Medigap Premiums and Rates - How is Pricing For Medigap Plans Determined?
Every insurance company has the right to choose how to price their plans.
There are three different ways that they set Medigap Premiums and Rates: community-rated pricing, issue-age-rated pricing, and attained-age-rated pricing.
It is crucial that you understand how these different types of pricing will affect how much you end up paying for Medigap, both now and in the future.
When deciding on an insurance company, be sure to find out which kind of pricing they use.
Community-rated pricing is also called "no-age-rated" pricing, because your age is not a determining factor in the cost of your premium.
In general, everyone covered by the Medigap policy pays the same monthly premium, regardless of age.
Your premium may increase due to inflation or other factors, however.
Example: Mr.
Johnson is 66 and Mrs.
Clark is 73.
They both buy a community-rated policy, and each pays $150 a month despite their age difference.
(All of these amounts are hypothetical and are only for reference purposes.
) Issue-age-rated pricing, also known as "entry-age-rated" pricing, bases your premium on the age you are when you first buy the Medigap policy.
Like community-rated pricing, your premiums may go up due to inflation, but not because you get older.
This means that your monthly premiums, for every year that you have Medigap, will cost less the younger you are when you buy the policy.
Example: Mr.
Smith and Ms.
Chen are ages 65 and 72, respectively.
They both buy this policy; Mr.
Smith's monthly premium is $125, while Ms.
Chen's is $200.
Attained-age-rated pricing calculate monthly premiums based on your "attained" or current age, which means that premiums will be low when you are younger and higher as you age.
You should be aware that even though these plans might initially seem very appealing due to their low monthly premiums, they may eventually end up costing you the most.
Example: Ms.
Walker, age 67, and Mrs.
Baker, age 70, both purchase this policy.
Ms.
Walker's monthly premium is $140 in 2010, $160 in 2011, $180 in 2012, and so on.
Mrs.
Baker initially pays $200 in 2010, and then $220 in 2011, $240 in 2012, etc.
In addition to age, other factors may influence your monthly premium; these include geographical rating, the presence of pre-existing health problems, and discounts or specials that insurance companies may offer.
You should keep these different pricing options in mind, so that you do not end up overpaying in the long run.
There are three different ways that they set Medigap Premiums and Rates: community-rated pricing, issue-age-rated pricing, and attained-age-rated pricing.
It is crucial that you understand how these different types of pricing will affect how much you end up paying for Medigap, both now and in the future.
When deciding on an insurance company, be sure to find out which kind of pricing they use.
Community-rated pricing is also called "no-age-rated" pricing, because your age is not a determining factor in the cost of your premium.
In general, everyone covered by the Medigap policy pays the same monthly premium, regardless of age.
Your premium may increase due to inflation or other factors, however.
Example: Mr.
Johnson is 66 and Mrs.
Clark is 73.
They both buy a community-rated policy, and each pays $150 a month despite their age difference.
(All of these amounts are hypothetical and are only for reference purposes.
) Issue-age-rated pricing, also known as "entry-age-rated" pricing, bases your premium on the age you are when you first buy the Medigap policy.
Like community-rated pricing, your premiums may go up due to inflation, but not because you get older.
This means that your monthly premiums, for every year that you have Medigap, will cost less the younger you are when you buy the policy.
Example: Mr.
Smith and Ms.
Chen are ages 65 and 72, respectively.
They both buy this policy; Mr.
Smith's monthly premium is $125, while Ms.
Chen's is $200.
Attained-age-rated pricing calculate monthly premiums based on your "attained" or current age, which means that premiums will be low when you are younger and higher as you age.
You should be aware that even though these plans might initially seem very appealing due to their low monthly premiums, they may eventually end up costing you the most.
Example: Ms.
Walker, age 67, and Mrs.
Baker, age 70, both purchase this policy.
Ms.
Walker's monthly premium is $140 in 2010, $160 in 2011, $180 in 2012, and so on.
Mrs.
Baker initially pays $200 in 2010, and then $220 in 2011, $240 in 2012, etc.
In addition to age, other factors may influence your monthly premium; these include geographical rating, the presence of pre-existing health problems, and discounts or specials that insurance companies may offer.
You should keep these different pricing options in mind, so that you do not end up overpaying in the long run.
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