Medigap Rating Methods: How Your Premiums Are Calculated

When you buy a Medicare Supplement (Medigap) policy, the price you pay today is only part of the story. How that price changes over time depends entirely on the "rating method" the insurance company uses to price the policy.

There are three ways insurance companies price Medigap policies: Community-rated, Issue-age-rated, and Attained-age-rated. Understanding these methods is crucial because they dictate how your premiums will increase as you get older.

Remember, the Medigap decision comes AFTER you choose Traditional Medicare. It's a component of the Traditional path, not an alternative to Advantage. If you choose the Traditional path, a supplement fills the gaps by law. Benefits are standardized by federal law, meaning a Plan G from one company has the exact same coverage as a Plan G from another. The difference is the price, the company's reputation, and how they calculate your premium increases.

Community-Rated (No-Age-Rated) Policies

With a community-rated policy, everyone in the same area pays the same premium, regardless of their age. Whether you are 65 or 85, your base premium is the same.

While premiums may go up due to inflation or rising healthcare costs, they will not increase simply because you are getting older. These policies often start out slightly more expensive than other types, but they can save you money in the long run since age isn't a factor in price increases.

Issue-Age-Rated (Entry-Age-Rated) Policies

Issue-age-rated policies base your premium on your age when you first buy the policy. The younger you are when you enroll, the lower your premium will be.

Like community-rated policies, your premium will not increase just because you get older. However, premiums can still rise due to inflation and other economic factors. If you buy an issue-age policy at 65, you will always pay the rate of a 65-year-old, even when you turn 80.

Attained-Age-Rated Policies

Attained-age-rated policies base your premium on your current age (the age you have "attained"). Your premium starts low when you are younger but automatically increases as you get older.

These policies are often the cheapest option when you first turn 65, making them very attractive initially. However, they can become the most expensive option as you age into your 70s and 80s. In addition to age-based increases, these premiums can also go up due to inflation.

You've worked hard to build your life, and you deserve straight answers, no surprises when it comes to your healthcare costs. The paper promises of a low initial premium don't mean much if you can't afford the policy ten years from now.

We are on your side of the table. We'll walk you through every option and help you understand exactly how a company's rating method will impact your wallet over the long haul. Your dollars are votes, and you should cast them for a company that treats you fairly.