In general, the cost of health insurance increases as we get older, but does this apply to a Medicare supplement policy?
Most of the time, the answer to the question, “do Medigap premiums increase with age?” is yes. Medicare Supplement plans vary, but most Medigap insurance policies have premiums based on your age. There are, however, exceptions, and this article outlines how Medigap rates work, depending on your plan.
Do Medicare Beneficiaries Need a Medigap Plan?
First things first. Do you need a Medicare supplement plan like Medigap if you have Original Medicare?
The short answer is that it depends. Original Medicare coverage (referred to as Medicare Part A and Medicare Part B) covers hospital stays and outpatient visits, but 90% of beneficiaries choose either a Medicare Advantage plan or a Medigap policy to cover healthcare costs that Original Medicare doesn’t.
Coverage not available under Original Medicare includes dental and vision benefits, prescription drug coverage, and additional cost-sharing coverage. Because the coverage available to beneficiaries of Original Medicare is somewhat limited, most people look to either Medicare Advantage plans or Medigap policies to keep costs reasonable and avoid paying exorbitant out-of-pocket costs for coverage.
Every person is different, but if you have pre-existing conditions, need prescription drugs, or have concerns about high medical costs, Medicare supplement insurance can give you peace of mind while saving you money.
How Age Influences Medicare Supplement Insurance Prices
There are three different pricing models Medigap plans use to structure Medigap premiums:
- Attained-Age-Rated Medigap Plans
- Issue-Age-Rated Medigap Plans
- Community-Rated Medigap Plans
Depending on the plan you choose, age may play a significant factor, a minor factor, or not be relevant at all. However, Medigap plan availability varies by state, and private insurance companies usually don’t sell all three.
By having an understanding of how insurance companies structure pricing, you’ll be armed with better data to secure favorable rates and shield yourself from surprise premium increases.
Attained-Age-Rated Medigap Plans
The most commonly issued Medicare Supplement insurance is the attained-age Medigap plan. With attained-age-rated plans, your premiums are based on your age when you enroll in Medigap, and your premiums increase as you get older.
Depending on your plan, your monthly premium could be subject to an annual increase, or the premiums could increase on a different schedule.
Many Medicare beneficiaries who are a relatively younger age find attained-age rating prices affordable at enrollment. However, beware that attained-age premiums rachet upward over time.
If you select an attained-age plan, you might be tempted to jump ship to another Medicare Supplement plan or Medicare Advantage when you see your premiums rise. Keep in mind that if you switch plans, you might not be able to enroll in another Medigap plan unless you meet specific qualifications, or your state has guaranteed issue rights.
Before you decide on a Medicare Supplement plan, it’s a good idea to explore how your rates could increase and speak to a Medicare advisor about your best options.
Issue-Age-Rated Medigap Plans
Age also plays a part in an issue-age-rated plan; however, your age will only influence Medigap premiums at the time of enrollment. In other words, your initial premiums are based on age, but subsequent premium increases are determined by other factors that are not age-related.
Instead of increasing premiums based on your age, you may see premiums rise due to inflation or other health cost drivers.
Not all states have issue-age plans, and they do come with higher premiums in the beginning. However, because premium increases aren’t age-related, your Medicare Supplement rate for insurance can be more affordable in the long term.
Community-Rated Medigap Plans
A community-rated Medigap plan bundles everyone in an area who has the same plan and provides them with the same premium for coverage. Age does not play a role in your rates, and your premium will not increase with age.
Very few states offer a community-rating plan, and it can be equally rare to find an insurance company that issues these policies. If you do live in an area where these plans are available, it’s a good idea to compare them side-by-side with other Medicare Supplement rate schedules.
To sum up, age can influence Medigap prices on two of these policies, but the only policy that increases over time due to your age is the attained-age-rated plan.
Comparing Three Medigap Plans Side by Side
Most states offer 12 Medigap plan varieties, though actual availability may vary. These plans are lettered A through N, though F, G, and N are the most popular.
To understand how age can affect your Medicare supplement premiums, we’ve outlined the cost for the three most popular age-rated plans in five-year increments.
|Medigap Plan F (Average Cost)
|Medigap Plan G (Average Cost)
|Medigap Plan N (Average Cost)
You’ll probably notice that Medigap premiums for Plan N are the least expensive. The reason Medigap premium prices are significantly lower for Plan N is because the coverage is reduced for certain benefits, and there are significant copays that are often cheaper under other Medigap plans.
Other Factors that Affect Prices of Medicare Plans
Every Medigap policy is different, and there are other factors that determine the cost of a monthly premium for the same Medigap plan other than your current age. Your premium may vary widely and also depend on the following:
- Overall health
- Where you live
- Whether you smoke
- Your plan’s deductible
- Eligible discounts
Choosing the Best Medicare Supplement Insurance
When choosing a Medigap plan, it’s important to consider the Medigap premiums you have at the time you sign up with the insurance company and how those premiums may increase when you get older.
One of the best ways to secure a reasonable Medigap premium is to sign up during the Medigap Open Enrollment Period, where there is no medical underwriting required, and you can’t be refused coverage due to pre-existing conditions. To learn more about Medicare Supplement open enrollment and how to secure a Medigap plan that fits your health needs, contact a Medicare Advisor today.