High Deductible Medigap Plans: A Smart Choice?

It’s not uncommon for individuals and families to have a high deductible health insurance plan. Many people enjoy taking advantage of having access to a Health Savings Account (HSA), which allows them to save and spend money tax-free.

These same people may also be interested in a high deductible Medigap plan when it’s time for them to transition into Medicare. Even those who aren’t accustomed to a high deductible may be tempted by the plan’s lower monthly premium.

But are high-deductible Medigap plans really a smart choice? Let’s review the costs associated with these plans and then offer some alternatives. By the end of this article, you’ll be able to decide if a high-deductible Medigap plan is right for you.

How Do High Deductible Medigap Plans Work?

There are about ten Medigap plans available to Medicare beneficiaries. They’re named by an alphabet letter and include Plans A, B, C, D, F, G, K, L, M, and N. In addition, Plans F and G have a high deductible option. You might see these plans abbreviated by the acronyms HDF and HDG. Only beneficiaries who were enrolled in Medicare Parts A and B prior to January 2020 are allowed to enroll in Plan F - either the regular or high deductible version.

High-deductible Medigap plans work the same as traditional Medigap plans. They become your secondary insurance plan, with Original Medicare as your primary. Unlike non-Medicare high-deductible plans, beneficiaries are not allowed to contribute to an HSA while enrolled. Now let’s compare how the two options are different.

If you are enrolled in the traditional Plan G, your only out-of-pocket cost is the Part B deductible. In 2024, that deductible is $240. If you are enrolled in the High Deductible Plan G, however, your deductible is much higher. The Medicare program sets the deductible each year, usually with an increase from one year to the next. In 2024, the deductible for either HDG or HDF is $2,800.

Now, let’s look at the difference in premiums. Medigap premiums vary from one person to another. They’re determined by your age, gender, location, tobacco use, and possible household discounts. The average premium for traditional Plan G is between $100 and $300 per month. HDG will cost somewhere between $40 and $90 per month.

Who Should Enroll in a High Deductible Medigap Plan?

As you can see, you will save a significant amount of money in premiums by enrolling in a high-deductible Medigap plan. However, these plans are not ideal for everyone. They might be a good option for individuals who are comfortable paying the higher deductible should they need to or people who rarely see a doctor or visit the hospital. If you have health concerns and are likely to meet the deductible each year, you will save money by choosing a traditional Medigap plan.

Alternatives to High Deductible Medigap Plans

Even for those who are good candidates for a high deductible plan, they may not be the smartest choice. Before enrolling, you may want to consider other options, such as a Medicare Advantage plan.

Medicare Advantage plans have low monthly premiums - sometimes as low as $0 per month. In addition, you’ll likely have extra benefits not found in any Medigap plan. Medicare Advantage plans often have dental benefits, hearing and vision care, gym memberships, over-the-counter stipends, and more. Each plan also has an annual maximum out-of-pocket or MOOP. Sometimes, the MOOP is not much higher than the high deductible Medigap plans.

Before enrolling in any Medicare health plan, seek advice from Local Medicare Specialists. Our advisors understand your local Medicare market and can help you make the best decisions for your unique situation.