Because Medicare supplements are standardized by the Federal Government, the main factor in determining which Medicare supplement policy is right for you is the monthly premium. The monthly premium for your Medicare supplement will depend on 2 things:
- The type of Medigap plan you choose (Plan F, G, N, etc.), and
- The company you buy it from.
States are allowed to offer up to 10 different types of Medigap plans. Benefits are standardized across each plan type, meaning the benefits will be the same no matter where you live and which company you choose (with the exception of Massachusetts, Minnesota and Wisconsin).
Medicare supplement insurance companies set their own monthly premiums, so costs will vary from company to company. For example, if you are buying a Plan F, a Plan F from Blue Cross Blue Shield may cost more than a Plan F from Mutual of Omaha, even though both plans provide the exact same benefits.
How Companies Set Prices for Medicare Supplement Policies
There are three ways that a company can price or rate its Medicare supplement policies:
- Community-rated: With this pricing policy, every member, regardless of age, pays the same price. Hence, the name “Community.” However, premiums may increase each year due to inflation and other factors. You’ll not often find plans with community-rated pricing nowadays. When available, in our experience, the pricing tends to be expensive for people under approximately age 75 and competitive for people over the age 75.
- Issue-age-rated: With this policy, your age used for pricing is locked in on your policy start date. However, premiums will often increase due to inflation and other factors each year. Issue-aged policies are becoming exceedingly rare offerings outside of the handful of states that mandate plans be issue-age rated. When you do find them they are often more expensive than available attained-age plans, if available.
- Attained-age-rated: This is, by far, the most common pricing model for Medicare supplement plans in most areas (outside of the few states that mandate Issue-age rated plans). Your initial pricing will be based on your age at the time the policy is signed or issued and you’ll receive a relatively small age-related increase each year as you age. Outside of the age-related increase, premiums will typically increase from year-to-year due to inflation and other factors.
While you should be wary of how the companies you consider handle their pricing, don’t be surprised to find out that, in your state, there are only attained-age rated plans. Your GoMedigap agent can guide you in understanding availability of plans with these pricing models.
Other Factors Determining Premium Cost
1. When You Enroll
The biggest factor affecting how much you pay for a Medicare supplement plan is when you enroll. The best time to purchase a Medicare supplement plan is during your Medigap Open Enrollment Period, which starts automatically 6 months in advance of taking your Medicare Part B. During this period, you have the right to join any Medigap plan, regardless of pre-existing conditions or disabilities. Insurers cannot deny you coverage if you have health issues, nor can they charge you a higher premium.
After your Open Enrollment Period is over, insurance companies may require medical underwriting, deny you coverage and charge you more for your premiums. Generally, you will have the most choices available and the lowest costs if you join a Medicare Supplement plan when you are first eligible.
Some insurance companies offer lower rates on Medicare supplements for women. According to statistics, women typically live longer. Thus, they pay more for their coverage over their lifetime. Also, women tend to enjoy better health and thus claim less.
Where you live typically makes a difference in the amount you’ll pay for your Medigap premiums. Insurance companies consider average wealth in any area and charge what they believe residents can afford to pay.
Since tobacco use typically leads to more health complaints, it is reasonable to assume that your Medigap premium will be more expensive if you use tobacco. On average, tobacco users will spend about 10% more on their monthly premium than a non-tobacco user.
Your age can significantly impact how much you’ll pay for your Medicare supplement premiums. As discussed above, whether your age affects your premium continuously depends on how the insurance companies determine their pricing.
However, if you purchase a Medicare supplement when you are first eligible, usually at the age of 65, you’ll pay less than if you had waited until you were 75.
Household discounts are given by insurance companies to entice couples to take out a Medicare supplement plan with the same insurance provider. Some companies even offer discounts if you have anyone living in the house with you over 18 years of age. Discount amounts vary among providers.
7. How You Pay the Insurance Company
How often you pay the insurance carrier can also impact your Medicare supplement premium. Some insurance companies will charge more for quarterly, semi-annual and annual payments, because they prefer clients to pay with a monthly draft.
Furthermore, it is easier and more cost effective for insurance companies to process payments paid electronically, rather than by check or credit card. Because of this, some insurance providers will discount the premiums for people who pay with electronic funds transfer.
Due to inflation and rising health care costs, you will typically see your Medicare supplement premiums increase every year. Some insurance carriers will raise their prices more than others depending on different costs.
That’s why we have our Rate Watch program. Because Medicare supplement premiums are subject to change in price every year, we have developed a special service to help you save money. This service automatically checks your Medigap plans and prices so you can rest assured that you are getting the best price possible. With our proprietary Rate Watch technology, we have the ability to research rates on your behalf and proactively notify you if there is an opportunity to save money on your current plan with a different Medicare supplement insurance provider.
GoMedigap is a Medicare supplement insurance agency, representing over 30 of the top insurance companies to ensure you have multiple options when it comes to choosing your insurance plan and company. For any questions regarding Medicare or Medicare Supplements, please fill out this form or give us a call at (866) 894-3258, and one of our expert agents will be readily available to help you.