Medicare Supplement Insurance, also known as Medigap, helps cover the ‘gaps’ in Original Medicare and is a significant part of healthcare planning for many Americans. However, the cost of Medigap policies can vary widely, and understanding the pricing methods used by insurance companies can help beneficiaries make informed decisions. There are three main pricing methods used for Medigap policies: community-rated, issue-age-rated, and attained-age-rated.
Community-Rated In community-rated (also known as no-age-rated) pricing, everyone pays the same rate for a policy, regardless of age. For example, a 72-year-old would pay the same rate as a 65-year-old for the same policy. While premiums do increase due to inflation and other factors, they do not increase based on age. This method may result in higher initial premiums for younger enrollees, but the premiums do not increase as the enrollee ages.
Issue-Age-Rated Issue-age-rated (or entry-age-rated) pricing bases the premium on the age at which you buy (or are “issued”) your Medigap policy. Premiums are lower for people who buy at a younger age and won’t change as you get older. Like community-rated, premiums may increase due to inflation and other factors, but not because of your age.
Attained-Age-Rated Attained-age-rated pricing bases the premium on your current (or “attained”) age, meaning the premium increases as you get older. Premiums are low for younger buyers but increase as the buyer ages. These plans can seem attractive to younger buyers due to the lower initial premiums, but the costs can add up over time as the premiums increase with age.
It’s important to note that regardless of the pricing method, premiums may increase over time due to inflation and other factors. Additionally, each state may regulate which pricing methods insurance companies can use.
Understanding these pricing methods can help you anticipate potential changes in your Medigap premiums and plan for your healthcare costs effectively. Always consider these pricing methods when comparing Medigap policies and choose the one that best fits your healthcare needs and financial situation.