Although Medigap plans are standardized, premiums vary by company. Certain companies base premiums on your age. Some companies charge more for smokers, and others offer a variety of discounts. A few companies charge all members the same price, regardless of age or marital status. Many companies charge younger people with Medicare more than they charge people age 65 and over for the same policy. In addition, most companies increase premiums each year.
How Insurance Companies Set Prices
Insurance companies set prices for Medigap policies in 1 of 3 ways:
- Attained-Age Rating — This is the most common way policies are priced in California. Attained age-rated policies increase in price as you age, because as you get older, you typically require more health care. Certain companies increase the premium each year; others increase the premium every 4 years based on age. This results in a much lower premium at younger ages, but a higher premium at older ages.
- Issue-Age Rating —Premiums in these policies are based mostly on your age when you buy the policy. Unlike attained age-rated policies, issue age-rated policies do not increase in cost simply because you get older. However, their premiums can increase for other reasons, such as inflation.
- No-Age Rating or Community Rating — This is the least common way policies are priced in California. No age-rated or community-rated policies cost the same to all members, regardless of age, marital status or where one lives. Within this structure, younger members may pay more than they would for other policies, and older members may pay less.
Regardless of which type of pricing your Medigap insurer employs, the price will most likely increase each year because of inflation and rising health care costs.
As a general rule of thumb, premiums that are based on both age and increased medical costs typically increase faster and at a steeper rate than other premiums.
Note: Companies are not required to sell you a Medigap policy except during open enrollment or a guaranteed-issue period. As a result, if you buy an attained age-rated policy and its prices increase faster than another type of policy, you may not be able to switch to another policy depending on your health condition, except during open enrollment or a guaranteed-issue period.
It is important to compare policies and premiums from different companies before you enroll. You can find information about the companies that sell Medigap plans in California and sample premiums in the Department of Insurance’s Guide on Medicare Supplement Insurance.
Learn more about the other out-of-pocket costs for Medigap plans A-N.
