Medicare Supplement Insurance (Medigap) Policy Pricing
Medicare Supplement Insurance (Medigap) policies are regulated by the states and don’t follow Medicare enrollment time frames. You may change your Medigap policy at any time by applying with another insurance carrier. Most carriers evaluate your risk factors and issue you a rate based on that evaluation through a process called underwriting. Different states have different rules, and some carriers may not require the evaluation depending on your situation.
Each insurance carrier decides how it sets the price, or premium, for its Medigap policies. It’s important to consider how a carrier prices its policies. The way it sets the price affects how much you pay now and in the future.
Medigap policies can be priced, or “rated,” in three ways:
Community rated (also called “no-age rated”)
Issue-age rated (also called “entry-age rated”)
Attained-age rated
Each pricing method is described below. The amounts in each example aren't actual costs. Other factors like where you live, medical underwriting, and discounts can also affect your premium amount.
Note: Some policies may have rate increases throughout the year.
Community Rated
How it's priced
Generally the same premium is charged to everyone who has the Medigap policy regardless of age or gender.
What this pricing may mean for you
There is one premium for everyone living in your area regardless of age or gender; however, discounts may be applied based on your age.
Premiums may go up because of inflation, or because your discount decreases as you age.
Examples
Mr. Smith is 65. He buys a Medigap policy and pays a $125 monthly premium; this is his premium after he receives a discount based on his age (the community-rated price for those who don't qualify for a discount is $195).
Mrs. Perez is 72, and she buys the same Medigap policy as Mr. Smith. She pays a $166 monthly premium. This is her premium after she receives a discount based on her age (the community-rated price for those who don't qualify for a discount is $195).
Note: The amounts used in this example aren’t the actual costs of plans.
Issue-Age Rated
How it's priced
The premium is based on your age when you buy (are "issued") the Medigap policy.
What this pricing may mean for you
Premiums are lower if you buy at a younger age and won't change as you get older. Premiums may go up because of inflation and other factors but not because of your age.
Examples
Mr. Han is 65. He buys a Medigap policy and pays a $145 monthly premium.
Mrs. Wright is 72. She buys the same Medigap policy as Mr. Han. Because she is older when she buys it, her monthly premium is $175.
Note: The amounts used in this example aren’t the actual costs of plans.
Attained-Age Rated
How it's priced
The premium is based on your current age (the age you have "attained"), so your premium goes up as you get older.
What this pricing may mean for you
Premiums are low for younger buyers, but go up as you get older. These policies may be the least expensive at first, but they can eventually become the most expensive. Premiums may also go up because of inflation and other factors.
Examples
Mrs. Anderson is 65. She buys a Medigap policy and pays a $120 monthly premium. Her premium goes up each year:
At 66, her premium goes up to $126
At 67, her premium goes up to $132
At 72, her premium goes up to $165
Mr. Dodd is 72. He buys the same Medigap policy as Mrs. Anderson. He pays a $165 monthly premium. His premium is higher than Mrs. Anderson's because it's based on his current age. Mr. Dodd's premium goes up each year:
At 73, his premium goes up to $171
At 74, his premium goes up to $177
Note: The amounts used in this example aren’t the actual costs of plans.
Medigap policy carriers usually increase their rates annually, but they can increase rates at any time with the approval of state regulators. These rate increases may happen at different times of the year for different insurance carriers.
All insurance carriers raise their rates to adjust for inflation and health care costs. Some carriers also raise rates as you age in to higher age brackets. Other carriers offer discounts to new enrollees, and these discounts gradually expire over time, resulting in a rate increase that may be larger than you anticipated. All of these factors make deciding to change plans due to a rate increase more challenging.
Via Benefits Insurance Services recommends the following:
Use trusted, established insurance carriers
Choose the level of coverage that matches the level of heath services you actually use
If your rate increase is more than 12%, call and speak with one of our licensed benefit advisors* about your options. We can review the current rates for other insurance carriers and their enrollment criteria
*Our licensed benefit advisors specialize in health insurance for retirees. They go through annual training and certification to ensure they can help you make an informed and confident decision.
