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One of the main factors in determining which Medigap or Medicare supplemental insurance policy is right for you is the monthly premium amount, especially if you are on a budget. The monthly premium will depend on the type of Medigap plan you choose (Plan A, B, C, etc.) and the company you buy it from.
Medigap insurance companies set their own monthly premiums, so costs will vary from company to company. If you are buying a Medigap Plan A, for example, keep in mind that a Plan A from one company may cost more than a Plan A from another company, even though both plans provide the same benefits.
How insurance companies set prices for Medigap polices
One reason why prices vary so much is because each insurance company decides how it will set the premium amounts for its Medigap policies. There are 3 ways that a company can price or "rate" its Medigap policies:
- Community-rated: This is also called "no-age-rated," because no matter how old you are, the policy costs the same. Premiums may go up due to inflation or other factors, but not due to your age.
- Issue-age-rated: Also called "entry-age-rated," because the premium is based on your age at the time of purchase. When you buy your policy, you are charged the same amount as others your age in your area. With issue-age-rated policies, younger people will have lower premium amounts. Premiums may go up due to inflation or other factors, but not due to your age.
- Attained-age-rated: These plans are less expensive to begin with, especially for younger buyers, but the premium amount automatically increases as you age. Premiums can also go up for inflation and other factors.
When comparing plans, always ask how an insurance company prices its policies, because this factor can affect how much you pay now and in the future.
What other factors can affect the cost of Medigap policies?
Insurance plans, like other products, are affected by inflation and rising health costs. So you should probably count on the price of your Medigap premium going up each year. Some companies may even increase rates more rapidly than others.
The cost of your Medigap policy may also depend on your gender, where you live, and on whether the insurance company does any of the following:
- Offers discounts, such as for:
- Non-smokers
- Married people who buy two policies
- Those who pay their premiums using electronic funds transfer
- Those who pay their premiums yearly
- Sells Medicare SELECT policies, which may require you to use network providers, and thus, may have a lower premium
- Offers a high-deductible option for Medigap Plan F, which may have a lower premium
- Uses medical underwriting or bases the premium rate on your medical history if you don't have a guaranteed issue right or are not in your Medigap open enrollment period
Questions to ask when comparing Medigap policy costs
Many private insurance providers sell Medigap policies, so it's important to shop around and make some calls when you're ready to buy. Just make sure you compare apples to apples: For example, if you're looking for a Plan C, make sure you compare the premium rates for Plan C from each company you call.
In order to compare costs, ask each insurance company:
- How do you price your Medigap policies (community-rating, issue-age-rating, or attained-age-rating)?
- If attained-age-rated: How often will the premium increase due to my age?
- What is the premium amount for someone my age?
- How much has the premium increased in the past few years due to inflation or other factors?
- Do you offer any discounts?
In general, the more coverage the Medigap policy provides the higher the premium amount. But because premiums can vary drastically, it pays to compare coverage and costs carefully.
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