There are 3 different ways Insurance Companies Rate Medicare Supplements; Community Rated, IssueAge, and Attained Age. Here is how each of them work.
Community-Rated, No-Age-Rated Pricing:
Medicare Supplement (or Medigap) plans with community-rated pricing charge the same premium to all beneficiaries, regardless of their age and overall health condition. Community-rated plans (also known as No-Age-Rated pricing) tend to be cheaper over time than Medigap plans with attained-age pricing, in which the monthly plan premium increases as you get older.
How does community-rated pricing work?
- Community-rated pricing means that monthly premiums are generally priced (or "rated") the same for everyone who has that Medicare Supplement plan. The age of the beneficiary does not affect the premium price.
- Note that although premiums for community-rated Medigap policies will not increase due to age, they may still go up due to other factors, including inflation.
- However, in spite of this, community-rated or issue-age pricing plans may still end up being cheaper in the long run since the cost does not change based on age.
Examples of how community-rated pricing works
The following example shows how community-rated pricing of a Medicare Supplement plan might work for two different individuals.
- Mr. Kim is age 65. He buys a Medigap policy, paying a $150 monthly premium.
- Mrs. Torres is age 72. She buys the same Medicare Supplement policy as Mr. Kim. Her monthly premium is also $150 because her Medigap plan is community-rated, meaning that all beneficiaries pay the same premium price regardless of age.
Please note - these are not actual examples; they are meant to illustrate the concept of community-rated pricing.
Other factors that may affect Medigap costs
Keep in mind that aside from premium prices, factors like high deductibles, discounts, and whether you have a guaranteed issue right can all affect the cost of the Medicare Supplement plan. Depending on the state that you live in, you may be able to purchase a Medicare SELECT plan (a Medigap policy that limits coverage within a network and is usually cheaper).
For Medigap policies, private insurance companies set their own prices, so it is important to ask how an insurance company prices its policies before applying for a new plan. When choosing a Medigap plan, consider which type of pricing best fits what you can afford, both now and into the future, while also offering the health coverage you need.
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Source: Choosing a Medigap Policy. Baltimore: Centers for Medicare and Medicaid Services, 2015.