www.medsupp.org - MedSupp.org
Posted 11/22/2021 in News

Medigap Premiums: Issue-Age vs. Attained-Age vs. Community-Rated

Medigap Premiums: Issue-Age vs. Attained-Age vs. Community-Rated

If you have a Medigap plan, you may wonder how your insurance company sets your monthly premiums. The premiums vary by the insurance provider, by state, and by a few individual factors. There are two main ways that insurers use to set their rates. Understanding both models will help you choose the one that best suits your circumstances.

Issue-Age Rating Method

If an insurance company uses the issue-age rating method, the premium for your policy will be based on your age at the time of your application. The younger you are when you apply, the cheaper your premium. After that, the premium will never be increased because of an increase in age.

However, premiums will not be "locked in." They will increase annually based on factors like inflation and the cost of healthcare.

Attained-Age Rating Method

As the name implies, the attained-age pricing method uses the current age of the enrollee to determine their premiums. As you age, the premium increases, sometimes significantly. This is the most common method used to set rates for Medigap plans because as we age, it is likely that our healthcare costs will go up. As your healthcare needs increase, so does the plan's premium.

Age is not the only factor that can increase the premiums set with this method. As with the issue-age rating method, they may also increase due to inflation and overall changes in the cost of healthcare.

Community-Rated Method

We said there were only two rating methods. There are actually three, but the community-rating method is no longer commonly used. However, we'll mention it here just in case. In a community-rated plan, premiums are the same for every person enrolled in that plan in that geographical area. Age does not matter. Someone who is 85 will pay the same premium as someone who is 65. Like the other rating methods, these premiums can still increase over time, but age will never be a factor.

Understanding the types of rating methods is somewhat important when you choose which insurance carrier to purchase your Medigap plan through. However, whichever rating method is used, the premiums are still going to increase with time.

You'll also want to know what their history of rate increases is. Do their policies typically increase by a small percentage or a more significant amount? This is important to consider when you first purchase a plan. What looks like the least expensive premium right now could quickly become one of the more expensive ones.

This is why it is so important to work with an independent agent when you are choosing a Medigap plan. Medicare Brokers can compare plans and premiums across many different insurance carriers and also tell you what their history of rate increases looks like.

This was originally posted on CertifiedMedicareAgents.com.