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Understanding AARP Insurance Options: An Overview

AARP offers information about several types of insurance products that may be available to members age 50 and older. These include Medicare supplement insurance (also called Medigap), Medicare Advantage plans, prescription drug coverage, and long-term care insurance. A free guide about these options can help you understand what each type of insurance covers and how they work together.

According to the Kaiser Family Foundation, about 19 million people in the United States have Medigap coverage. Understanding the differences between insurance types is important because they work differently and cover different services. For example, Medicare Advantage plans work through private insurance companies and typically include prescription drug coverage built in. Medigap policies, on the other hand, work alongside Original Medicare and help cover costs that Medicare doesn't pay.

Many people find that learning about these options before making decisions helps them understand what coverage might work for their situation. A guide about AARP insurance options explains how each type of plan functions, what services each covers, and how costs compare. The guide also describes how these plans coordinate with Medicare, which is the federal health insurance program for people age 65 and older and some younger people with disabilities.

Reading about these options doesn't commit you to any plan. Instead, it provides background information you can use to have conversations with insurance agents, your doctor, or trusted advisors. Many people use educational materials like this to make more informed decisions about their coverage.

Practical Takeaway: Before comparing specific plans, spend time learning the basic differences between Medigap and Medicare Advantage. This foundation makes it much easier to understand plan details when you review actual options.

What Medicare Supplement Insurance (Medigap) Covers and How It Works

Medicare Supplement insurance, commonly called Medigap, is a type of insurance sold by private companies that helps cover some of the costs that Original Medicare doesn't pay. According to the Centers for Medicare & Medicaid Services (CMS), Original Medicare covers about 80% of covered services, which means beneficiaries pay the remaining 20%. A Medigap policy helps cover some or all of these out-of-pocket costs.

There are ten standardized Medigap plans, labeled A through N. Each plan covers a different combination of costs. For example, Plan G typically covers Medicare Part B coinsurance and copayments, blood (after the first three pints), hospice care coinsurance or copayment, and skilled nursing facility care coinsurance. Plan N covers similar benefits but requires you to pay certain copayments and coinsurances. Plan A is often the most basic, while Plan F and Plan G tend to offer broader coverage.

An informational guide about Medigap explains which costs Medicare covers and which it doesn't. It describes what coinsurance means (your percentage of the cost), what a copayment is (a fixed dollar amount), and what a deductible is (an amount you pay before the plan starts paying). Understanding these terms helps you compare what different plans cover.

One important detail about Medigap is that these plans do not cover prescription drugs. If you want prescription drug coverage, you must join a separate Medicare Part D plan or a Medicare Advantage plan that includes drug coverage. Additionally, if you have a Medigap plan, you typically cannot use Medicare Advantage or Medicare Part D together with it, because Medigap is designed to work with Original Medicare specifically.

Practical Takeaway: Write down the top five medical services you use most (such as doctor visits, prescriptions, hospital care). Then, when comparing Medigap plans, look at how each plan covers these specific services rather than trying to understand every covered benefit.

Medicare Advantage Plans: Coverage Structure and What to Consider

Medicare Advantage plans, also called Part C, are an alternative way to receive Medicare benefits. Instead of using Original Medicare and potentially adding Medigap coverage, you can join a Medicare Advantage plan offered by a private insurance company. These plans contract with Medicare to provide Part A (hospital) and Part B (medical) coverage, and most include Part D (prescription drug) coverage as well.

According to the Kaiser Family Foundation, about 28% of Medicare beneficiaries were enrolled in Medicare Advantage plans as of 2023, representing over 11 million people. These plans often include extra benefits that Original Medicare doesn't cover, such as dental care, vision care, hearing aids, or fitness memberships. However, Medicare Advantage plans typically have network restrictions, meaning you usually must use doctors and hospitals within the plan's network to receive full coverage.

Medicare Advantage plans may have lower monthly premiums than Original Medicare plus Medigap, but they generally require higher out-of-pocket costs when you use services. They have yearly deductibles, copayments for doctor visits, and out-of-pocket maximums (a yearly limit on how much you pay). A guide about Medicare Advantage explains how these costs work and helps you understand what happens if you need care from an out-of-network provider.

There are different types of Medicare Advantage plans. Health Maintenance Organizations (HMOs) require you to use doctors in their network (except emergencies). Preferred Provider Organizations (PPOs) allow you to use doctors outside the network for an additional cost. Point of Service (POS) plans combine features of HMOs and PPOs. Private Fee-for-Service (PFFS) plans work differently from the others. Reading about each type helps you understand which structure matches how you typically receive medical care.

Practical Takeaway: If you have specific doctors or hospitals you want to keep using, check whether they're in a Medicare Advantage plan's network before enrolling. Network restrictions are often the most important factor in whether a plan works for you.

Prescription Drug Coverage: Medicare Part D and Plan Options

Prescription drug coverage through Medicare is called Part D. According to the Centers for Medicare & Medicaid Services, about 45 million people had Medicare Part D coverage in 2022. Prescription drug costs can be significant, so understanding how Part D works helps you manage this expense.

If you have Original Medicare and a Medigap policy, you must join a separate Part D plan to get prescription drug coverage. If you have a Medicare Advantage plan, prescription drug coverage is usually included. A guide about prescription drug coverage explains the different stages of how costs work in Part D plans. Initially, you pay a monthly premium. Then you pay a deductible (usually up to $505 in 2024). After meeting your deductible, you typically pay 25% of the cost of covered drugs until you reach a certain amount in total spending (called the initial coverage limit). Beyond that point, you enter the "donut hole" or coverage gap, where you pay a higher percentage of drug costs, until you reach your out-of-pocket maximum. Once you reach the maximum, catastrophic coverage kicks in, and Medicare pays most costs.

The specific drugs covered and their cost-sharing amounts vary by plan. Each Part D plan has a formulary, which is the list of drugs it covers. Some drugs may require prior authorization, meaning the plan must approve them first. Some may have quantity limits. A formulary also lists the tier, or cost level, for each drug. Tier 1 drugs (generic) typically have the lowest copayment, while higher tiers cost more.

An informational guide about Part D helps you understand terms like "generic," "brand name," and "formulary." It explains why the same drug might cost different amounts through different plans. It also describes how to find plans that cover the specific medications you take and how costs for those medications compare across plans.

Practical Takeaway: Make a list of all prescription medications you currently take, including the exact drug name and dosage. When comparing Part D plans, check each plan's formulary to see what tier your drugs are on and what you would pay. This single step often eliminates plans that don't work for you.

Long-Term Care Insurance: Understanding Coverage and Considerations

Long-term care insurance is different from health insurance. It covers the cost of ongoing care if you need help with daily activities like bathing, dressing, eating, or using the bathroom. This care might happen at home, in an assisted living facility, or in a nursing home. According to the U.S. Department of Health & Human Services, about one in four people who reach age 65 will need long-term care services at some point in their lives.

The cost of long-term