If you’re shopping for Medicare Supplement Plans (also known as Medigap), premium costs are a big factor in deciding which plan to buy. Original Medicare has premiums that are set at the federal level and standardized for every enrollee. Private insurance companies, however, offer Medigap plans, not Medicare. Each Medigap insurance company sets its own premiums.
Here’s a look at the factors that influence the cost of a Medicare Supplement plan.
Things That Affect Your Medicare Supplements Cost
You Plan Choice Affects the Cost
The federal government authorizes insurance companies to offer up to 10 different approved Medigap plans. These are labeled with the letters A through N. Since Medicare standardized these plans, you will it easier to compare costs. The benefits under a Plan A offered in Texas will be exactly the same as those in a Plan A offered in. The exceptions are Minnesota, Massachusetts, and Washington, which have established their own Medigap policy standards.
All Medigap plans provide an additional 365 days of Part A hospital coverage once you’ve exhausted your standard Part A hospital benefits, and all cover your Part B preventive care coinsurance.
Beyond that, there is a wide range of coverage options. Some offer “first dollar” coverage, which means you pay nothing out of pocket before your benefits kick in, because the plan covers your Part A and Part B deductibles. Others include a maximum out-of-pocket (MOOP) limit on medical expenses—your plan covers 100% of allowable charges once you’ve reached your MOOP. Some even cover your Part B excess charges if you use providers who don’t participate with Medicare.
In general, the more comprehensive your coverage is, the higher your monthly premiums will be in comparison to other plans.
How the Company “Rates” your Medigap policy Affects Your Cost
The government allows companies offering Medicare Supplement Plans to choose one of three rating, or pricing, systems:
- No-Age or Community-Rated. This means that everyone’s premium is the same, regardless of age. Your premiums may go up due to inflation or other factors, but it will not increase based on your age.
- Issue-Age-Rated. These policies are priced based on your age at the time you buy the plan. For example, if you enroll at age 65, your premium might be $150 a month, but if you enroll at age 75, your premium might be $225 a month for the same coverage. Again, your premium might increase each year for inflation, but it will not go up as you age.
- Attained-Age-Rated. Premiums are based on your current age, which means that they increase each year based on your “attained” age. For example, your premium might be $125 at age 65, $128 at age 66, and $150 at age 70. These plans favor younger enrollees and can get quite costly as you get older.
It’s important to understand how the plan is rated before you select a Medigap policy. This helps you know how your premiums are affected. This is especially true for attained-age-rated plans. Be sure to ask how often and how much your premiums will increase.
When You Enroll Can Affect Your Cost
When you enroll may have the greatest influence on how much you pay for your Medigap plan.
If you think you want Medigap protection, it’s extremely important to enroll as soon as you are initially eligible. Your first six months after your Part B effective date are your Medigap Open Enrollment Period (OEP).
Why is this so important? Because, aside from a few other very specific “guaranteed-issue” situations, the Medigap OEP is the only time you are guaranteed the right to purchase any Medigap plan offered in your state—regardless of your health status and without pre-existing condition exclusions—and you cannot be charged a higher premium than anyone else in the plan based on your health.
Companies that offer Medicare Supplement Plans are allowed to use medical underwriting to determine whether or not to cover you, and what premium to charge, once you are outside the OEP or other guaranteed-issue situations. This means that if you have a serious or chronic health condition, the insurance company may refuse to issue you a policy, or they may charge you such a high premium that the coverage is unaffordable.
Opportunities to Lower Your Medicare Supplement Cost
In some cases, you may be able to lower your monthly premiums if you qualify for certain discounts or choose low-cost plan options.
Discounts on Medigap Policies
Some insurance companies offer discounts if you and your spouse both buy a policy from them, if you are a non-smoker, or if you sign up for automatic payments, for example. It’s also worth seeing if you can get a discount for paying your premium once a year instead of in 12 monthly payments.
You can lower your premiums for a Plan F by choosing the high-deductible option. It’s a good idea to compare the plans’ total out-of-pocket costs to see how much you might actually save with the high-deductible option. Your medical usage will affect this, so enlist your agent to help you with your estimate.
Depending on where you live, you may also be able to enroll in a Medicare SELECT Medigap plan. SELECT plans can lower your overall out-of-pocket costs. Under a Medicare SELECT plan, you must get all your health care, except in the case of emergencies, from a provider within the plan’s network. If you go out of your plan network, you will pay for all costs not covered by Original Medicare.
Not all insurance companies offer Medicare SELECT plans. They may not be available in all areas. An experienced Medicare insurance specialist can help you find out which options are available where you live.
Keep in mind that plan premiums are just one part of the cost of a Medigap plan. Coinsurance, copayments, and deductibles all factor into what you actually pay out-of-pocket with your plan. Medigap plans also do not include routine dental care so it’s always a good ideas to plan for that as well.
It’s a good idea to talk to an agent. Work through a few options to see which plans are best for your particular situation.