Medicare supplement plans (aka Medigap plans) help cover the costs that your Medicare plan doesn’t. Ten plans are available, each costing different monthly premiums in exchange for different levels of coverage. These plans are sold by private insurance companies. This means that while plan coverage is standardized across most states, the actual cost of each plan can vary. Learn more about the factors influencing Medigap plan cost so you can make the best decision for your needs.
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Factors Impacting Cost
Medigap plan cost variation is influenced by three main factors:
- The plan you choose
- The insurance company you purchase from
- Your demographics
Let’s take a closer look at each of these…
Plan Cost Variation
Medigap plans require a monthly premium in addition to any out of pocket costs not covered by both Medicare and your Medigap plan. For higher coverage Medigap plans, like plans F or G, you’ll pay a higher monthly premium in exchange for lower (or no) out-of-pocket expenses. For lower coverage plans, like Plan N or K, you’ll pay less monthly but could get saddled with higher out-of-pocket costs. The lower coverage plans are a good option if you’re open to some cost-sharing in return for monthly premium savings.
Choosing the right plan for you will depend on your finances, overall health, and tolerance for risk. Before making your decision you’ll want to compare plans and speak with a representative about what’s best. Keep in mind that you will be mostly locked into your plan and rate once you make your selection during your open enrollment period. It’s important to seriously consider all factors involved.
Insurance Cost Variation
Medigap plans are standardized across states. While the benefits remain constant, the rates and experience can differ across private insurance companies. When looking for the right insurance company, you’ll want to consider its financial security, insurance rates, rate increase history, customer service quality, and reputation. You’ll also want to know if they offer the plan you’re looking for and operate in the state in which you live.
Insurance companies in your area may use one of the following systems to set their premium rates:
- Community-rated: Regardless of age, everybody pays the same amount for the policy. The policy price cannot change due to your age.
- Issue-age-rated: Price is based on your age at the time of purchase. The premium will cost less for those who purchase their Medigap Plan at a younger age, but it will not change based on your age once you purchase it.
- Attained-age-rated: Premium starts low and increases as you age.
Most insurance companies primarily use attained-age to determine premium costs. Out of the three methods, this is typically the least expensive type of plan upon initial enrollment.
The plan and carrier age is another factor that can determine your rates. In general, the older the coverage, the more expensive the plan. Additionally, a newer provider in your area will almost always have lower rates than one that is more established and has been offering insurance for years.
The cost of Medigap plans also depends on several factors personal to you, including your age, gender, zip code, premium payment method, and available discounts, etc. Here are some things that can impact cost:
- Zip code: Where you live will greatly affect the price of your insurance. Some states, such as Florida and Ohio are more expensive than others based on demographics and the cost of care as determined by actuaries.
- Gender: Gender is usually a factor. Women tend to have lower premiums.
- Personal health: Tobacco users will always have higher premiums, though some states do not factor this in during open enrollment. Some companies will provide a preferred rate for very healthy individuals, though it is a less common practice and will not affect your rates during your open enrollment.
- Premium payment method: Typically, you’ll be able to save a small percentage or predetermined dollar amount by paying for your Medicare supplement insurance monthly through an automated bank draft or yearly by check. This automated process helps insurance companies avoid administrative expenses.
- Available discounts: Many Medigap providers will offer some discounts. The most common is a marital/spouse discount that can decrease the premiums by around five to seven percent for each spouse or domestic partner (assuming both are enrolled). Some carriers now offer household discounts as well. By simply having someone else living with you, you may qualify for savings of five to seven percent.
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