Medicare Supplement

Three Ways Medigap Sets Your Premium — And Why It Can Still Climb

# Three Ways Medigap Sets Your Premium — And Why It Can Still…

REDMOND, Wash. — If you've shopped for a Medicare Supplement policy — better known as Medigap — you may have noticed something confusing. The benefits inside a lettered plan (like Plan G or Plan N) are standardized by the federal government and can't change once you're enrolled. Yet the premium you pay for that same policy can go up year after year. How is that possible?

The answer sits in the pricing method the insurance company uses. There are three of them, and understanding which one applies to your policy — or a policy you're thinking about buying — can help you plan for what your bill may look like at 70, 75, or 85.

What Medigap actually covers — and what stays fixed

Medigap is private insurance that helps pay some of the out-of-pocket costs Original Medicare leaves behind, like coinsurance and deductibles. Plans are sold by letter (A, B, C, D, F, G, K, L, M, N), and every insurer that sells "Plan G," for example, must offer the exact same core benefits as every other insurer selling Plan G. That's federal law, per CMS.

What isn't standardized is the price. Two carriers can sell the identical Plan G and charge very different premiums — and raise those premiums on different schedules — because they use different pricing methods.

The three pricing methods

Community-rated (also called "no-age-rated"). Everyone who has the same policy pays roughly the same premium, no matter their age. A 65-year-old and an 80-year-old with the same community-rated Plan G would pay similar rates. The premium doesn't go up just because you had a birthday, but it can still rise due to inflation and overall claims costs.

Issue-age-rated (also called "entry-age-rated"). Your premium is based on the age you were when you first bought the policy. Buy at 65, and your rate is tied to a 65-year-old's price forever. Buy the same plan at 72, and you'll start out paying more. The premium doesn't jump each year just because you aged, but — like all Medigap — 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 usually starts out as the cheapest of the three at age 65, then increases at set ages (often every year or every few years). Over a long retirement, this method can end up costing significantly more than it looked like at first.

Why the bill can still climb, even when benefits can't

All three pricing methods can — and generally do — see rate increases over time, for reasons that have nothing to do with your age:

• Medical inflation. Doctor visits, hospital stays, and procedures get more expensive every year.
• Claims experience. If the pool of people holding that policy uses more care than expected, insurers file for higher rates with state regulators.
• The aging pool. Even in community-rated plans, if the average age of the group creeps up, costs rise for everyone.

On top of that, attained-age plans add automatic increases tied to your birthday. That's the part many people miss when they compare quotes at 65 and pick the lowest sticker price.

What Redmond residents should know

Redmond is in King County, and Washington state's Medigap rules are among the more consumer-friendly in the country — but the specific pricing methods an insurer offers can vary by carrier and by state. Rather than assume, ask each company (or your broker) directly: "Is this policy community-rated, issue-age-rated, or attained-age-rated?" Then ask for the company's rate-increase history over the last several years. Both are fair questions, and reputable agents expect them.

For personalized help at no cost, King County residents can contact Washington's SHIBA program — the state's federally funded SHIP (State Health Insurance Assistance Program) — which offers unbiased Medicare counseling.

A quick note on shopping windows

Your best shot at getting into any Medigap policy is during your six-month Medigap Open Enrollment Period, which starts the month you're 65 and enrolled in Part B. During that window, insurers can't turn you down or charge you more for health reasons. Outside it, medical underwriting usually applies — which can matter more than pricing method if you have health conditions.