Medicare Supplement

The Three Ways Medigap Is Priced — and Why Yours Can Go Up

# The Three Ways Medigap Is Priced — and Why Yours Can Go…

FONTANA, Calif. — If you have a Medicare Supplement (Medigap) policy, or you're shopping for one, you may have noticed something confusing. The benefits in a Medigap plan are standardized by the federal government and cannot change. Yet the premium you pay for that plan can — and often does — go up over time.

The reason lies in how insurers are allowed to price these policies. There are three main methods, and knowing which one applies to your policy can help you understand why your bill looks the way it does.

Standard benefits, non-standard prices

Medigap policies are labeled by letter — Plan A, Plan G, Plan N, and so on. Every Plan G sold in the United States, for example, covers the exact same things. The federal government requires it.

What is not standardized is the price. Two insurers can sell the identical Plan G in the same ZIP code and charge very different premiums. That's because Congress and state regulators let each company set its own rates, using one of three approved pricing methods.

Method 1: Community-rated (also called "no-age-rated")

With a community-rated policy, everyone who buys the same plan from the same company pays roughly the same premium, no matter how old they are. A 65-year-old and an 80-year-old with the same Plan G pay the same base rate.

The premium can still go up over time — usually because of inflation or the insurer's overall claims costs — but it does not go up simply because you had another birthday.

Method 2: Issue-age-rated

With an issue-age policy, the premium is based on your age when you first bought the plan. If you enrolled at 65, your rate is tied to age 65 pricing. If you enrolled at 72, it's tied to age 72 pricing.

After that, your premium won't rise because you're getting older. But, like every Medigap policy, it can still increase due to inflation and claims trends.

Method 3: Attained-age-rated

Attained-age policies are priced based on your current age. The premium starts lower when you're younger and increases as you age — sometimes every year, sometimes at set age bands.

On top of those age-based increases, the premium can also rise due to inflation and claims costs. That's why an attained-age policy that looks affordable at 65 may feel very different at 80.

Why premiums rise even when benefits can't

Regardless of pricing method, three forces push Medigap premiums up over time:

• Medical inflation. The cost of doctor visits, hospital stays, and medical supplies goes up almost every year.
• Claims experience. If the pool of people insured under a plan uses more care than expected, the insurer may raise rates for everyone in that pool.
• Age (for attained-age policies only). Older policyholders tend to use more health care, and attained-age pricing reflects that.

None of these changes affect what your policy covers. The benefits are locked in by federal standards. Only the price moves.

What this means in Fontana

Fontana is in San Bernardino County, where Medicare beneficiaries can choose from a range of Medigap policies sold by private insurers licensed in California. Which of the three pricing methods a company uses depends on the insurer — and state rules also play a role in what's allowed and how rate increases must be justified.

If you're comparing policies, ask each insurer directly:

1. Which pricing method does this plan use? 2. What has the rate history looked like over the past several years? 3. How often do premiums typically change?

The answers can help you compare not just today's price but the likely cost years down the road.

Where to get personalized help

Because rules and available policies vary by state and by company, general information can only take you so far. For help specific to your situation:

• Visit Medicare.gov and use the Medigap policy search tool.
• Call 1-800-MEDICARE (1-800-633-4227), available 24/7.
• Contact California's SHIP program, known as HICAP (Health Insurance Counseling and Advocacy Program), for free, unbiased local counseling.