Understand What Affects Medicare Supplement Costs
Your Medicare Supplement (Medigap) costs will depend on the specific plan you have, when you enrolled, how the insurer prices its premiums, and which insurance company you purchased from. Private insurance companies are free to charge different prices for the exact same coverage, meaning that costs can vary widely from plan to plan. It's important to be aware of the different factors that affect how much you pay for Medigap coverage so you can find the best plan for you.
Same benefits, different Medigap costs
Medigap coverage is standardized by the federal government. There are 10 different types of Medigap policies, with each plan designed by a different letter (for example, Medigap Plan F). Each plan letter covers different benefits, but regardless of which insurer is selling the policy, coverage within a given plan letter will be the same from one company to the next.
Because insurance companies set their own prices, Medigap premiums may differ depending on the insurer, even if the products are the same. Always be sure you are comparing prices across the same letter plan, and please note that Massachusetts, Minnesota, and Wisconsin standardize Medigap plan benefits differently.
For the most part, your Medigap costs will depend on the specific plan you join and how the insurance company sets its prices. Medigap Plan F has a high-deductible option, meaning you may have to pay more out of pocket for this plan before the insurance company begins to pay.
How insurers set Medicare Supplement premiums
Another factor that can strongly impact your Medicare Supplement costs is how the insurance company prices its premiums. Each insurer chooses how to set its Medigap premiums and the method it uses impacts how much you pay now and in the future. When shopping for a policy, always pay attention to not only how much a plan currently charges for a plan, but which pricing method is used to set that price.
Medigap premiums are priced in three different ways:
Community-rated ("no-age-rated") plans:
Everyone pays the same monthly Medigap premiums, regardless of age. That means if one person is 65 years old and another is 72 when first enrolling, they both pay the same monthly premium. Premiums will not go up because of your age, but may still go up each year because of inflation.
Issue-age-rated ("entry-age-rated") plans:
Medigap costs are based on how old you are when you first enroll. The 65 year old person will pay less than the person who is age 72. Premiums don't change because you get older, but could increase because of inflation.
This Medigap premium method is based on your current age. As you get older, your premium goes up. The 72-year-old individual will pay more, but the 65-year old person will get to that price eventually. Inflation can also impact pricing.
When joining a Medigap plan, your age when you enroll may impact the premium-pricing method you prefer. For example, if you delay enrolling in Medicare Part B because you have other health insurance, your Medigap Open Enrollment Period would not begin until you're both over 65 and have Part B. Depending on your age, your Medicare Supplement premiums might cost more under an attained-age or issue-age-rated Medigap plan.
Some plans offer discounts to members for various criteria. Check with the individual insurer to see if you qualify for any plan discounts. Discounts can be for:
- Being a non-smoker.
- Being a married couple.
- Setting up automatic payments.
- Buying more than one policy.*
*Medigap plans only cover one person. If you are married, you and your spouse will both need individual policies.
Medigap costs less during the Medigap Open Enrollment Period
One of the biggest factors affecting the cost of your Medigap premiums is when you enroll. Even if you're in good health, joining a Medicare Supplement plan when you're first eligible ensures that you'll not only get the best price for your coverage, but the best plan selection. If you buy a policy during the Medigap Open Enrollment Period (the six-month period following when a person is 65 and has Part B), you can choose any of the 10 plans available, no matter what your health status is. During this enrollment period, insurers are required by law to cover all pre-existing conditions and cannot deny you coverage or charge you more because of health. These are known as guaranteed issue rights.
If you buy a policy after your Medigap OEP, you may have trouble getting the plan you want. Insurers can require medical underwriting and reject you based on health status. Even if you're accepted for a plan, insurers will most likely charge you a higher premium if you have health issues.
When choosing a plan during your Medigap Open Enrollment period, it's important to consider both present and future health needs. If you choose a policy with minimal coverage because you're currently in good health, it may be difficult to switch to a more comprehensive one later if your health takes a downward turn. With a few exceptions, you are generally guaranteed any policy only during your initial open enrollment.
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Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare and provide Medicare Part A and Part B coverage. Medicare prescription drug coverage is insurance run by an insurance company or other private company approved by Medicare. A Medicare Supplement plan is a health insurance plan provided by a private company that fills in the "gaps" in original Medicare coverage.