What are cost-sharing plans?

Unlike other Medigap plans that provide 100% coverage for certain benefits, cost-sharing Medicare Supplement Insurance plans provide only partial coverage for some specific benefits. There are two cost-sharing plans currently available: Medigap Plan K and Medigap Plan L.

Both cost-sharing Medigap plans include the same benefits, but the levels of cost-sharing differ. Both plans have an annual out-of-pocket limit. This limit exists to help prevent cost-sharing from getting out of control. Once you pay up to this annual limit in cost-sharing expenses, the plan changes and begins covering 100% of all covered benefits.

The two cost-sharing plans are among the least popular Medigap plan options, according to enrollment data from America’s Health Insurance Plans (AHIP). However, they are growing in popularity.

Cost-sharing Medigap Plan K

Medigap Plan K is a 50% cost-sharing plan. It provides 50% coverage for 5 Medigap benefits and full coverage for 1 benefit.

Here’s an example of how Plan K cost-sharing works: Plan K covers 50% of the Medicare Part B co-insurance or co-payment. If you have a $100 co-payment for a Medicare Part B service, Plan K would pay for 50% of the co-payment (i.e., $50), and you would pay the remaining 50% ($50).

Medicare Supplement Insurance Plan K includes the following benefits:

• Medicare Part A co-insurance (100%)
• Medicare Part B co-insurance and co-payment (50%)
• First 3 pints of blood (50%)
• Part A hospice care co-insurance or co-payment (50%)
• Co-insurance for skilled nursing facility (50%)
• Medicare Part A deductible (50%)

To prevent large out-of-pocket costs for plan enrollees, there is an annual limit on cost-sharing. In 2022, this limit is set at $6,620. Once you hit your yearly out-of-pocket cost-sharing limit, Plan K will fully pay for all covered benefits.

Plan K enrollment

According to 2022 data from AHIP, only 1% of Medigap policyholders chose cost-sharing Plan K in 2021, making it an unpopular plan. The low enrollment numbers may be due in part to the fact that only 15% of insurance providers offered Plan K in 2021, according to AHIP.

Cost-sharing Medigap Plan L

Plan L is a 75% cost-sharing Medicare Supplement insurance plan. This cost-sharing plan provides partial coverage for 5 Medigap benefits and full coverage for 1 benefit.

Plan L works similarly to Plan K, in that it works after Medicare pays its portion of the approved services. The plan will pay for 75% of the costs, leaving the remaining 25% for you to pay. So if you have a $100 co-payment for a service covered by Medicare Part B, Plan L would pay 75% ($75), and you would pay 25% ($25).

Medigap Plan L includes the following benefits:

• Medicare Part A co-insurance (100%)
• Medicare Part B co-insurance and co-payment (75%)
• First 3 pints of blood (75%)
• Part A hospice care co-insurance or co-payment (75%)
• Co-insurance for skilled nursing facility (75%)
• Medicare Part A deductible (75%)

To prevent large out-of-pocket costs for plan enrollees, Plan L also has an annual limit on cost-sharing. In 2023, this limit is set at $3,470. Once you hit your yearly out-of-pocket limit for Medigap coverage, the insurance company will fully pay for all covered benefits.

Plan L enrollment

Enrollment in Plan L is rather low, according to the AHIP report. In 2022, Plan L represented less than 0.5% of all Medigap plans. Only 15% of Medigap insurance companies offered this cost-sharing Medicare Supplement Insurance plan in 2022.