Insurance companies can set their rates for Medicare supplement policies by a number of factors, including gender, age, zip code, and tobacco usage.
An Attained-age policy is one in which the premiums are based on your age at enrollment. The prices will be lower when you first enroll but may increase as you get older. There are three primary methods that insurance companies use to price their Medigap plans: attained-age rated, issue-age rated, and community rated.
No matter how the policies are rates, ALL Medigap policies will have annual rate increases due to healthcare inflation. Let’s take a look at each of these more closely so we can show you how they work and what to expect.
Attained-Age Medigap Policies
An Attained-age rating is probably the most common pricing method in the United States. The monthly premiums for these policies will be based on your current age at policy start. The rates will increase slowly over time.
Don’t let that scare you. As we mentioned, All Medicare supplements will incur rate increases to keep up with inflation. For the most part, they are reasonable since most increases must first be approved by the Department of Insurance before they can take effect.
Also, because attained-age rated policies are so common, they represent the biggest group of insured policyholders. This helps to minimize and spread the insurance risk out over many people, thereby keeping pricing on these policies competitive.
Attained-Age Pricing Example
Let’s say that Harry is turning 65 in Texas where many of the policies are attained-age rated. He finds a Medicare Supplement Plan G for $130/month.
Joe wants to buy the same policy but he is age 68. His rate for the policy is $150/month because he has attained a higher age before buying the policy.
The cost of these Medicare supplements will go up slightly every year, due to increased age and also due to healthcare inflation.
Keep in mind that all supplement policies will have rate increases every year, regardless of whether they are attained-age rated or otherwise.
Community-Rated and Issue-Age Rated Policies
The other two methods of pricing are less common. Community-rated policies generally offer rates based on geographical factors, such as which zip code you live in or whether you use tobacco. In other words, they don’t base rates on just age alone.
Issue-age rated policies have rates based on what age you were at the time you purchased the policy. In theory, when you buy an issue-age rated policy, the carrier will always price you at the age at which you bought the policy. While this idea seems alluring, these policies (depending on your state) will often have much higher premiums to start out.
People who buy them don’t realize that the policy is still subject to annual rate increases to keep up with inflation. Be wary of any agent who tries to mislead you into believing that buying an issue-age rated policy means you will never have an increase in premiums. That simply isn’t the case.
If you are considering an issue-age policy, give us a call. We can check how your state typically rate its policies. We’ll also tell you whether these are a good buy where you live, or if you should pursue another alternative that’s a better bet for long-term rate stability.
Community-rated policies offer the same premiums for everyone in a certain area, regardless of their age. However, they can still set their rates based on other factors, such as which zip code you live in or whether you use tobacco.
When you buy an issue-age rated policy, the carrier will always price you at the age at which you bought the policy. Your rates will go up over time due to other factors but your rate will not go up automatically as you get older.
Compare Attained-Age vs Issue-Age
You need several pieces of information to choose the most suitable Medigap policy. Of course, you should review the current rates offered by the carrier. However, be sure you also check the carrier’s rate increase trends over the last five years and its financial ratings.
Would you like a free report that shows the difference in pricing for both attained-age and issue-age Medigap policies? We can provide one for you! Get what you need to make an informed decision about your choice of Medigap company. Request your free Medigap rate report today for help!