Note: If you want to get an estimate of your premiums and your eligibility, go to the calculator on the medicare.gov page:
Calculate Your Premium Estimates Here
When it comes to Medigap policies, the cost can vary significantly from one insurer to another. Insurance companies determine the premiums for these policies in different ways, and understanding how they set these prices is essential to making informed decisions about your coverage. Here, we’ll explain the three common pricing methods for Medigap policies and what they mean for you.
Community-Rated (No Age Classification)
Pricing method: With community-rated policies, also known as “age-rated” policies, everyone with the same Medigap policy pays the same monthly premium, regardless of their age.
What does this mean for you: Your premium is not influenced by your age. While premiums may increase due to inflation and other factors, they will not change based on your age. For example, if Mr. Smith, 65, and Ms. Perez, 72, have the same Medigap policy, they will pay the same monthly premium of $168.
Issue-Age-Rated (Entry Age Classification)
Pricing method: Policies with issue age ratings determine the premium based on her age when she initially purchased the policy.
What does this mean for you: Premiums are lower for people who buy the policy at a younger age and remain constant as they age. Your premiums may increase due to inflation and other factors, but not because of your age. For example, Mr. Han, at age 65, pays a monthly premium of $148, while Ms. Wright, at age 72, when she purchases the same policy, pays a monthly premium of $178.
Attained-Age-Rated
Pricing method: With attained-age rating policies, your premium is based on your current age, causing your premium to increase as you age.
What does this mean for you: Premiums are initially lower for younger buyers, but increase progressively with age, potentially making them the more expensive option in the long term. These premiums can also increase due to inflation and other factors. For example, Ms. Anderson, at age 65, starts with a monthly premium of $123, which increases each year. At age 72, she pays $168. In contrast, Dodd, who is 72, pays a monthly premium of $177, which is higher than Anderson’s because it is based on her current age and will also increase annually.
Note: Keep in mind that the cost of Medigap policies can vary widely between insurers, even for the same coverage. When purchasing a Medigap policy, compare the same type of Medigap policy and consider the pricing method used. Additionally, the cost of your policy may be influenced by several factors, such as specific group discounts, medical underwriting, and the type of Medigap policy you choose, such as select Medicare policies or high-deductible options for Plans F or G.
Understanding these pricing methods and considering your specific needs and circumstances will help you make the right decision when selecting a Medigap policy.