Medigap insurance, which is also called Medigap Supplement, helps cover the 20% of costs that Original Medicare doesn’t cover, significantly reducing your out-of-pocket costs. Because Medigap plans of the same type (e.g., all Plan Gs) are identical, many are confused by the differences in pricing. The monthly premiums can feel kind of random if you aren’t aware of the different pricing structures that Medigap plans can have. It’s also important to know that Medigap pricing can change over time, depending on your policy pricing structure.
Medicare uses three pricing (or rating) structures to determine how your policy can change over time. In other words, you can have one of three kinds of Medicare Supplement policies:
Each pricing structure affects your monthly Medigap premiums differently over time. We’ll dive into each of these structures so you have a better understanding of your Medicare Supplement plan options.
It’s unlikely that your neighbor and you will pay the exact same premiums for a Medicare Supplement plan. This is because there are various personal factors that can impact what you’ll pay for a Medigap policy, including:
Depending on the type of pricing structure your Medigap policy has, your age and location may play a bigger role in determining your monthly premium. Read on to learn about each type of price structure.
If you have an attained-age-rated Medicare Supplement policy, your monthly premium is based on your current age (the age you’ve “attained”). With an attained-age-rated policy, you’ll have lower premiums when you sign up at a younger age, but your premiums increase as you get older. Attained-age-rated policies can be tricky because they may have attractive premiums at first, but will become more expensive over time.
If you’re in a state with a birthday rule or anniversary rule, you can change from one Medigap plan to another with equal or lesser coverage once each year. In these cases, opting for the attained-age-rated policy and switching to another type once the pricing is no longer competitive is a good strategy.
If you have an issue-age-rated Medicare Supplement plan, your monthly premium is based on the age you are when you apply for coverage. Like an attained-age-rated plan, issue-age-rated policies have lower premiums at a younger age. However, while your rates can increase over time due to inflation and other factors, it can’t increase due to age. Keep in mind that not all states offer issue-age-rated plans.
The main difference between an attained-age-rated plan and an issue-age-rated plan is whether or not your premiums can increase due to age. The monthly price of an attained-age-rated plan can increase as you get older, but an issue-age-rated plan can’t increase because of age.
There’s one more type of Medicare Supplement pricing structure that you should know about—community-age-rated. If you have a community-rated plan, the premium you pay is the same as everyone else with that same policy, regardless of age. Your price can vary based on where you live, your gender, and your smoking status.
Like an issue-age-rated policy, your premium will not increase as you age with a community-rated plan. Community-rated plans are also not available in every state.
How you should choose between an attained-age-rated, issue-age-rated, or community-rated plan depends on your unique health, financial, and lifestyle factors. Besides the pricing structure, there are other considerations you need to make as well. Medigap has ten plans to choose from, lettered A-N, and each plan covers a different set of out-of-pocket costs.
The plan and price that works for you can be a difficult decision to make. Let our licensed Medicare Advisors provide some guidance with a free, personalized consultation. We’ll help you understand your different options and choose a plan that’s best for you. Call us at 855-900-2427 or schedule a chat today to get started!