Medicare Supplement premiums mostly likely will increase over time, but the amount and timing depend on multiple factors. For example, some insurance plans will have increases simply because you’re getting older.
Insurance companies can raise Medicare Supplement premiums, also referred to as Medigap premiums, multiple times throughout the year. Despite the limited number of price hikes, various factors affect how Medicare Supplement premiums will increase. They include the plan’s pricing methods, company losses, and the rising cost of Medicare.
Pricing Methods of Medicare Supplements
Pricing methods reveal how the Medigap premiums will increase as you age. Medicare Supplement insurance companies review the following to determine price policies:
- Attained-age pricing
- Community-rated pricing
- Issue-age pricing
Attained-age pricing actually bases the premium on your current age. Each year, this premium will increase, as you age.
Community-related pricing isn’t affected by your age. For this structure, a 65-year-old would be quoted the same rate as a 70-year-old. These are often referred to as “age-banded prices.” Though premiums do not increase based on age, they can increase due to inflation and other factors, including tobacco use.
Issue-age pricing is simple. The premium is based on how old you are when you enroll into the policy. The premium will not increase based on your age but can increase for other reasons.
These pricing structures vary across the country. However, patient health factors, such as a tobacco use, also affect both the long-term and short-term costs of Medigap. National statistics have reviewed the information, and a Kaiser Family Foundation (KFF) report found that smokers paid 12% higher monthly premiums than non-smokers.
Inflation & Healthcare Costs
As previously mentioned aside from age and tobacco use, there are additional factors that affect Medicare Supplement insurance premiums: increases in inflation and healthcare costs. As the cost of healthcare rises, the insurance to cover those expenses must also increase.
The average annual growth in premiums based on inflation is about 4.1%, according to the KFF report. However, the yearly shifts will be minimal due to the slow evolution of the Original Medicare Program. Everything in Medicare and the industry is slow to change. Therefore, any annual increases will be small and manageable for Medicare beneficiaries.