Is there a dangerous gap lurking in your Medigap plan selection process? Medigap plans, also known as Medicare Supplement Plans, are a type of health insurance that covers some of the costs that original Medicare does not cover. Enrolling in a Medigap plan along with original Medicare will result in higher insurance premiums but lower co-pays, co-insurance and deductibles.
Medigap plans are sold by private insurance companies, and multiple companies offer this coverage in most areas. The plans are “standardized”—in other words, the Medigap “Plan G” offered by one insurer will provide precisely the same benefits as the “Plan G” offered by another. (Note: A Medigap plan is not the same as a Medicare Advantage plan, which is an all-in-one alternative to Original Medicare offered by private insurance companies.)
So how should consumers choose between Medigap companies when their coverage is the same? What separates the worst Medigap companies from the best?
Bottom Line Personal asked Medicare expert Lauren Bigham Steele to review 10 potential warning signs of problematic Medigap providers and to weigh in on which of these warning signs matter most and, most important, how to choose a Medicare supplement plan.
What Makes a Medicare Supplement Company “The Worst”?
Common consumer complaints about insurance companies involve their rejecting legitimate claims…hiding potentially costly coverage gaps in policies…and increasing premiums. But when it comes to Medigap policies, only one of those insurance company issues matters—rising premiums.
Medigap companies typically cannot reject legitimate claims because Medicare, not the Medigap provider, determines whether claims are legitimate. Medigap companies can’t create policies that have hidden coverage gaps either, because the plans are standardized.
But the insurers do set their own premiums, and the worst Medigap insurance providers don’t just set high prices. They often rapidly ratchet up the premiums after consumers have enrolled…and by then, it isn’t always feasible for consumers to switch from one Medigap provider to another. “You usually have to pass medical underwriting to choose another one, depending on your state,” says Bigham Steele. “Some people get locked in [to a particular provider] if they have health issues.”
10 Warning Signs of a Poor Medicare Supplement Provider
Rapidly rising prices are the most important sign of a Medigap provider that should be avoided, but they’re not the only potential warning sign. Here’s a look at 10 concerns, along with Bigham Steele’s take on which are meaningful.
- Negative customer reviews and complaints.
- Frequent and unpredictable premium increases.
- Poor customer service.
- Complicated or delayed claims process.
- Lack of financial stability.
- Hidden fees and unclear policies.
- Limited plan options.
- Poor transparency and communication.
- High rate of policy cancellations or non-renewals.
- Regulatory actions or low industry ratings.
1. Negative customer reviews and complaints
There can be value in reading Medicare supplement company reviews on Facebook or Google to see what consumers are saying about them. But don’t put too much stock in these reviews. Here’s why: Most of the online reviews you find for large health insurance companies won’t be Medigap-related…consumers sometimes blame their Medigap providers for claim denials that actually were denied by Medicare…and policyholders tend to write reviews of health insurers only when something has gone wrong, so ratings may skew very strongly negative. “Most people who leave those reviews are not happy,” says Bigham Steele. “Not a lot of people are leaving positive reviews about their health insurance companies.”
2. Frequent and unpredictable premium increases
Pricing should be the primary consideration when choosing among Medigap plan providers—both the price currently being charged and the potential price hikes that might be on the horizon. Comparing current prices is relatively simple. Once you’ve decided which plan tier you want—plan G is most popular among plans currently available to new enrollees—contact an insurance broker who handles Medigap policies to compare prices…or visit Medicare.gov to see which companies offer this plan in your area, then contact those plan providers.
The best way to gauge which companies are likely to raise rates fastest in the future is to check which have raised rates fastest in the past. A broker should be able to provide this information upon request. Investigating rate hike history is especially important these days, since Medigap rates have been rising sharply. “In the past we saw 3% to 5% increases,” says Bigham Steele “But now we’re seeing 15% to 20% increases for a lot of Medigap plans.”
3. Poor customer service
Long hold times, unhelpful phone reps and inscrutable websites are common complaints about insurance companies. Strategies to weed out the insurers with the worst Medicare supplement customer service: Call Medigap companies’ customer service numbers to compare hold times…and visit their websites to determine which are frustrating to navigate. But Bigham Steele says it’s not worth worrying too much about such things. Customer service doesn’t matter as much with Medigap as with other forms of health insurance, because the problems Medigap policyholders encounter tend not to be with the Medigap provider. “Typically, if you have an issue, it’s because Medicare itself is denying something, and they’re the ones you need to contact,” says Bigham Steele. “The Medigap plan is really just on the back end listening to what Medicare is saying.”
4. Complicated or delayed claims process
Complicated claims processes are not a meaningful concern with Medigap—health-care providers submit claims to Medicare, then Medicare typically forwards those claims to the Medigap provider, which pays the health-care provider directly. The customer is rarely involved at all. Lengthy claims-payment delays were an issue during the peak pandemic years, says Bigham Steele, but these days it’s extremely uncommon for slow payments from Medigap companies to health-care providers to create problems for consumers. When problems with Medicare supplement claims do occur, they’re often due to issues outside of the Medigap company’s control. “There are some that can take a little bit longer,” says Bigham Steele. “But a lot of time it isn’t because of the Medigap plan, it’s because of how long it took for Medicare to approve the claim.”
5. Lack of financial stability
Steer clear of Medigap companies that are in poor financial shape, advises Bigham Steele. Such companies have high odds of rapidly raising rates in the years ahead or they could go out of business entirely. (Note: If a company does go under, customers have a guaranteed issue period to change to a new Medigap plan.) An insurance broker or agent should be able to provide Medicare supplement company ratings from a major financial rating companies, such as A.M. Best. Medicare supplement financial stability scores tend to be similar to school grades, with scores below B best avoided. Fortunately, most major insurance companies are in good financial shape. “As long as you’re with a big national carrier you shouldn’t run into issues like that,” says Bigham Steele.
6. Hidden fees and unclear policies
The standardized nature of Medigap policies means that hidden fees and sneaky rules are unlikely, says Bigham. Exception: Medigap providers sometimes try to sell customers dental and vision coverage for added fees, notes Bigham. Those could be considered Medicare supplement hidden fees, though this dental and vision coverage actually isn’t part of the Medigap plan and are not related to Medicare either.
7. Limited plan options
Some insurance companies offer a veritable alphabet soup of Medigap plan options, while others offer only the most popular plans, such as G and N. But this isn’t a difference that consumers need to worry about unless they’re shopping for one of the less popular plans. “You just want to make sure the company offers the plan that you’re looking for,” says Bigham Steele.
8. Poor transparency and communication
This doesn’t tend to be a meaningful factor for Medigap plan selection, says Bigham Steele. Medigap companies don’t often make major decisions that must be communicated to policyholders, aside from rate changes. Medicare makes the key decisions, and Medigap simply pays a portion of Medicare-approved bills.
9. High rate of policy cancellations or non-renewals
It could be a troubling sign if an unusually large share of a company’s Medigap customers leaves the company each year. A broker might be able to provide this information.
10. Regulatory actions or low industry ratings
Your state’s insurance department might be able to tell you whether an insurance company has any regulatory actions against it or comparable concerns. And a broker should be able to share information about any actions toward a carrier and its ratings.
How to Research and Compare Medicare Supplement Companies
Go to Medicare.gov to determine which companies offer the Medigap plan tier you want in your area. An insurance broker or agent that sells Medigap coverage can help you compare those plans and companies and obtain quotes, or you can contact the Medigap companies directly. You won’t pay extra if you obtain coverage through an agent or broker.
To find a reliable broker: Ask friends and neighbors or on a local Facebook group or Google to find brokers. Read consumer reviews of Medigap brokers and agents on Google or Facebook before choosing one. It’s a bad sign if multiple reviewers say they felt pushed to work with a particular insurance company, says Bigham Steele, and/or that the broker or agent didn’t help them solve a problem they later encountered with the insurance company selected.
What to Do If You’re Unhappy With Your Current Provider
Can you change Medigap companies if you become unhappy with the current one? “It depends on the state that you live in,” says Bigham Steele, “and whether you can pass underwriting.”
If you live in California, Connecticut, Idaho, Illinois, Maine, Massachusetts, Missouri, Nevada, New York, or Oregon, it often is possible to change Medigap companies, perhaps during a designated window each year.
In other states, you likely would have to pass medical underwriting to switch to a different company’s Medigap plan.
Filing complaints is another option when things go wrong. Medigap plan complaints can be made to a state insurance department and/or Medicare (800-633-4227). “They take complaints pretty seriously,” says Bigham Steele.
