A Medigap plan is health insurance sold by private companies to help cover what Original Medicare does not. Before you buy a policy, it’s essential to ask how the companies set the rates (premium). They way they determine the price impacts how much you pay today and in the future.
Related Post: Top 3 Medicare Supplement Companies in 2021
Three Ways
Did you know? Medicare Supplements can be rated in three ways:
- Community-rated (also called “no age-rated”)
- Issue-age-rated (also called “entry age-rated”)
- Attained-age-rated
We’ll explain each of these below. The main thing to remember is that Medigap premiums are unique for every recipient.
Community-rated
Also called no age-rated, here the same monthly premium is typically charged to everybody who has the Medigap plan, no matter their age.
What might this pricing mean for you?
Your premium is not connected with your age. It may increase due to inflation and other variables, but not because of age.
Example:
Mr. Johnson is 65. He buys a Medigap plan and pays a $170 monthly premium.
Mrs. Garcia is 72. She buys the same plan as Mr. Johnson. She also pays a $170 monthly premium. With a community-rated policy, everybody pays the same rate regardless of age.
Issue-Age-Rated
Also called entry age-rated, the premium here is based on your age when you buy — when you’re issued — the Medigap plan.
What might this pricing mean for you?
Younger buyers benefit from lower premiums and these won’t go up as you age. Your premium may increase because of inflation and other causes, but not due to your age.
Example:
Mr. Davis is 65. He buys a Medigap plan and pays a $140 monthly premium.
Mrs. Williams is 72. She buys the same plan as Mr. Davis. Since she’s older when she purchases the policy, her monthly premium is $170.
Attained-Age-Rated
The Medigap premium is based on the age you’ve “attained” so your payment rises as you get older.
What might this pricing mean for you?
Younger buyers also benefit from low premiums. The amount increases as you age.
They may be the cheapest at first, but they can become the most expensive in the long run. Premiums may also increase due to inflation and other variables.
Example: Mrs. Starnes is 65. She buys a Medigap plan and pays a $125 monthly premium. This amount will increase every year.
At 66, her premium increases to $131.
At 67, it increases to $137.
At age 72, it goes up to $170.
Mr. Dale is 72. He buys the same Medigap plan as Mrs. Starnes. He pays a $170 monthly premium. Why is his premium higher than hers? Because of his current age. Mr. Dale’s premium will increase each year.
- At 73, his premium goes up to $176.
- At 74, his premium goes up to $183.
What’s the Average Cost of Medigap Insurance?
It’s hard to say, exactly. A Medigap policy can cost between $50 and $350 per month — depending on the plan letter.
What Else Can Affect the Cost?
The cost of your plan may also be based on whether the company:
- Offers discounts for non-smokers, women, or married couples
- Uses medical underwriting or “protections”
- Offers a high-deductible Plan F or G
- Sells Medicare SELECT policies that may make you use certain providers.
Related Post: Key Medicare Terms A Through Z
The Bottom Line
The cost of Medicare Supplement plans can vary far and wide. There can be significant differences in the prices that different companies charge for the same coverage.
When trying to find quotes, it helps to use an agent who specializes in Medigap insurance, like the ones at The Fussell Group Insurance Advisors. We can give you multiple quotes in one phone call and compare plans with you.