Medigap Costs

Premiums for Medicare Supplement Plans

If you have Original Medicare (Medicare Parts A and B), you may want to purchase a Medicare Supplement plan to cover the expenses (or "gaps" in coverage) that Medicare does not. But before you do, there are a few things you should know about the cost of Medicare supplement (Medigap) plans.

All private insurers must follow specific coverage guidelines for the 10 different Medigap plan designs that are available in most states. This means that all private insurers must offer the same benefits for the 10 plan designs. (Note that Massachusetts, Minnesota and Wisconsin residents have a different selection of Medigap plan designs.)

Although all Medigap plans are the same, private insurers do not have to follow any specific pricing guidelines for Medigap premiums. This is why it is so important to learn about Medicare supplement premiums - since you're getting the same coverage, you should make sure you're getting the best price!

Medicare Supplement Premiums - Pricing Guidelines

Private insurers use a variety of factors to help them determine Medigap costs. Those factors may include:

• Where you live
• Whether you use tobacco products or not
• Your age
• Your gender
• Your health status
• Your marital status

It's important to purchase a Medigap policy during the open enrollment period (the first six months that you are at least age 65 and covered by Medicare Part B), because the insurer cannot use health status as a factor during that time. If you wait, you may end up paying higher Medigap premiums, or they can refuse to issue a policy.

Differences in How Medicare Supplement Premiums are Determined

Pay attention to how each insurance company uses age to calculate Medigap premiums. Depending on where you live, Medigap premiums may be:

• No-age-rated or community-rated. Rates are not affected by age. These are generally the most inexpensive plans over your lifetime. Premiums can increase due to inflation.
• Issue-age-rated. The rate is set at the age you are when purchasing the policy. The younger you are when you buy the policy, the lower your premiums will be. Your premiums will still increase over time because of inflation, but they cannot increase because of age.
• Attained-age-rated. The premiums are based on your age when purchasing the policy, but they will increase as you get older. These policies are generally the least expensive in the beginning, but they are the most expensive over a long period of time. Premiums can increase because of inflation.

Saving on Medicare Supplement Premiums

The best way to keep your Medigap costs down is to purchase a policy as soon as you're eligible. Aside from that, there may be other ways for you to buy the best policy for your needs at the lowest cost. You can shop around for the lowest Medigap premiums and compare costs by checking your state insurance department's website.

If you choose to buy a cheaper plan during your open enrollment period, you may not be able to change to a better plan later on. You may be in good health when you purchase your plan, but your health may decline over time. The cheaper Medigap plans do not provide the same amount of coverage as the more expensive plans. Considering the high cost of paying for health care out of pocket, you may save money in the long term by purchasing a Medigap plan with better coverage when you first become eligible.

Many plans may not allow you to switch later if your health declines as you get older. But a few will. If this happens, shop around to find a plan in your state that will accept you regardless of health. But do not allow your Medigap plan to lapse before switching to a new plan.