Age, place, and premiums: Medigap policy ratings and costs
Medicare is a vital source of health insurance for millions of Americans, but it doesn’t cover all health care expenses. Beneficiaries can often face coverage gaps that require additional insurance. A Medigap insurance plan helps cover out-of-pocket costs such as deductibles, copays, and coinsurance for people enrolled in Original Medicare (Parts A and B).
What do Medigap plans cover?
All Medigap plans cover at least some portion of:
- Medicare Part A coinsurance and hospital fees
- Medicare Part A hospice coinsurance or copayment costs
- Medicare Part B coinsurance or copayment costs
- Blood transfusion costs (up to initial first three pints)
Medigap is an important benefit for over 14 million Medicare enrollees¹. It’s important for anyone considering a Medigap plan to understand that the cost of Medigap policies can vary significantly because insurance companies use different rating criteria.
What are Medigap Policy Ratings?
Attained-age-related – Premiums for attained-age-related policies are based on your current age, not your age when the policy was purchased. Consequently, premiums increase as you age. The younger you are when at enrollment, the lower your premium will be. However, keep in mind that inflation and other factors can also impact what you will pay in premiums.
Issue-age-related (also called entry-age-related) – The cost of issue-age-related plans are based on your age at the time you purchase a policy. Thus, purchasing at a young age means your premiums will be lower and will generally remain unchanged as you grow older, though inflation and other factors may produce small increases. Enrolling at an older age means you will pay higher premiums.
Community-rated – For these policies, premium pricing is based on location, meaning that people in a given geographic area pay the same premium regardless of age. Generally, community-rated plans have the lowest premiums over time, although pricing may be affected by whether you live in a rural or urban area (community-rated policies are available only in Arkansas, Connecticut, Maine, Massachusetts, Minnesota, New York, Vermont and Washington).
Medigap plans can vary substantially in price based on how much individual insurance companies charge for the same type of coverage. (When comparing plans, always compare the same letter types of Medigap policies, i.e., compare a Plan G plan from one insurer with a Plan G from another insurance company.) Inflation, health care costs in your community, smoking habits, and the type of plan you choose are a few of the factors that will impact what you’ll pay for Medigap. A policy premium may also be affected by whether:
- An insurer offers discounts for being a non-smoker, for having multiple policies, for being married, etc.
- An enrollee applies outside their Open Enrollment Period and becomes subject to medical underwriting
- The individual enrolls in a high-deductible Plan F or G policy, requiring payment of up to $2,700 in deductibles, copayment, and coinsurance
Considering the number of factors that can impact Medigap policy ratings, it is very important to carefully assess your situation and always choose a plan that best suits your needs and financial situation.
¹ 2023 AHIP Report: Understanding the Value and Benefit of Medicare Supplement Coverage for 14.5 Million Americans
