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) and the impact of cost sharing can be a little confusing.
In this article, we’ll dive into each of the three different price structure used for Medicare supplement insurance, including attained age rated. The three pricing methods used for Medicare supplement insurance are Attained age, Issue age and Community rated.
Keep in mind, a Medicare supplement plan can also be referred to as a Medigap plan or Medigap insurance. These are two terms referring to the exact same thing: Medicare supplement insurance.
Key Points for Issue age vs attained age
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There are three Medigap pricing methods allowed, depending on the state: attained age, issue age, or community rated Medigap plans.
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Attained Age (aka age rated) premiums generally start lower than either of the other pricing methods. Attained age premiums automatically adjust higher as you age. The premium rate increase is automatic on your Medigap Policy anniversary.
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With Issue Age plans, premiums can start higher, but won’t automatically increase yearly. You’ll always pay the premium for the age you were when you started the Medicare supplement policy.
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Community Rated plans mean that all people in a designated area or zip code will pay the same price for the same policy (if they use the same insurance provider), regardless of age or gender. Different insurance providers may have different premiums.
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There is no one Medicare supplement plan pricing method that offers a lower price over your lifetime. Insurance companies can increase monthly premiums with each pricing structure and prices will increase over time.
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There is no pricing structure that will turn a Medicare supplement insurance company into a philanthropic organization. They are all for profit organizations.
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Medicare beneficiaries can choose from 10 different Medigap plans, designated with different letters: Medigap Plan G, Plan N, Plan A, etc.
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A Medigap plan, or Medicare Supplement plan, covers gaps in your primary Medicare insurance, such as copays, coinsurance, and deductibles.
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Medigap plans also vary in the covered services they provide, which can include nonacute services and other benefits not covered by Original Medicare.
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Unlike Medicare Supplement plans, Medicare Advantage plans are a private alternative to traditional Medicare plan, but offer a maximum limit on Medicare beneficiaries out of pocket costs.
What is Medigap Insurance?
A Medigap plan is a type of supplemental coverage 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, especially when considering Attained Age vs Issue Age . 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 despite other factors . Medicare Advantage Plans, however, have benefits that can change every year.
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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
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.
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 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 provider 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.
Medicaid focuses on low-income households, disabled individuals, and elderly adults, it can be a viable alternative to Medigap policies in some cases. When a person is on Medicaid, they cannot have a Medicare supplement policy.
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 your Medicare supplement plans coverage is determined by federal law, Medicare supplement pricing is regulated by state authorities. Medigap insurance companies must keep their profit margins and losses within a range set by the state.
In addition, 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. Attained Age pricing structure is preferred by insurance companies because attained age premiums more accurately reflect the risk to the insurance provider.
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 plan” 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. If you change polices or insurance companies your issue age plans can be reset to a higher age.
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. Prices can increase over time because the price of a policy for a 70-year old can increase over time.
By necessity, all Medicare Supplement 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 plans status. That means your new Issue Age 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 regardless of age or gender, that’s called a “Community Rated” plan. This type of policy ignores criteria like age and gender where Medigap premiums are concerned.
Community Rated Plans can be very expensive relative to other pricing structures. You can pay more for a Community rated medigap plan than the same Medigap plan priced as attained age rated or an issue age Medigap policy.
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 Medicare Supplement 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.
Factors Affecting Medicare Supplement Premiums
Medigap premiums can vary significantly depending on several factors. Understanding these factors can help you make an informed decision when choosing a Medigap plan.
Age
Age is a significant factor in determining Medigap premiums, especially regarding attained age plan premiums . Attained-age plans, which are the most common type of Medigap plan, charge premiums based on your current age. This means that your premiums will increase as you get older. For example, a $120 premium at age 65 may increase to $132 at age 69 and $165 at age 72. Issue-age plans, on the other hand, charge premiums based on your age at the time of enrollment, and premiums remain the same for your lifetime, regardless of age.
Location
Location is another factor that affects Medigap premiums. Community-rated plans charge the same premium to all policyholders enrolled in the same plan, regardless of age. However, premiums may vary depending on where you live. For example, premiums may be higher in urban areas compared to rural areas. Additionally, some states have different Medigap standardized plans and coverage guidelines, which can affect premiums.
Health Status
Your health status can also impact your Medigap premiums. If you have pre-existing conditions, you may be charged higher premiums or denied coverage. However, some Medigap plans offer guaranteed issue rights, which means that you cannot be denied coverage due to pre-existing conditions. Additionally, some plans may offer discounts for healthy habits, such as non-smoking or regular exercise.
Medigap Premium Increases
Medigap premiums can increase over time due to various factors, including inflation, rising healthcare costs, and changes in the policyholder’s age. Attained-Age plans typically experience premium increases as the policyholder gets older, while Issue-Age plans may experience premium increases due to inflation and other factors. Community-Rated plans may also experience premium increases due to inflation, but not due to age.
It’s essential to note that Medigap premium increases can vary depending on the insurance company and the specific plan. Some insurance companies may offer more stable premium rates, while others may experience more significant increases.
Choosing the Right Medigap Plan
Choosing the right Medigap plan can be overwhelming, but it’s crucial to consider several factors to make an informed decision. Here are some key considerations:
Comprehensiveness of the plan: Consider the level of coverage you need and choose a plan that meets your requirements.
Reputation of the insurer: Research the insurance company’s reputation, financial stability, and customer service.
Price: Compare prices among different insurance companies and plans to find the best option for your budget.
Rate increase history: Consider the insurance company’s history of rate increases and choose a plan with a stable premium rate.
Medigap Plans vs. Medicare Advantage
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
Getting the Best Medigap Rate
Matthew Claassen and his MedigapSeminars.org teamTo get the best Medigap rate, it’s essential to compare rates among different insurance companies and plans. Here are some tips:
Research and compare rates: Use online resources or consult with a licensed insurance agent to compare rates among different insurance companies and plans.
Consider working with a licensed insurance agent: A licensed insurance agent can help you navigate the complex world of Medigap insurance and find the best plan for your needs.
Look for discounts: Some insurance companies offer discounts for certain groups, such as non-smokers or couples.
Review and adjust your plan annually: Review your Medigap plan annually and adjust as needed to ensure you’re getting the best rate and coverage for your needs.
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: You may also be interested in the Medigap Seminars Scholarship for adults over 50 returning to school.
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 Group Advantage Plan or 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. If you are trying to research a Medicare supplement insurance company, to find out which insurance company to use, or want to compare your employer plan to Medicare, this article is for you.
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 Attained Age vs Issue 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 to read our customer reviews, request a quote, more information about enrolling in Medicare help with finding, and applying for, a Medigap plan in your state, please feel free to contact us learn more about Matthew Claassen, CMT
