While most of us have an understanding of Medicare Supplement (also known as “Medigap”) plans and what coverage each plan identified A through M provides; however, one topic that has that is of importance in determining which plan you want to purchase is how the insurance companies set the Medicare Supplement plan premiums.  There are three ways an insurance company can set Medicare Supplement plan premium rates:

  1. “Community-rated” (or “no-age-rated”) premiums are the same for everyone, regardless of age.
  2.  “Issue-age-rated” (or “entry-age-rated”) premiums are based on your age when you first buy the policy. The sooner you enroll, the less you will pay.
  3. “Attained-age rated” premiums are based on your current age, meaning it goes up as you grow older.

There are also other factors that impact Medicare Supplement plan premium rates.  These factors can include, but are not limited to, the following:

  • inflation
  • geography
  • medical underwriting (if you did no enroll during a guarantee issue period)
  • as well as other possible discounts.

A Medicare Pathways Benefit Advisor can explain the differences to you as well as inform you how the Medicare Supplement plan premium he or she is quoting you is priced.

Medicare Supplement plan premiums explained – “community-rated”

Medicare Supplement plan premiums that are community-rated, also known as “no-age-rated” means that the same monthly premium, or price, is charged to everyone who has the Medicare Supplement policy, regardless of their age. The premiums will not increase due to your age. However, premiums may go up due to other factors, including inflation.

The following is an example of community-rated Medicare Supplement plan premiums works: 

Medicare beneficiary “A” is a 65-year-old male who purchased a community-rated Medicare Supplement plan and has a premium of $165.00 per month.  If Medicare beneficiary “B” is a 77-year-old female who purchased the same a community-rated Medicare Supplement plan then her premium is $165.00 per month as well. 

A Medicare Supplement plan premium that is community-rated is the same for each and every individual – everyone pays the same premium regardless of sex or age.

Medicare Supplement plan premiums explained – “issue-age pricing”

Medicare Supplement plans premiums based on issued-aged means that the premium is based on the age you are when you purchase the Medicare Supplement plan, or when the policy is issued by the private insurance company.  Medicare Supplement plan premiums that are issue-age pricing have lower premiums for individuals who purchase at a younger age and like “community-rated pricing”, the premiums will not go up due to his or her age. However, premiums may go up due to other factors, including inflation.

The following is an example of issue-age pricing Medicare Supplement plan premiums works: 

Medicare beneficiary “A” is a 65-year-old male who purchased an issue-age pricing Medicare Supplement plan and has a premium is $165.00 per month.  If Medicare beneficiary “B” purchases the same Medicare Supplement plan and she is a 77-year-old female then her premium will be higher because she is older when she purchased the Medicare Supplement plan.  The Medicare Supplement plan premium is based on the age of the Medicare beneficiary when he or she purchases the policy.

Medicare Supplement plan premiums explained – “attained-age pricing”

Medicare Supplement plan premiums under attained age pricing means the price you pay for your Medicare Supplement plan is based on the individual’s current age. Unlike plans based on “community-rating” or “issue-age pricing”, your premium goes up as you get older. Although Medicare Supplement plans based on attained age pricing may be the least expensive initially, they can be the most expensive of the three pricing models. Also, premiums of the Medicare Supplement plans may also go up due to other factors, including inflation.

The following is an example of attained-age pricing Medicare Supplement plan premiums works: 

Medicare beneficiary “A” is 65 years of age and female when she purchases a Medicare Supplement policy.  Her premium is $120.00 per month.  However, as she ages, her monthly premium amount increases.  The following is an example of premium increases for Medicare beneficiary “A”:

At age 66, her premium goes up to $126.00 per month.

At age 67, her premium goes up to $132.00 per month.

At age 72, her premium goes up to $165.00 per month.

Medicare Beneficiary “B” is 77 years of age and male when he purchases the exact same Medicare Supplement plan.  His premium is $165.00 per month.  His premium is higher than that of Medicare beneficiary “A” because the premium is based on his age.  Medicare beneficiary “B” will also have an increase in premium as he ages as well.  The following is an example of premium increases for Medicare beneficiary “B”:

At age 78, his premium goes up to $171.00 per month.

At age 79, his premium goes up to $177.00 per month.

Medicare Supplement plan premiums explained – does every insurance company offer all three premium pricing options?

No, not all insurance companies that sell Medicare Supplement plans offer plans priced by each of the three pricing methods.  Typically, an insurance company will only offer premiums priced by utilizing one method.  Additionally, most insurance companies offering Medicare Supplement plans in an area are consistent with the method of premium pricing.  For example, the premiums offered through each insurance company offering Medicare Supplement plans in a specific area are either “community-rated”, “issue-age pricing” or “attained-age pricing”. 

 When discussing Medicare Supplement plans with a Medicare Pathways Benefit Advisor ask how the Medicare Supplement plan premiums are priced.  The method of pricing may explain the difference in the premium amount and may influence which company you choose to purchase your Medicare Supplement plan.  Understanding the different Medicare Supplement plan premium pricing methods will help you make a more educated decision regarding the Medicare supplement policy you purchase.  The three pricing methods apply to all Medicare Supplement plans labeled A through N, not just specific plans.  You can speak with a Medicare Pathways Benefit Advisor by calling 1-866-466-9118 or you can request a quote and a Benefit Advisor will contact you.

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Medicare Pathways:  1-866-466-9118.