Medicare Supplement Insurance (Medigap) plans come in three major categories (attained-age, issue-age and community-rated) that determine your premium costs.
Premiums for attained-age-rated Medigap plans are based on your current age and increase as you age. This is the most common type of category offered by Medigap plans.
Issue-age-rated Medigap plan premiums are based on your age when you sign up with the plan.
Community-rated Medigap plan premiums are based on where you live and other factors, not your age.
If you’re eligible for Medicare and have an Original Medicare plan (Part A and Part B), not all of your out-of-pocket costs are covered by Original Medicare. Depending on your healthcare expenses, you may consider buying a Medicare supplemental insurance plan, also called Medigap. These plans help pay for some out-of-pocket costs, such as deductibles, coinsurance and copays.
Medigap supplemental plans are offered by private insurance companies regulated by the Centers for Medicare and Medicaid Services (CMS). Premiums vary between different plans based on coverage, the plan rating system and other factors. Medigap plan pricing is based on three main rating categories or formulas – attained-age, issue-age and community-rated.
If you’re considering buying a Medigap supplemental plan, it’s important to understand the differences between attained-age vs. issue-age, as well as community-rated plans. The rating model affects your premiums when you sign up and future price increases.
In this article we’ll review the differences between the three ratings and how to choose the best Medigap plan for your needs.
Find a local Medicare plan that fits your needs
Attained-age rating models are the most frequently used by Medigap insurance providers. This rating system for calculating premiums is based on your age when you sign up for the plan. The younger you are at enrollment, the lower your premium. But your premium rates increase as you get older.
For example, if you’re 65 years old, your premium for a particular Medigap plan might be $130, but the same plan may cost $170 when you’re 75 years old. Generally, rates increase by a small percentage either annually or by a set timeframe. Rate increases are approved by state health insurance agencies.
Attained-age plans may seem attractive when you’re younger because of their low premiums, but they may become expensive over your lifetime. It’s important to keep this in mind when shopping for a Medigap plan.
Some states such as Massachusetts, Minnesota and Wisconsin have different Medigap standardized plans and coverage guidelines. If you live in these states, you can check with your State Health Insurance Assistance Program (SHIP) or Medigap plan provider for specific coverage and cost information.
Issue-age-rated plan premiums are based on your age when you apply for coverage. Your premium rate will be lower if you sign up when you’re younger than if you wait until you’re older (at age 65 versus 75, for example). These rating plans also generally increase rates annually, but rate increases are not dependent on your age in the future like they are with attained-age premiums. Small percentage increases are based on inflation and other health cost factors.
Not every state offers issue-age-rated plans. Depending on where you live, you may not be able to buy an issue-age-rated plan. States offering issue-age Medigap plans include Arizona, Idaho, Georgia and Florida. You can check with Medigap plan providers in your state to find out if they offer issue-age-rated plans.
This type of plan is less expensive than attained-age plans if you sign up when you first become eligible to purchase a Medigap plan. But in comparison to attained-age-rated plans, issue-age-rated plans start with higher premiums than attained-age-rated plans.
If your state offers issue-age-rated plans along with attained-age-rated plans, compare premium costs of attained-age vs. issue-age Medigap based on future rate increases, not just the rate when you purchase.
Are you eligible for cost-saving Medicare subsidies?
Community-rated Medigap plan premiums are based on where you live. Everyone within a certain geographic area pays the same premium for the same Medigap plan regardless of individual age. So, if you and your neighbor buy the same Medigap plan, your monthly premium will be the same even if you’re 70 years old and your neighbor is 80 years old.
Only a few states offer community-rated Medigap plans. They include Maine, Vermont, Massachusetts, Connecticut, New York, Arkansas, Minnesota and Washington. States that don’t offer community-rated plans can charge you a higher premium based on your age depending on if they offer attained-age or issue-age-rated plans and your age at enrollment.
Typically, community-rated plans offer the lowest cost premiums over time as you age. But rates may be different depending on if you live in a rural versus urban location and other factors.
Yes, your Medigap premiums may increase with age in some cases. Premium cost increases depend on the rating type for the plan you choose. Attained-age-plan premiums increase as you get older, but also with inflation and for other reasons.
Issue-age-rated Medigap plans have higher premiums if you join when you’re older. These plans are less expensive if you join when you’re younger, but premiums may still be higher than attained-age for younger ages. Premiums also increase with inflation and health costs.
Community-rated plans aren’t based on your age. Cost increases depend on where you live (urban or rural), inflation and other causes.
When deciding between attained-age vs. issue-age or community-rated plans, there are several points to consider.
- your overall medical needs.
- plan premiums and benefits.
- your age.
- the plan provider reputation.
- premium cost rate projections.
Different states have different levels of protection for Medicare beneficiaries interested in buying a Medigap plan, including guaranteed issue protections. These rights ensure a Medigap insurance provider will not deny you a plan if you meet certain guidelines. They also guarantee coverage for pre-existing conditions and won’t increase your premiums unreasonably due to your health conditions.
The easiest time to join a Medigap plan is during your six-month Medigap Open Enrollment Period, which begins after you enroll in Medicare Part B. Medigap plan providers can deny you coverage if you have pre-existing conditions after this initial enrollment period.
For example, if you drop your Medigap attained-age-rated Medigap coverage due to high cost, you may not be able to buy another Medigap plan unless your state has guaranteed issue rights or you meet other qualifying circumstances. Connecticut, Maine, Massachusetts and New York have guaranteed issue rights that require all Medigap providers in the state to offer policies at least once per month or continuously throughout the year.
This is why it’s important to understand the rating category to estimate your long-term premium costs before signing up with a Medigap plan.
What extra benefits and savings do you qualify for?
There are several other factors that influence Medigap premium prices. These include inflation rates, your state, the cost of healthcare, where you live and individual health factors such as any pre-existing conditions you may have, if you smoke, and the type of Medigap plan you choose. The more comprehensive the plan benefits, the higher the premium. If you select a high deductible plan, your premiums will be lower. But in deciding on the right plan for you, you should carefully review your healthcare needs and long-term costs for each plan.
You may wonder if a Medicare Advantage plan would be less expensive than having Original Medicare (Part A and B) and a Medigap supplemental plan. This depends on several factors, such as plan coverage benefits, out-of-pocket costs, premiums for each plan and other considerations.
Factors to consider include:
- the specific Medicare Advantage plan.
- coverage benefits (including prescription drugs).
- where you live.
- your age.
- if you have pre-existing conditions.
- Medigap plan rating category.
There are 10 Medigap plans (A to N) all offering standardized benefits by plan regardless of where you live. However, premium and guaranteed issue rights can vary widely from state to state. Also, If you’re newly eligible for Medicare, you can no longer buy Plan C and Plan F as of January 1, 2020.
All Medicare Advantage plans must offer community rating and guaranteed issue to beneficiaries, and many Medicare Advantage plans have no-cost or very low monthly premiums compared to the average Medigap plan monthly premium of $180 in 2019.
A Medigap plan premium may be less expensive when you enroll at a younger age, but based on the rating category, you could end up with much higher premiums compared to Medicare Advantage premiums in the long-term. Often, it depends on your specific situation.
Attained-Age Medigap vs. Medicare Advantage
Attained-age Medicare supplement insurance premiums are higher if you’re older. Premiums also increase over your lifetime. This may make attained-age-rated plans more expensive than a Medicare Advantage plan, which doesn’t factor age into premium cost when comparing costs long term.
But a consideration with Medicare Advantage plans is that they feature network providers, and it may cost you more to see a provider outside your plan network. With a Medigap plan, you can go to any provider that accepts assignment, which means the provider agrees to accept Medicare’s established rates for services.
Overall, Medicare Advantage plans may be less expensive than an Original Medicare plan with separate Part D and supplemental coverage with Medigap. Medicare Advantage plans may be a good option to consider if you’re healthy, and if you want lower premiums and all-in-one coverage for your health and medical needs. Keep in mind, you cannot have a Medicare Advantage plan and a Medigap plan. You’ll still have out-of-pocket costs with a Medicare Advantage plan.
Issue-Age Medigap vs. Medicare Advantage
When comparing a Medicare Advantage plan to Original Medicare with a Medigap plan with issue-age rating for premiums, your age and health conditions may be a factor in the cost of the overall plan.
Remember, with issue-age-rated plans, the older you are when you enroll, the higher your plan premium. Medicare Advantage plans are based on coverage benefits and certain other factors such as where you live, not your age. Unlike Medigap, Medicare Advantage plans also cannot deny you coverage if you have pre-existing conditions.
When deciding between a Medicare Advantage plan and an issue-age-rated Medigap plan, consider all your costs and the benefits offered by each plan over the long term, and the plan rating. Also keep in mind, depending on where you live, you may not have the option to choose an issue-age-rated Medigap plan.
A GoHealth licensed insurance agent can help you determine what supplement insurance is the right fit for your specific situation.
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