Supplemental insurance options — what's out there beyond Medigap

This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Your parent has Medicare. Medicare helps. Medicare does not cover everything, which is why conversations about supplemental insurance exist. You've probably heard about Medigap—supplemental insurance that sits alongside Original Medicare and helps pay for the copays and deductibles Medicare doesn't. But there are other options you might not know about. Hospital indemnity insurance, critical illness insurance, accident insurance, Medicare Advantage plans that might or might not be supplemental depending on how you look at them. The terrain is confusing because there are a lot of moving pieces and some of them sound similar but work completely differently.

The core question is always the same: what gaps exist in your parent's current coverage, and which supplemental product actually fills those gaps? A product that sounds great in marketing might not help your parent's specific situation. A cheap product with a narrow scope might be perfect for one family and useless for another. Understanding what each type does, and what it doesn't do, means you can make decisions instead of just reacting to sales pitches.

Medigap: The Standard Supplemental Insurance

Medigap, formally called Medicare Supplement Insurance, is the most traditional form of supplemental coverage. Your parent has Original Medicare, and Medigap fills in the gaps between what Medicare pays and what the provider charges. Medigap covers copays, deductibles, coinsurance, and some services Medicare doesn't cover at all.

Medigap comes in plans labeled A through N (there used to be more, but these are what's available now). Each plan has a standardized set of benefits, which means Plan G is the same whether your parent buys it from insurance company X or insurance company Y. The difference is in the premium—one company might charge $150 monthly for Plan G and another might charge $200 for the exact same coverage.

How Medigap works: Medicare pays its part of the bill, then Medigap pays some or all of the part that Medicare doesn't cover. If your parent's doctor charge is $200 and Medicare covers $160, leaving a $40 copay, Medigap might pay that $40 copay. If the doctor is within Medicare's approved network, the process is fairly invisible,Medicare and Medigap coordinate and your parent just pays their premium.

The most comprehensive Medigap plans (like Plan G) cover Medicare Part A deductibles, Medicare Part B deductibles and copays, and lots of coinsurance. They're the most expensive but the most complete. The least comprehensive plans (like Plan A) cover basic things but leave your parent with more out-of-pocket costs. Most people buying Medigap are trying to balance premium costs against coverage gaps.

One important thing: Medigap is only available to people on Original Medicare. If your parent chooses Medicare Advantage instead, they can't have Medigap. These are mutually exclusive decisions. You choose one or the other.

The right time to buy Medigap is right when your parent turns 65 and enrolls in Original Medicare. There's a limited open enrollment period, and if your parent doesn't sign up then, they might be charged higher premiums later and some might refuse to cover them entirely due to pre-existing conditions. If your parent is already on Original Medicare and doesn't have Medigap, they can still apply, but they might face higher costs.

Medicare Advantage: All-in-One Alternative to Medigap

Medicare Advantage (sometimes called Part C or MA plans) is not supplemental insurance. It's a complete replacement for Original Medicare. Your parent gets their Medicare benefits through a private insurance company instead of through the traditional Medicare system. Medicare Advantage typically includes drug coverage (Part D) built in, whereas Original Medicare + Medigap requires a separate drug plan.

Medicare Advantage plans usually have lower premiums than Original Medicare + Medigap. They also usually have networks (you have to use doctors and hospitals in the network, or pay more). They often have limits on out-of-pocket costs, which Original Medicare doesn't have.

The key tension: Medicare Advantage is more convenient and cheaper on the premium side. But if your parent has specific doctors they want to see, or if they live part of the year in different states, they might run into network issues. Medicare Advantage plans are designed for people who stay in the service area and want predictability about out-of-pocket costs.

If your parent chooses Medicare Advantage, they don't buy Medigap. The two approaches are incompatible. This is an either-or decision, not a combine-them-both decision.

Hospital Indemnity Insurance: Fixed Dollar Coverage

Hospital indemnity insurance is different from Medigap. It doesn't coordinate with Medicare or fill specific gaps. Instead, it pays you a fixed amount per day that you're in the hospital or facility. The amount is written into the contract,maybe $200 per day, or $400 per day. That's what the company pays, regardless of what your medical bills actually cost.

This is useful if your parent is worried about copays or deductibles during a hospital stay. Hospital indemnity insurance can cover the copays while they're hospitalized. But unlike Medigap, which adjusts based on what doctors charge, hospital indemnity pays the same fixed amount no matter what the charges are.

Hospital indemnity is usually cheap,maybe $30 to $60 monthly for someone in their sixties and seventies. The catch is that it only covers hospital stays, not outpatient care or doctor's visits. If your parent rarely goes to the hospital but is worried about the financial impact if they do, hospital indemnity is a narrow but cheap bet.

Some people combine hospital indemnity with a basic Medigap plan, figuring they'll have backup coverage if they end up hospitalized. Some people use it as a standalone product if they're worried about hospital costs but think they're otherwise healthy. The math depends on how likely your parent is to be hospitalized and whether they'd rather have that protection or save the monthly premium.

Critical Illness Insurance: Lump Sum If Major Diagnosis Happens

Critical illness insurance is another layer that's not health insurance but fills a gap some people worry about. It pays a lump sum,maybe $5,000, $10,000, or $25,000,if your parent is diagnosed with a major illness like cancer, heart attack, stroke, or other serious conditions.

This is obviously not going to cover all medical costs from a serious illness. But it provides cash that your parent can use however they want. Maybe they need to take time off work. Maybe they need to hire someone to help with the house while they're in treatment. Maybe they need airfare to see a specialist. The insurance company just pays the amount and your parent decides how to use it.

Critical illness insurance premiums are cheap,often $30 to $80 monthly for older adults,because the insurance company knows they're unlikely to actually pay claims (assuming your parent stays relatively healthy). The bet here is that your parent has a catastrophic diagnosis and having cash available is valuable.

This product is purely optional and somewhat speculative. Some people value the safety net. Some people would rather not pay for something they probably won't need.

Accident Insurance: Narrow but Valuable for Accident Costs

Accident insurance covers costs related to accidents,falls, car accidents, injuries. It might pay for emergency room visits, hospitalization related to the accident, physical therapy, or even home modifications needed after the accident (like a shower chair or grab bars).

Like hospital indemnity and critical illness insurance, accident insurance is cheap and narrow. You're betting that your parent will have an accident and that this insurance will help cover costs. For someone who's very active or lives alone in a multi-story house, the risk of accidents is higher. For someone who's careful and has help, the risk is lower.

The cost is usually $10 to $40 monthly. The benefit is coverage for a specific type of event. If the event doesn't happen, you paid premiums for something you didn't use. If it does happen, the insurance helps.

The Medigap vs. Advantage Decision: Figuring Out What Makes Sense

Choosing between Medigap and Medicare Advantage is the most consequential decision your parent will make about supplemental coverage. There's no universal right answer, but there are questions that point toward the better choice for your parent's situation.

Ask whether your parent has doctors they're committed to seeing. If yes, you need to know whether those doctors are in the Medicare Advantage network your parent is considering. If they're not, Medicare Advantage might force your parent to switch providers, which many people don't want to do.

Ask whether your parent travels or spends time in multiple locations. If your parent splits time between two states or travels frequently, Medicare Advantage networks might be restrictive. Original Medicare + Medigap works nationwide without network restrictions.

Ask what your parent's expected healthcare use is. Someone with multiple chronic conditions and regular doctor visits might save money with Medigap and Original Medicare (which don't restrict specialists or require referrals). Someone who's generally healthy and wants low monthly premiums might prefer Medicare Advantage.

Ask about costs in a concrete way. Get a specific Medicare Advantage plan premium and compare it to Original Medicare + Medigap premium + drug coverage (Part D). Calculate the total annual cost for each approach. Look at out-of-pocket maximums for Medicare Advantage and the annual deductibles for Medigap. Then ask which scenario feels more predictable to your parent.

The choice is reversible to some degree (you can switch during open enrollment periods) but it's also consequential. Medicare Advantage plans change every year,providers drop out of networks, benefits change, premiums change. Original Medicare is stable. These are different philosophies and they matter to how comfortable your parent will feel.

When Narrower Products Make Sense Alongside Medigap

If your parent has Original Medicare + Medigap, supplemental products like hospital indemnity or accident insurance are optional add-ons. They're not necessary,Medigap covers the main gaps. But some people like having backup products anyway.

The decision about whether these narrow products are worth it comes down to personal risk tolerance and financial situation. Someone who's anxious about catastrophic health costs might feel better having critical illness insurance even though it's a long shot. Someone who's active outdoors might appreciate accident insurance. Someone who's worried about hospitalization might add hospital indemnity.

The premiums are small enough that they don't usually break the budget. The real question is psychological: does having this coverage reduce your parent's anxiety about healthcare costs? If yes, it's probably worth the cost. If your parent doesn't think about these scenarios, the coverage is just money spent on something that probably won't happen.

Evaluating Any Product: The Questions to Ask

Whenever your parent is considering a supplemental insurance product, ask these questions: What gap does this actually fill in current coverage? Is there a waiting period before coverage starts? Are there conditions that might trigger non-payment? What's the annual or lifetime limit? Can the company deny claims after they've approved coverage? Is the premium guaranteed to stay the same?

Get answers in writing. Don't rely on what a sales agent tells you. Read the actual policy language or at least the summary sheet. If you're confused, ask a second time. There's no such thing as a dumb question when you're about to commit to years of premiums.

Also ask whether your parent might be better served by a different product entirely. Sometimes a conversation with an insurance broker who sells multiple products (rather than just one company's products) helps clarify what's actually appropriate for your parent's situation.

The Real Purpose of Supplemental Coverage

Underneath all of this is a simple truth: Medicare alone leaves gaps. Your parent is going to face some out-of-pocket costs if they don't have supplemental coverage. The question is what amount of out-of-pocket cost is acceptable and which gaps are most important to cover.

For most people, Medigap or Medicare Advantage answers this question. One or the other is appropriate. The narrow supplemental products (hospital indemnity, critical illness, accident insurance) are optional add-ons that some people value and others don't.

Your parent's job is to understand what coverage they have, what gaps exist, and what they're comfortable paying out of pocket. Your job as the adult child is sometimes to help think through this, make sure the choice is intentional, and confirm that someone isn't paying for something they don't need. Having that conversation now, before a health crisis forces quick decisions, means your parent is covered appropriately and isn't stressed about costs when they're already dealing with health problems.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you are concerned about a loved one's cognitive health or safety, consult with their healthcare provider or contact your local Area Agency on Aging for guidance and support.