In the Medicare insurance industry, it is very common for beneficiaries to confuse the Medigap Open Enrollment Period with the Annual Election Period (AEP). These two Medicare Election Periods are distinct and different windows of time. So what is AEP Medicare? Let’s find out.
AEP Medicare vs Medigap Open Enrollment
The Medicare Annual Election Period occurs every year in the fall. It runs from October 15th – December 7th. It’s a time of year when you can change your Part D drug plan or Medicare Advantage plan.
You can switch from Original Medicare to a Medicare Advantage plan. You can also change from a Medicare Advantage plan to another Medicare Advantage plan or back to Original Medicare.
What the AEP ISN’T is a time when you can apply for a Medigap plan without underwriting. This election period applies to Medicare Advantage plans and Medicare Part D prescription drug plans only – not to Medicare supplements. Read further if you want a fuller description.
Medigap Open Enrollment Period
Medicare’s publication called “Choosing a Medigap Policy” offers a good description of what the open enrollment period is. This period begins on the first day of the month in which you turn 65 or you enroll in Medicare Part B, whichever occurs later. The period lasts for only 6 months.
The purpose of the Medigap open enrollment period is for someone new to Medicare Part B to be able to enroll in any Medigap plan without medical underwriting. That means that the insurance carrier cannot decline to cover you based on any health problems. They cannot refuse to sell you a policy or make you pay a higher rate for health problems either. In fact, during this period, you are not even required to answer any health questions on the application.
What’s so important to understand about this period is that once the 6-month window passes, it is gone for good. Most people do not get any elections periods where they are guaranteed to be issued a Medigap policy. It’s important to choose wisely up front.
Changing Often Means Medical Underwriting
Let’s say that your first Medigap policy has a rate increase next year. This is common as all Medigap plans almost always have annual rate increases. Obviously, you’ll want to shop around for another insurance company to see if you can get better pricing. In most states, you must answer health questions and go through medical underwriting to do so. The underwriter may call you to ask health questions or pull a copy of your medical records. Ultimately the company will decline some people for health conditions.
This is crucial is because people will often leap at the lowest priced carrier on the market during their open enrollment period. They don’t do any research on that company’s rate increase trend over time.
If an insurance carrier has abnormally low rates, then there is a chance they will have some heavy losses. This could cause rates to increase by 10% – 12% the following year to make up for those losses. If you have health conditions which will make it difficult for you to change policies in the future, then you want to be sure you choose a stable carrier with a good rate increase trend history during your open enrollment period.
The Annual Election Period (AEP)
Now back to that Medicare AEP. Medicare’s Annual Election Period has nothing to do with Medigap policies.
The AEP came about with the introduction of Medicare Part D plans in 2006. Since insurance companies that offer Part D policies can change their premiums, copays and even their drug formularies annually, Medicare allows you an annual opportunity as well to make a change to your drug plan or Medicare Advantage plan during the AEP. Some examples of why or how you might use your AEP are:
- find a less expensive drug plan
- find a drug plan with a formulary that more closely matches the medications you need
- enroll into a Medicare Advantage plan instead of staying with Original Medicare
- disenroll from a Medicare Advantage plan and return to Original Medicare
What the AEP is Not
What the AEP does NOT provide is the opportunity to enroll in a Medigap policy without underwriting. You can use the AEP to leave a Medicare Advantage plan and return to Original Medicare. However, when you apply for a new Medigap policy to supplement your Medicare at the same time, be prepared to answer health questions. There is no guarantee of your approval for the new Medigap plan.
There are some exceptions when the Medigap insurance carrier may give you what is called a guaranteed issue enrollment into a Medigap policy. This is usually due to something changing that is beyond your control. For example, if your Medicare Advantage plan is pulled from the market and will no longer be offered next year, you will have a window of time where you can select a policy without underwriting.
Enrollment windows and election periods are some of the most confusing parts about Medicare, so don’t feel overwhelmed. The best thing you can do is to work with an agent or agency that specializes in Medicare insurance products. These folks will know the rules and can walk you easily through the steps you need to take and what information will be required of you to make the change that you want.
Get Someone on Your Side During the Medicare AEP
In a nutshell, you use your Medicare Supplement Open Enrollment window to enroll in a Medicare supplement, or Medigap plan, without answering any health questions. Most people have only one open enrollment period in their lifetime. The Medicare AEP, on the other hand, occurs each year in the fall from October 15th – December 7th.