Should you have secondary insurance when on Medicare?

For most people, yes, supplemental insurance (known as Medigap) or an alternative like Medicare Advantage is strongly recommended because Original Medicare has no annual out-of-pocket maximum and leaves you responsible for a 20% coinsurance on Part B costs.

Why You Might Need a Supplement

• No Out-of-Pocket Cap: Original Medicare (Parts A and B) covers about 80% of approved medical costs, meaning a major illness or extended hospital stay could leave you with thousands of dollars in uncapped bills.
• Fills Gaps: A Medigap policy helps pay for deductibles, copayments, and coinsurance.
• Provider Freedom: Medigap allows you to visit any doctor or specialist in the U.S. who accepts Medicare, with no network restrictions or referral requirements.
• Mixed Opinions on Risk: Opinions on Reddit differ regarding whether those with large personal savings can safely go without a supplement, but many users note that catastrophic costs—like expensive chemotherapy or extended rehab—make supplemental coverage vital.

When You Might Not Need a Supplement

• You have Medicaid: Dual-eligible beneficiaries often have their out-of-pocket costs covered by Medicaid.
• You have employer coverage: A qualifying union or retiree health plan may already cover your Medicare gaps.
• You choose Medicare Advantage: Instead of Original Medicare plus a supplement, you can opt for a Medicare Advantage (Part C) plan, which bundles services and includes an annual out-of-pocket maximum, though it usually requires using specific provider networks.

For most retirees, yes, supplemental insurance or an alternative like Medicare Advantage is strongly recommended because Original Medicare leaves an open-ended 20% coinsurance with no annual out-of-pocket maximum.

Why Original Medicare Has Gaps

• No Out-of-Pocket Cap: Original Medicare Parts A and B cover about 80% of approved medical costs, leaving you responsible for the remaining 20% with no ceiling to protect against high bills.
• Missing Services: Standard Medicare does not pay for routine dental, vision, hearing aids, or long-term care.
• Deductibles: You must pay separate deductibles for hospital stays (Part A) and outpatient services (Part B).

Who Needs Supplemental Coverage (Medigap)

• Chronic Health Needs: If you visit specialists frequently or need ongoing treatments, a 20% coinsurance adds up quickly.
• Provider Freedom: Medigap lets you see any doctor nationwide who accepts Medicare, without network limits or referrals.
• Travel: Most Medigap policies cover emergency medical care when traveling outside the United States.

Who Might Not Need a Medigap Plan

• Robust Retiree Benefits: Former employers or unions sometimes provide comprehensive wraparound health plans that already fill Medicare’s gaps.
• Medicaid Eligibility: Individuals who qualify for both Medicare and Medicaid (dual-eligible) have state assistance covering out-of-pocket costs.
• Medicare Advantage (Part C): These private plans replace Original Medicare, bundle prescription drugs, and set an annual out-of-pocket maximum, though they use restricted doctor networks.

The biggest mistake people make with Medicare is missing enrollment windows, which can lead to permanent financial penalties and coverage gaps.

Timing and Enrollment Mistakes

• Missing Deadlines: Failing to sign up during your Initial Enrollment Period (IEP) around age 65 triggers lifelong financial penalties for Part B and Part D.
• Misjudging Work Coverage: Assuming you can delay enrollment while working past 65 without checking if your employer plan is "creditable coverage" (plans with fewer than 20 employees often require Medicare to go first).
• Missing the Medigap Window: Waiting past your 6-month Medigap Open Enrollment Period (which starts when you turn 65 and enroll in Part B) means you may have to pass medical underwriting to get a supplemental plan.

Plan Choice and Cost Mistakes

• Focusing Only on Premiums: Choosing a plan with a low or $0 monthly premium without checking deductibles, copays, or maximum out-of-pocket costs.
• Ignoring Annual Changes: Not reviewing your plan’s Annual Notice of Change (ANOC) or skipping the Annual Enrollment Period, which leads to surprise costs as drug formularies and doctor networks shift yearly.
• Assuming Doctors are In-Network: Failing to verify if your preferred physicians and hospitals accept your specific Medicare Advantage or Part D network.
• Thinking Medicare is Free: Forgetting that Original Medicare has monthly premiums, deductibles, and coinsurance, and does not cover routine dental, vision, or hearing care.

You cannot usually choose whether Medicare is primary or secondary; federal coordination of benefits rules set the order automatically based on your employment status, company size, or other coverage.

How the Payment Order Works

• Primary Payer: Pays first up to its coverage limits.
• Secondary Payer: Pays remaining costs (like deductibles or copays) only if it covers that service, though it may not pay the full leftover amount.
• Having a secondary insurance is generally beneficial because it helps cover the gaps left by the primary insurance.

When Medicare is Primary vs. Secondary

Federal rules dictate which plan pays first:

• Large Employer Plan (20+ employees): If you or a spouse are actively working and covered by a large employer group health plan, the employer plan is primary and Medicare is secondary.
• Small Employer Plan (Fewer than 20 employees): If you are working and covered by a small business, Medicare is primary and the employer plan is secondary.
• Retiree Coverage: If you have health insurance from a former employer or union, Medicare is primary and the retiree plan is secondary.
• COBRA: If you have COBRA continuation coverage and enroll in Medicare, Medicare is primary and COBRA is secondary.

A Medicare Supplement Insurance (Medigap) plan is the best secondary insurance to pair with Original Medicare.

Top Medigap Plan Choices

• Plan G: This is the most comprehensive and popular plan available for new Medicare enrollees. It covers almost all out-of-pocket costs that Original Medicare leaves behind, except for the annual Part B deductible.
• Plan N: This is a lower-premium alternative to Plan G. It covers most costs, but you may have small copayments for certain office or emergency room visits.
• High-Deductible Plan G: This option offers very low monthly premiums, but you must pay out-of-pocket medical costs up to the deductible limit before secondary coverage starts.

Highly Rated Medigap Insurance Companies

• State Farm Medigap Plans: Highly rated for having the slowest average rate increases over time.
• Mutual of Omaha: Noted for exceptional customer service and very low consumer complaint rates.
• AARP / UnitedHealthcare: Offers broad nationwide availability and stable, reliable coverage options.

Key Rules to Remember

• Standardized Benefits: A Plan G from one company offers the exact same medical benefits as a Plan G from another company. The only differences are the monthly cost and customer service.
• Separate Prescription Coverage: Medigap plans do not cover prescription drugs. You must buy a standalone Medicare Part D plan for medications.
• Original Medicare Requirement: You must have Part A and Part B to buy a Medigap policy. You cannot combine Medigap with a Medicare Advantage plan.