When choosing a Medicare Supplement, or Medigap plan, you’re probably concerned about cost. There are 10 Medigap plans available through private insurers, and each has a standard set of benefits no matter which insurance company you choose.
As you would expect, the plans with the most benefits tend to cost more.
But many people don’t realize that insurance companies may charge different amounts for the exact same plan.
The pricing method in your Medigap policy helps determine the monthly premium you will pay now, and whether your premiums will increase as you get older. When you understand that there are different types of pricing methods, you can better understand your premium.
Medigap Pricing Methods
There are three types of Medigap pricing methods:
- Community Rated
- Issue Age Rated
- Attained Age Rated
It’s important to understand pricing before you buy a policy. Some policies seem like a good deal, but the premiums will go up as you age.
This can potentially leave you struggling to pay premiums in your later years when your health is failing and it is hard to qualify for other coverage. Here are the basic features of each type of Medigap pricing.
Community Rated Medigap Plans: Everyone Pays the Same Amount
With community-rated Medigap pricing (also known as “no-age-rated” pricing), everyone pays the same rate for a policy. Age simply doesn’t matter.
For example, if you buy a community rated Medigap policy at age 72, you’ll pay the same rate as someone who is buying coverage at age 65. Your premium will not go up as you get older, but it might increase because of inflation or other factors.
Issue-Age-Rated Medigap Plans: Premiums Based on Your Age When You Bought Your Policy
Issue age rated Medigap pricing (also known as “Entry-Age-Rated” pricing), bases your premium on the age you were when you first bought your 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.
Once your premium has been set, however, it will not increase because of your age. Inflation or other factors might still make your premium go up over time.
Attained-Age-Rated Medigap: Higher Premiums as You Get Older
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 cost $120 a month when you bought it at age 65 might be $165 a month by the time you are 72.
An attained age rated policy can be the lowest-price option when you are 65, but as you get older it may become the most expensive type of plan. And like the other two pricing models, attained age premiums can go up because of inflation or other factors.
Attained Age Rated Medicare Supplements usually start increasing around your 68th birthday, somewhere between 1.5%-5% per year. However, some plans can increase their rates twice per year.
Attained-Age vs Issue-Age Medigap plans
The attained age rated Medicare Supplements are common among insurance carriers. Attained age rated Medigap plan premiums rise as enrollees get older.
Issue age rated Medicare Supplement policies are required in four states; including Florida, Arizona, Idaho, and Georgia. In these states, carriers can opt into using community ratings instead if they choose.
Issue-Age vs Community Rated Medigap Policies
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 right can affect the price of your policy.
Attained-Age vs Community Rated Medicare Supplement Pricing
Many seniors wonder about attained age vs community rated Medicare supplement plans.
When you have a policy that is based on your attained age, that just 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.
What Medigap Policies are Community Rated?
As of 2019, there are eight states that require community rated Medigap insurance companies.
These states are community rated Medigap states, they include:
- New York
The other states don’t require community rated policies. The insurance carrier can decide the rating type.
Other Important Information
Aside from understanding the different types of Medicare Supplement pricing methods, it’s important to understand when and what the different types of Medicare Enrollment Periods are.
There are enrollment periods for Original Medicare, Medigap, Medicare Advantage and Prescription Drug Plans. It’s also important to understand Medicare Supplements guaranteed issue rules and guidelines.
Find Prices on Medicare Supplements Online
At MedicareFAQ, we research top insurers to find you the best Medigap policy for your needs and your budget. 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.