Attained-Age vs. Issue-Age Medigap Plans

A Medigap plan is an excellent way to help ensure that your health insurance policy covers every eventuality. But the different pricing structure of policies (like attained age vs. issue age and community-rated) can be a little confusing.

In this article, we’ll dive into each type of price structure and explain how insurers calculate the monthly premium. Plus, we’ll break down the difference between some types of Medicare plans and Medigap plans.

Key Points

• • There are three Medigap pricing methods, depending on the state: attained age, issue age, or community rated Medigap plans.
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    • • Attained Age premiums generally start lower than either of the other pricing methods.
    • • With Issue Age plans, premiums start higher, but won’t automatically increase yearly. You’ll always pay the current premium for people who are the age you were when you took out the policy.
    • • Community Rated plans mean that all people in a designated area or zip code will pay the same price for a policy (if they use the same insurance company), regardless of age or gender. Different providers may have different premiums.
    • • There is no one Medicare supplement pricing method that is a lower price over your lifetime. Insurance companies can increase prices with each pricing structure.
    • • There is no pricing structure that will turn a Medicare supplement insurance company into a philanthropic organization. They are all for profit.

• • There are 10 different Medigap plans, designated with different letters: Medigap Plan G, Plan N, Plan A, etc.

• • A Medigap plan, or Medicare Supplement plan, covers gaps in your primary Medicare insurance, such as copays, coinsurance, and deductibles.

• • Unlike Medicare Supplement plans, Medicare Advantage plans are a private alternative to traditional Medicare plan.

What is Medigap Insurance?

A Medigap plan is insurance that helps cover the gaps left by Original Medicare, your primary health insurance. These Medicare supplement plans enable you to cover copays, coinsurance, and deductibles that your original Medicare policy doesn’t cover. It also sets a maximum out of pocket limit for you as the policyholder.

It’s important to know that Medigap plans work differently than Medicare Advantage plans. Medigap plans simply supplement and add to your original Medicare policy, while Medicare Advantage plans replace your original policy with a private version.

Something else to bear in mind is that Medigap plan benefits remain the same over time. So, if you have Plan A, it will always offer the same benefits. Plan B may offer different benefits than Plan A, but it will always stay the same. Medicare Advantage Plans, however, have benefits that can change every year.

Understanding Medicare Parts and Supplement Insurance

Before you can truly understand the difference between Attained Age Medigap plans vs Issue Age rated Medigap plans, you need to understand what original Medicare plans cover. Let’s take a look at the different Medicare parts.

• • Medicare Part A – Part A is inpatient hospital coverage for Medicare beneficiaries. It covers services like:
    • • Inpatient care at a treatment facility or hospital
    • • Care at a skilled nursing facility
    • • Health care at home
    • • Hospice care for patients with serious illness

• • Medicare Part B – Part B is outpatient medical insurance. It covers an array of services, including:
    • • Outpatient care (medical care administered without staying overnight in a hospital).
    • • Fees charged by doctors and other medical service providers.
    • • Health care at home.
    • • Many preventative tests, screens, and services.
    • • Some medical equipment, like wheelchairs and hospital beds.

• • Medicare Part D – Part D is prescription drug coverage that beneficiaries can purchase in addition to Parts A and B (Original Medicare). It offers prescription drug coverage for prescriptions you would normally pick up at a pharmacy.

• • Medicare Part C (Medicare Advantage) – Part C, also known as a Medicare Advantage plan, is a type of bundled policy, approved by Medicare. These plans are not directly offered by Medicare and are essentially a private alternative to Medicare Original. Typically, a Medicare Advantage plan covers:
    • • All benefit categories covered by Part A
    • • All benefit categories covered by Part B
    • • In most cases it includes a bundled Part D
    • • Sometimes, added value services or benefits

• • Medicare Supplement Insurance (Medigap) – Medicare supplement insurance, or Medigap, is a way you can acquire additional medical insurance to cover certain elements not covered by original Medicare. This type of policy is sold by private insurance companies and insurance brokers.

While looking into Medigap plan types, you may encounter another type of plan called Medicaid services. Unlike the other plans listed above, this system is unrelated to the Medicare plans. Instead, it is a plan offered by a state insurance department, and funded by state and federal authorities.

While it focuses on low-income households, disabled individuals, and elderly adults, it can be a viable alternative to Medigap policies in some cases.

What Medigap Plans Cover

Not all Medigap plans are equal, but they all help cover out of pocket costs to some degree. Let’s take a quick look at some of the aspects covered by the different Parts of Medicare:

• • Part A coinsurance, and additional hospital costs – all plans offer 100% up to a maximum of one year hospitalization (when Part A benefits are depleted).

• • Part B coinsurance, or copayments – all plans offer 100 percent, except plan K (50%) and Plan L (75%)

• • First three pints of blood – all plans offer 100 percent, except plan K (50%) and Plan L (75%)

• • Deductible for Part A – all plans offer 100 percent, except plan K (50%), Plan L (75%), Plan M (50%), and Plan A (0%)

Of course, there are many other differences as well. But this gives you a basic idea of some differences between the plans.

Medigap Plans: Community Rated Vs. Attained Age Vs. Issue Age

While what your Medigap plan covers is determined by the type of plan, that’s not all that affects your monthly premium. Pricing plans are, to a certain degree, implemented by state authorities.

Some states mandate that Medicare supplement policies are priced as either Issue Age or Community Rated. If there is no pricing structure mandate, then the polices will be priced as Attained Age. That is the preferred pricing method because it allows the policy price to more accurately reflect the risk to the insurance company.

Below, we’ll take a closer look at the different pricing plans practiced by each rated state.

Issue Age Rated Medigap Plans

Certain states base the pricing for Medicare supplement policies on your age when you acquired the policy. These are called “Issue Age” states, and some of them may also allow “Community Rated” pricing.

The thing that stands out about an Issue Age policy is that you’ll always pay the monthly premium rate that corresponds to your age when you first purchased your policy.

Let’s say you were 70 when you registered for a policy. That means you’ll always pay the rate applicable for a 70-year-old. What it doesn’t mean is that you’ll always pay the same premium that your Medigap plan required when you registered. Prices can increase over time.

By necessity, all Medigap plans increase in cost over time. However, if you live in an Issue Age state and choose the right insurance company, rate increases should be infrequent. Even with price increases, issue age rated Medigap policies issued at 65 will still be more affordable than paying the rate for a 75-year-old.

Pay careful attention when choosing your plan and insurance company. If you end up wanting to switch plans or companies, you’ll lose your Issue Age status. That means your new plan will be priced based on your current age, which will likely be higher.

Community Rated Medigap Plans

When everyone in a particular zip code or region pays the same premium, that’s called a “Community Rated” policy. This type of policy ignores criteria like age and gender where Medigap premiums are concerned.

It’s worth noting, however, that not all Medigap insurance companies will charge the same premium for this type of plan. While every person within the defined region will pay the same monthly premiums, those premiums can differ significantly between insurance providers.

This type of pricing structure can seem really helpful in states where you can change policies or insurers without having to go through medical underwriting. But here’s the thing: a true Community Rated policy is usually much more expensive than similar policies that use other pricing structures.

While some people believe that monthly premiums are more affordable in a Community Rated state, that’s rarely the case. Government interventions in pricing structure tend to make plans more expensive, rather than more affordable.

Attained Age Medigap Plans

In regions where state law doesn’t require Issue Age or Community Rated pricing structures, then the state defaults to Attained Age policies.

With an Attained Age plan, the cost of your policy will increase each year on your policy anniversary, usually by around 2% to 3%. What’s great about an Attained Age policy is that the initial (and often lifetime) cost is generally much lower than that of other pricing methods.

An attained Age pricing strategy is useful for insurance companies, because they can better price their policies to accommodate inflation and account for specific risks within different demographics.

It’s worth noting that, the Medigap premiums are often more manageable with an Attained Age plan. This is because the increases are generally minute. For instance, at a 3% yearly increase it will take more than two decades to double your monthly premiums.

Attained Age Vs Issue Age Vs Community Rated Medigap Plan

Now that you understand the basics of the different pricing methods, let’s take a look at Community Rated vs. Attained Age vs. issue age rated Medigap plans in a nutshell.

If you have an Attained Age rated Medigap plan, then:

• • Your monthly premium will increase yearly, by a small percentage, on your policy anniversary.

• • You’ll likely pay a lower starting rate than for another Medicare Supplement Plan

• • Your insurance provider will be better able to account for inflation and other factors when calculating your Medicare supplement premiums

If you have an Issue Age rated Medigap plan, then:

• • You’ll pay the same price as other Medigap policy holders the age you were when you obtained your Medigap plan. I.E. the same price as a 65-year-old if you were 65 when you got the policy.

• • Your standard monthly premium will increase along with the premiums for other people who are the age you were when you applied for the Medicare Supplement Plan.

• • You can’t change policies or insurance companies without giving up your Issue Age status; you’ll have to pay the premium for your current age.

If you have one of the Community Rated Medigap plans, then:

• • Your Medicare supplement plan is likely to be more expensive than it would be with one of the other two pricing plans.

• • Your Medigap plan, and the plans of other residents in your zip code or region (as proclaimed by law), will have the same monthly premium at the same insurance companies.

• • The Medigap coverage may have different prices between different Medicare Supplement insurance companies, but won’t differ from person to person with the same provider.

Final Thoughts

Different states are required by law to apply either Community Rated or Issue Age pricing to all Medigap policies offered in their state. There are pros and cons to each pricing method, but notable points when comparing Issue Age vs Attained Age Medigap plans include:

• • If you live in a state that mandates Medigap policies to be priced as Issue Age or Community Rated, Attained age polices will not be available to you.

• • If your state has no pricing mandates, the Attained Age policy will likely be your best value.

• • Be wary of insurance companies that claim to be Community Rated in Attained age states. It’s usually a scheme to make you believe you are getting something you are not.

If you’d like more help with finding, and applying for, a Medigap plan in your state, please feel free to contact us.