October 6, 2016
Your Medicare Supplement plan (Medigap plan) costs will depend on the specific plan you have, when you enrolled, how the insurance company prices its premiums, and which insurance company you purchased the plan from. Private insurance companies are free to charge different prices for the exact same coverage, meaning that costs may vary widely from plan to plan. It’s important to be aware of the different factors that affect how much you pay for your Medicare Supplement insurance so you can find a Medigap plan suitable for you.
Same benefits, different Medigap plan costs
Medicare Supplement insurance is standardized by the federal government. There are 10 different types of Medigap plan policies, with each Medigap plan designated by a different letter (for example, Medigap Plan F). Each Medigap plan letter signifies a different level of benefits, but regardless of which insurance company is selling the policy, coverage within a given Medigap plan letter (labeled with letters A through N) will be the same from one insurance company to the next. Note that some insurance companies may provide additional benefits.
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 lettered plan, and please note that Massachusetts, Minnesota, and Wisconsin standardize Medigap plan benefits differently.
For the most part, your Medicare Supplement insurance costs will depend on the specific Medigap 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 insurance companies set Medicare Supplement plan premiums
Another factor that may impact your Medicare Supplement plan costs is how the insurance company prices its Medigap plan premiums. Each insurance company chooses how to set its Medigap plan premiums, and the method it uses can impact 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 plan premiums are priced in three different ways:
Community-rated (“no-age-rated”) Medigap plans:
Everyone pays the same monthly Medigap plan 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”) Medigap plans:
Medigap plan 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.
Attained-age-rated Medigap plans:
This Medigap plan 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 plan premiums might cost more under an attained-age or issue-age-rated Medigap plan.
Some plans may offer discounts to members for various criteria. Check with the individual insurer to see if you qualify for any plan discounts. Discounts may 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 plans may cost less during the Medigap Open Enrollment Period
One of the biggest factors affecting the cost of your Medigap plan premiums is when you enroll. Even if you’re in good health, joining a Medicare Supplement plan during your Medigap Open Enrollment Period can help ensure that you’ll not only get the best price for your coverage, but also the best Medigap plan selection. If you buy a Medigap plan policy during the Medigap Open Enrollment Period (the six-month period following when a person is 65 or older and has Part B), you may be able to choose from any of the 10 plans available in your state, no matter what your health status is. During this enrollment period, insurance companies are required by law to cover all pre-existing conditions and cannot deny you coverage or charge you more because of health status. These are known as guaranteed-issue rights, although waiting periods may apply.
If you buy a policy after your Medigap Open Enrollment Period, you may have trouble getting the Medigap plan you want. Insurance companies may require medical underwriting and reject you based on health status. Even if you’re accepted for a Medigap plan, insurers will most likely charge you a higher premium if you have health issues.
When choosing a Medicare Supplement plan during your Medigap Open Enrollment period, it’s important to consider both present and future health needs. If you choose a Medigap plan 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 Medigap plan policy only during your Medigap Open Enrollment Period.
Medicare Supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program.