Why Did My Medicare Supplement Rate Change?

Grandparents walk with their grandchild after learning about Medicare Supplement rate pricing

Medicare Supplement insurance (also known as Medigap) is offered through private insurance companies. Because of this, there are a few factors – like age and increased cost in covering claim expenses – that can affect how your premium rate is priced. While premium price adjustments are never welcomed news, it’s a good idea to understand why and how yours may change in the future.

How Private Insurance Companies Price Medicare Supplement Plans

First, private insurance companies determine Medicare Supplement insurance rates. There are three ways that these companies can price, or ‘rate,’ their Medicare Supplement Insurance plans. These different types of pricing for Medicare Supplement plans are:1

  • Community-rate pricing
  • Age-attained pricing
  • Issue-age pricing

Not every type of pricing is available in every state, and will depend on the insurance company you choose. Here’s what you should know when comparing Medicare Supplement plans and providers.

Community-rated pricing

Also referred to as “no-age rated,” this type of pricing is a flat rate that everyone pays. That means your age doesn’t affect your rate each month. Other factors, like inflation, can affect your rate. But your age will not.

Age-attained pricing

This type of pricing is based on your age when you purchase the Medicare Supplement insurance plan. Because of this, you may have a cheaper rate at first. But over the course of a few years, your rate will increase. This rate can also be affected by other factors, like inflation or the overall increase of health care costs.

Issue-age pricing

Also known as “entry-age rated,” this type of pricing is based on your age when you buy the Medicare Supplement insurance plan. Typically, this means that the younger you are when you purchase your plan, the cheaper your premium rate will be. Once purchased, your premium rate will not be affected by your age. Like age-attained pricing, it may be affected by other factors, like inflation or the overall increase of health care costs.

Other Factors that Can Affect Your Medicare Supplement Rate

Along with the initial pricing done by private insurance companies to set your Medicare Supplement rate, there are a few other factors that can impact the amount you pay for your plan.

  • Inflation – Like other types of insurance premiums, Medicare Supplement rates can be affected by inflation. If the overall costs for health care increase, you may see a change in your Medicare Supplement premium rate.
  • Demographics – Your age, location, and gender can affect your premium rate for a Medicare Supplement plan. Depending on where you live, you may pay more for your coverage. Age and gender can play a part in pricing, too. For example, women typically have longer life expectancies than men. So a woman may be offered a lower rate, but end up paying more in the long run due to her longer life expectancy.
  • When You Apply – When you apply for your Medicare Supplement plan can affect your premium rate. If you apply during your initial enrollment period, insurance companies can’t deny you coverage or charge you more due to pre-existing conditions or disabilities. However, if you apply for Medicare Supplement insurance after your initial enrollment period ends, your application may be subjected to underwriting. If this happens, the insurance provider may look at your health history, lifestyle and other factors that could impact your premium rate.

Pros and Cons of Switching Medicare Supplement Plans

Medicare Supplement insurance can be helpful if you’re looking to reduce your out-of-pocket health care costs that Original Medicare (Part A and Part B) may leave you with, like copays, coinsurance and deductibles. Medicare Supplement also provides you with a steady, predictable monthly bill that you can budget for. Plus, you can add coverage to a Medicare Supplement Plan – like a Medicare Part D (Prescription Drug Plan) and a dental plan— if you need more health care benefits. There are 10 standardized Medicare Supplement insurance plans in the United States. This means that if you have Medicare Supplement Plan A, your coverage won’t change across states (unless you’re in Minnesota, Wisconsin and Massachusetts, which have their own plans.)

You can apply for Medicare Supplement insurance year-round. However, if you choose to apply for a Medicare Supplement plan outside of your Initial Enrollment Period, your application could be subjected to underwriting. This means that you could be denied coverage. It also means that if you have any pre-existing conditions, you may have to wait up to six months before your Medicare Supplement insurance coverage kicks in.

To learn more about Medicare and the different plans available, visit our free online resources.


SOURCES:

1 Medicare.gov. Web page: Costs of Medigap policies. 02/20/19, from https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap/medigap-costs/costs-of-medigap-policies

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