s best to get premium costs for all policies offered, to ensure you’re not missing out on a rate that works better for your budget and coverage needs.
To begin narrowing your options decide which coverage variables are important to you. All the plans cover Part A coinsurance and inpatient hospitalization costs. But some don’t or only cover a portion of coinsurance and copayments for Part B services, Part A deductibles and foreign travel emergency care. Each plan is known by a letter such as “Plan A” or “Plan G.” To protect you, the plans are regulated and standardized by the federal government. This means that no matter which insurance company you choose to buy your plan from, you’ll receive the same basic benefits, though some companies may offer additional benefits and pricing will vary. Comparing the plan benefits side-by-side is the best way to get an idea of what plan choice might be best for you.

Deciding which plan is best for you

Since you can never be certain what type of health care you’ll need in the future many people choose to get the most coverage they can afford. This is a sound strategy, since it can be difficult to change/upgrade policies in later years. The best time to shop for your plan is during your “open enrollment period” which is the six-month period that starts when you turn 65 and are enrolled in Medicare Part B. During that time period you can buy any Medicare Supplement plan in your state and can’t be denied coverage based on preexisting health conditions. In most states, if you miss the open enrollment period, you may be subject to underwriting procedures and denied or offered more expensive coverage based on your preexisting conditions. 

Currently plan G is the most comprehensive and closest to plan F, which will no longer be available to new enrollees starting in 2020. Plans K and L are more budget minded options that may have lower monthly premiums, but only pay a percentage—50%-75%—of out-of-pocket medical expenses. If you regularly travel out of the country consider plans D,G, M and N, which cover up to 80% of emergency care while traveling abroad. 

The cost of your plan will change over time, so it’s important to ask insurance companies how they manage their pricing. There are three basic pricing systems to be aware of: community rates, issue-age related and attained-age related. With a community-rated plan everyone with the same plan pays the same price, regardless of age. For issue-age related policies the premiums are based on the age you are when you buy the plan. Though your premiums may increase, it won’t be based on your age. With attained-age rated policies the premium is based on your current age and can rise as you get older. Community-rated and issue-age related policies tend to start higher but not increase as much over the years, while attained age starts lower and will increase as you get older. Keep in mind that policies premiums may increase for other reasons besides age, such as inflation and rising health care costs. 

Comparing insurance companies and rates

After you decide which plan options appeal to you, find out what insurance companies offer Medicare Supplement plans in your state. You can find these companies by searching online, visiting the Medicare plan finding tool, talking to an insurance agent, contacting your state’s health insurance assistance program or speaking to friends and family who already have Medicare Supplement plans. Once you’ve compiled a list of prospective companies, doing some leg work will really pay off, as companies offer the same plans at very different rates. Make sure you know if you’re in your open enrollment period or have a guaranteed issue right before starting your calls. It’s also a good idea to ask each agent if the company they represent offers discounts or additional benefits. The most common option is the “household” discount, which lowers the rates of people living together with similar policies. You can also ask about their history of rate increases, which can give you an idea of what to expect going forward. 

Once you choose a plan that suits your needs and budget, you can begin the application process and you’re on your way to attaining supplemental coverage that will help protect you and your family for years to come.