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Community Rated, Issue-Age Rated, & Attained-Age Rated Medigap Plans


While there are different types of Medigap pricing methods, at the end of the day, letter plan and state, have a higher impact on rate increases. Although understanding pricing methods will give you a deeper understanding of how insurance companies determine local rates. It’s important to remember that rate increases must have state insurance department approval.

Medicare Supplement (Medigap) Pricing Methods

Regardless of the pricing method used, every carrier is going to increase rates annually. Most of the best Medicare Supplement companies try to keep increases modest. It’s easier to stay current policyholders happy than it is to find new policyholders.

There are three types of Medigap pricing methods:

  • Community Rated
  • Issue Age Rated
  • Attained Age Rated

Medicare Supplement (Medigap) Pricing Methods

Community Rated Medigap Plans

With community-rated Medigap plans (also known as “no-age-rated” pricing), everyone pays the same rate for a policy. Age doesn’t matter. For example, if you buy a community-rated policy at age 72, you’ll pay the same rate as someone who is buying coverage at age 65. Your premium increases because of inflation or other factors.

Younger Beneficiaries End Up Paying More

Someone who is 72 could benefit from paying the same amount as someone who is 65; in most cases, the 65-year-old is paying substantially more in an area with a community rating than they’d pay in another area with a different rating method. However, the costs tend to balance out as you age. This type of rating method doesn’t provide a good situation for beneficiaries. Thus, many companies don’t use this method.

What States Have Community-Rated Medigap Plans?

Eight states require community-rated Medigap insurance companies.

These states are community rated Medigap states;

Issue-Age-Rated Medigap Policies

Issue age-rated Medigap policies base your premium on the age when you first bought the policy. The older you are when you get your policy, the more you’ll pay. Under this pricing model, a person who buys a policy at age 72 will pay a higher monthly premium than a person who buys the same policy at age 65.

While Rates Aren’t Based on Aging, Costs Are Usually Higher

Once your premium has been set, age doesn’t play a factor in cost. Instead, inflation, administrative costs, or other factors impact your premium. Insurance companies know that age won’t be a factor in rate increases, and thus they usually charge more in the beginning.

The premiums for these policies increase at the state level; so, when Cigna raises the Florida Medigap premiums for Plan N, everyone in the state who has that policy sees a premium increase. In some states, insurance companies have no choice but to sell issue-age policies.

Many companies use a discount for those that sign up at age 65; then, as those beneficiaries age, the discount slowly goes away. This results in a policy that is very similar to an attained age policy during the length of the discount.

Issue age-rated policies are required in four states, including Florida, Arizona, Idaho, and Georgia. However, in these states, carriers can opt into using community ratings instead if they choose.

Attained-Age-Rated Medigap Policies

The attained age-rated Medigap policies are common among insurance carriers. Attained age-rated Medigap pricing always calculates your premium based on your current age (the age you have “attained”), no matter how long you have had your policy.

This means that when you first buy your policy, your premium will be based on your current age, with older people paying more. A person buying a policy at age 72 will pay more than a person who buys the same policy at age 65.

Because premiums are based on your current age, they go up each year as you get older. For example, a policy that costs $120 a month when you bought it at age 65 might be $165 a month by the time you are 72.

Generally Lower Initial Costs

An attained age policy can be the lowest-price option when 65, but as you get older, prices are expected to increase. Like the other two pricing models, attained age premiums can go up because of inflation or other factors.

Even though these policies can increase due to multiple factors, the costs of attained age-rated policies are usually still a better option.

For someone turning 65, a  premium could be $100 monthly for attained age and $140 per month for an issue or community-rated policy. Then, all three policies will increase in price over time, eventually evening themselves out.

FAQs

Is issue-age-rated or community-rated Medigap plans better?
Many of our clients ask us if they should get an issue age or community-rated Medigap policy. Neither of these pricing methods for Medigap policies will increase your premium as you age, but they still can increase due to other factors. Factors such as discounts, high deductibles, and guaranteed issue rights can affect the price of your policy. Also, the policy available in your service area impacts the method in use; some states require specific rating methods. There isn’t a better option; all of the coverage options increase with time.
Is attained-age rated or community-rated Medigap plans better??
When you have a policy that is based on your attained age, that means the rate is based on the age you enrolled in coverage. This policy will continue to increase as you get older. Community-rated Medigap plans charge the same rate for everyone enrolled in the same plan in the same area. Premiums will go up due to inflation, but never because of age. With all the rating methods, there will be an annual increase. Community rating can cost more in the beginning than some of the other pricing methods.
Which Medigap pricing method is best?
Overall, each rating method has rate increases, even policies with community ratings. The important part is choosing a company with a history of low rate increases and a competitive premium. No Medigap pricing method is superior to any other one, each option has its own increases.

How to Find The Best Medigap Rating Method

At MedicareFAQ, we research top insurers to find you the best Medigap rating method available in your state. We explain your choices and answer your questions, so you understand the pricing methods and other features of all the policies you are considering – before you make a decision. Give us a call for more information on the different types of pricing methods carriers use to determine your premiums. You can also complete our online rate form here.

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Lindsay Malzone

Lindsay Malzone is the Medicare expert for MedicareFAQ. She has been working in the Medicare industry since 2017. She is featured in many publications as well as writes regularly for other expert columns regarding Medicare. You can also find her over on our Medicare Channel on YouTube as well as contributing to our Medicare Community on Facebook.

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