Medicare Supplement

Grand Rapids Guide: The 3 Ways Medigap Pricing Is Built

In Grand Rapids, shoppers looking at Medicare Supplement Insurance — better known as Medigap — often notice something confusing: two people can buy the exact same lettered plan from the exact same company and pay different amounts. And a premium that felt comfortable at 66 can look very different at 76.

That is not a mistake or a bait-and-switch. It is the pricing method behind the policy. Medigap plans in Michigan and across the country are priced one of three ways, and knowing which one applies to a policy you are considering can help you plan for the years ahead.

What Medigap actually pays for

Medigap is private insurance that works alongside Original Medicare (Part A and Part B). It helps cover some of the out-of-pocket costs Medicare leaves behind, like coinsurance and copayments. Plans are standardized by letter — Plan G and Plan N are the most common choices for people newly eligible today — which means a Plan G from one company covers the same medical costs as a Plan G from another.

What is not standardized is the price. That is where the three pricing methods come in.

The three ways a Medigap premium is built

Community-rated (also called "no-age-rated"). Everyone who buys the same policy from that insurer pays the same base premium, regardless of age. A 65-year-old and a 78-year-old signing up today would start at the same rate. Premiums can still go up over time, but not because you personally got older.

Issue-age-rated (also called "entry-age-rated"). Your premium is based on the age you were when you bought the policy. Buy at 65, and your rate is tied to age 65. Buy at 72, and your rate is tied to age 72 — which is usually higher. After that, your premium will not increase just because you age, though it can still rise for other reasons.

Attained-age-rated. Your premium is based on your current age and goes up as you get older. It may look inexpensive at 65, then step up at 66, 67, 70, and so on. Over 20 years, these increases can add up.

Which of these methods a company uses depends on the insurer and the state. Michigan does not require a single method, so in Kent County you may see all three offered by different carriers. Always ask an agent or the insurer directly which method a policy uses before you enroll.

Why premiums rise even though benefits cannot

Here is the part that surprises people: the benefits inside a standardized Medigap plan cannot change. Once you have Plan G, it covers what Plan G covers — full stop. But the premium is a separate matter, and it can climb for reasons that have nothing to do with your specific policy:

• Medical inflation. Hospitals, doctors, and prescription costs generally rise year over year.
• Claims experience. If the group of people insured under a plan uses more care than expected, insurers adjust premiums for everyone in that pool.
• Age (for attained-age policies only). With this method, aging itself pushes the rate up.

None of these changes affect the benefits printed in your policy. They affect the price you pay to keep it.

What this means when you shop in Grand Rapids

A policy with a low starting premium is not automatically the better deal — it depends on the pricing method and how long you plan to keep it. An attained-age policy may look attractive at first but cost more later. An issue-age or community-rated policy may start higher and stay steadier.

Grand Rapids is in Kent County, and multiple insurers sell Medigap policies to Michigan residents. Before you commit:

1. Ask which of the three pricing methods the policy uses. 2. Ask for a history of the insurer's recent rate changes in Michigan. 3. Remember that your best chance to enroll without medical underwriting is generally your six-month Medigap Open Enrollment Period, which starts the month you are 65 or older AND enrolled in Part B.

For unbiased help, Michigan's State Health Insurance Assistance Program is called MMAP (Michigan Medicare/Medicaid Assistance Program). Counselors there do not sell insurance.