In order to effectively shop around for supplemental Medicare plans, it's necessary to understand how private insurance companies, such as Humana and Blue Cross Blue Shield, set the prices for their insurance supplemental premiums. Below is a guide which explains the three ways in which health insurance companies price their Medigap insurance supplemental plans (which can also be found in Medicare.gov's "Choosing a Medigap Policy"):
Community-rated Medigap Insurance (Supplemental Medicare Plans)
Community-rated plans are non-discriminatory Medigap plans which offer identical cost ratings for all policy holders. Below are some details on how community-rated plans work:
- Pricing - Community-rated (or "no-age-rated") plans have identical monthly premiums for all policy holders, regardless of age.
- Pricing Implication - While premiums for supplemental Medicare plans may go up as a result of inflation, rates can never be raised due to an increase in age.
A representative example of how this plan works is as follows: Mr. Reid buys a Medigap insurance supplemental plan at age 66, and pays $180 a month. Mrs. Clinton buys the identical Medicap insurance supplemental plan at age 77, but pays the identical $180 a month as Mr. Reid, since age does not affect pricing for this health care option.
Issue-age-rated Medigap Insurance (Supplemental Medicare) Plans
Issue-age-rated plans have costs which are set at the point of purchase. Below are some details on how issue-age-rated Medigap plans work:
- Pricing - Issue-age-rated plans' prices are set based upon the age one is when purchasing the plan.
- Pricing Implication - While premiums for supplemental Medicare plans never go up due to age once they have been purchased, plans are more expensive at the time of purchase for older buyers. Thus, it is better to buy an issue-age-rated Medigap insurance supplemental plan at a younger age.
A representative example of how this plan works is as follows: Mr. Baucus buys a Medigap insurance supplemental plan when he is 65, and his monthly premium is set at $150. Ms. Pelosi buys a Medigap insurance supplemental plan when she is 76, and her monthly premium is set at $190 since she was older at the time of purchasing this health care option.
Attained-age-rated Medigap Insurance (Supplemental Medicare) Plans
Attained-age-rated plans are adjustable Medigap plans in which premium costs increase on a sliding scale as one gets older. Below are some details on how attained-age-rated Medigap plans work:
- Pricing - Since the premium is priced according to one's current age, premiums increase in price as one gets older.
- Pricing Implication - The prices go up as one gets older, so while attained-age-rated Medigap insurance supplemental plans may be cheap at first, they can get quite expensive later on.
A representative example of how this plan works is as follows: Mr. Obama buys a plan at age 65, and only pays a monthly premium of $140. However, by the time Mr. Obama is 77, he may be paying $190 for the same health care option.
Comparing Medigap Insurance (Supplemental Medicare) Plans
It should be noted that the above three rating systems hold across state lines. However, within each state, and even within each health insurance company, similarly rated (and even identical) Medigap insurance supplemental plans can be priced differently. This is why it's not only necessary to compare the ratings of the Medigap plan you want, but also the individual private insurance companies offering the health care options.
David Harris-Gershon - David Harris-Gershon – a blogger for Tikkun magazine and a freelance writer on Israel, the Middle East and America’s role in ...
