Medicare Supplement

Why your Medigap premium can climb even when the benefits can't: the three pricing methods

CAMAS, Wash. — If you carry a Medicare Supplement policy — often called Medigap — you've probably noticed something puzzling. The letter-standardized benefits on your plan can't change from year to year, but the bill in your mailbox sometimes does. The reason usually comes down to one thing most shoppers never ask about at the point of sale: which of the three pricing methods your insurer used to set the premium.

Camas is in Clark County, where residents shop for Medigap coverage from a mix of insurers licensed in Washington. Federal rules standardize what each lettered Medigap plan covers, so a Plan G at one company pays the same kinds of costs as a Plan G at another. What is not standardized is how the price is calculated — and that pricing method shapes how your premium behaves for the rest of the time you own the policy.

Benefits are standardized. Prices are not.

Medigap plans sold today are labeled with letters — Plan A, Plan G, Plan N and so on. Under federal rules, every Plan G, for example, covers the same gaps in Original Medicare no matter which insurance company sells it. That is why "shopping" a Medigap plan is really about price, service and financial stability — not benefits.

But insurers are free (within state law) to choose how they set that price. According to the CMS consumer guide on Medigap at medicare.gov, there are three accepted methods. Understanding them is the single best way to avoid a surprise years down the road.

The three pricing methods

Community-rated (also called "no-age-rated"). Everyone who buys the same Medigap policy from that insurer pays the same base premium, regardless of age. A 67-year-old and an 80-year-old signing up on the same day would be quoted the same starting price. The premium can still go up later — but not because you personally got older.

Issue-age-rated. The premium is based on your age when you first bought the policy. Someone who buys at 65 locks in a price tied to age 65; someone who buys the same policy at 72 starts at a higher base. After that, your premium does not go up simply because you had another birthday.

Attained-age-rated. The premium is based on your current age and is recalculated as you age. It often looks the cheapest at 65 and then rises on a schedule as you move into your 70s and 80s, on top of any other increases.

Which of these methods an insurer uses is not the buyer's choice — it is the company's, and state law can limit the options. That is why two neighbors in Camas with the "same" Plan G can be on very different price paths.

Why the premium can still rise

Here is the part that trips people up: no pricing method locks your premium in place. Even a community-rated or issue-age-rated policy can go up over time. The most common reasons are:

• Inflation. Medical care costs more each year, and premiums generally follow.
• Claims experience. Insurers look at how much they have paid out for the whole pool of people holding that policy in your state. If claims run high, rates for everyone in that pool can be adjusted.
• Age (attained-age plans only). On these policies, turning a year older is itself a reason the premium ticks up.

What cannot change is your coverage. Once you own a lettered Medigap plan, the insurer cannot quietly trim the benefits. The letter is the contract.

A common mistake to avoid

The mistake we hear about most often is picking a Medigap policy purely on the first-year premium. An attained-age-rated plan can look like the friendliest number at 65 and become the most expensive one by the time you're 78 — even though the benefits never changed. A community-rated or issue-age-rated plan may cost more up front and behave differently over the long run.

Before you sign anything, ask the agent or insurer, in writing: Which of the three pricing methods does this policy use? If the answer is not clear, that is a reason to slow down, not to speed up.

Also worth remembering: the best time to shop Medigap is usually during your Medigap Open Enrollment Period — the six months that start when you are 65 or older and enrolled in Part B. During that window, insurers generally cannot use your health history against you. Outside of it, in most states, they can — and that includes Washington's specific rules, which your local SHIP counselor can walk you through.

Where to get unbiased help

Medigap is a long-term decision, and the right answer depends on your health, your budget and how long you expect to keep the policy. For neutral information:

• medicare.gov — the official Medicare site, including the Medigap policy search tool.
• 1-800-MEDICARE (1-800-633-4227) — 24/7 phone help.
• Washington SHIBA — the state's SHIP program, which offers free one-on-one counseling to Camas and other Clark County residents.