Most people are not aware that each Medicare Supplement, or Medigap plan, has three separate ways their premium can be priced or rated. The three premium pricing options are community rated, also called “no-age-rated,” issue age rated, also called “entry-age-rated,” and attained age rated.
Community-rated premiums are when your premium is not based on your age. Premiums may go up because of inflation, costs of insurance or other factors, but not because of your age. Insurance companies that offer community rated Medigap plans charge all individuals living in the same geographical area or zip code the same price. It does not matter if you enroll at age 65 or 73, your standard monthly premium will be the same price as the other people in your city. If premiums increase because of the reasons listed above, then premiums will increase for all individuals in that geographic area.
Issue age rated premiums are based on the age you were when you enrolled and were issued the Medigap policy. Your age at the time your policy is issued is locked in, and your premiums will not change just because you get older. Your premiums may still increase due to inflation, cost of insurance, and other factors, but your attained age each year is not factored into the premium pricing. Premiums may be lower for people who buy a Medigap plan at a younger age.
And lastly there is attained age premium. These premiums are calculated each year and are based on your current age. This type of premium may increase by more options than the other choices. Attained age rated policy premiums may increase because you are a year older than last year, and because of inflation, and because of the costs of insurance and because of other factors. Meaning premiums may be lower for younger beneficiaries, but as each year passes and you get older, “They can eventually become the most expensive,”1 according to Medicare.gov.
There can be other factors that affect your premiums, and they can vary from company to company. Many companies will offer discounts for things like head of household, being married, having another 65+ year old living with you, being a non-smoker among many others. Check with your agent to see if there are any discounts that can apply to your situation.
Whether you have been on Medicare for a few years or you are newly entering into the program, it is imperative to understand your pricing plan. Knowing how a company will charge you today and, in the future, will help you better understand your options and help you to make an intelligent decision that fits your situation.