Medicare Supplement

Why your Medigap bill can rise while benefits stay fixed

Why your Medigap bill can rise while benefits stay fixed — plain-language Medicare information for Palm Desert, California.

PALM DESERT, Calif. — If you own a Medigap policy, or you're shopping for one, here's a puzzle that trips up a lot of people: the benefits on a standardized Medigap plan can't change, but the premium you pay for that plan can. How is that possible?

The answer comes down to how the insurance company sets the price in the first place. Medigap policies are priced one of three ways — community-rated, issue-age-rated, or attained-age-rated — and each method behaves differently as you get older. Understanding which one applies to your policy can help you make sense of your bill and plan ahead.

What Medigap actually is

Medigap, also called Medicare Supplement Insurance, is private coverage that helps pay some of the out-of-pocket costs Original Medicare leaves behind — things like coinsurance, copays, and deductibles under Parts A and B. In most states, Medigap plans are standardized and labeled with letters (Plan G, Plan N, and so on). Every Plan G, for example, covers the same set of benefits no matter which company sells it.

Palm Desert is in Riverside County, where residents can shop Medigap policies from a range of private insurers licensed in California. Because benefits are standardized, the real differences between two versions of the same lettered plan come down to price, customer service, and — importantly — how that price is calculated.

The three pricing methods

According to Medicare's official Medigap guidance at medicare.gov, insurers use one of three methods to set premiums:

Community-rated (also called "no-age-rated"). Everyone who buys the same Medigap policy from the company pays the same monthly premium, regardless of age. A 65-year-old and an 80-year-old on the same plan pay the same rate.

Issue-age-rated (also called "entry-age-rated"). The premium is based on the age you are when you first buy the policy. If you buy at 65, your starting price is tied to age 65 — and it won't go up simply because you have a birthday.

Attained-age-rated. The premium is based on your current age, and it goes up as you get older. This kind of policy may look cheaper at 65 but typically increases each year as you "attain" a new age.

Which of these methods is offered depends on the insurer and the state you live in. Some states require a specific method; others allow all three. Ask the insurer directly which pricing method applies before you sign anything.

Why premiums can still rise even when benefits can't

Here's the part that surprises many readers. Medigap benefits are locked in — the insurer can't quietly trim your coverage. But the premium is a different story. Even a community-rated or issue-age-rated policy, which doesn't raise your rate because of your age, can still go up over time for other reasons:

• Inflation. Medical care simply costs more each year.
• Claims experience. If the pool of people holding that policy is using more health care than expected, the insurer may file for a rate increase with the state.
• Regulatory approvals. State insurance departments review and approve Medigap rate changes.

So "your benefits can't change" and "your premium can't change" are two very different promises. Medigap makes the first one. It does not make the second.

How this plays out over time

Think of the three methods as three different shapes on a graph. A community-rated policy tends to start higher but stays flatter across your lifetime. An issue-age-rated policy is priced to your entry age and generally rises more slowly, mostly for inflation and claims. An attained-age-rated policy often starts lowest but climbs the most steeply as you age.

No single method is "best" — it depends on your age, budget, how long you plan to keep the policy, and what's available where you live. The cheapest option at 65 is not always the cheapest option at 80.

What to ask before you buy

Before enrolling in any Medigap policy, it's worth asking the insurer or a licensed agent a few plain questions:

• Which pricing method does this policy use — community, issue-age, or attained-age?
• What has this company's rate history looked like over the last five to ten years?
• Are there discounts (for example, household or non-tobacco discounts)?
• When and how would I be notified of a rate change?

You also have your strongest right to buy Medigap during your six-month Medigap Open Enrollment Period, which starts the month you're 65 or older and enrolled in Part B. During that window, companies can't turn you down or charge more because of health issues.