If you didn’t already know, Medicare can be confusing, especially when it comes to Medicare Supplements and how they are priced.
Medicare Supplement insurance, also known as Medigap, is additional insurance you can purchase through a private health insurance company to help pay for any out-of-pocket costs without network restrictions (as long as your doctor or hospital accepts Medicare) that Original Medicare does not cover. You must have Original Medicare (Part A and Part B) to purchase a Medicare Supplement.
There are 10 different types of Medicare Supplement plans offered in most states (the different types of plans are designated using letters A-D, F, G, and K-N). Price is the only difference between plans with the same letter that are sold by different insurance companies. But how do carriers determine these prices?
Each insurance company conducts an annual review of their book of business to determine any rate changes based on the health of the risk pool, as well as changes in age, smoking status, and type of plan. Medicare Supplements are rated by the insurance company using three different metrics: attained age, issue age, or community rated. Here’s what those metrics mean…
- Attained age: Essentially, this type of rating increases your monthly premium as you age. For example, if you are currently 65, once you “attain” (turn) age 66, your premium may increase.
- Issue age: With issue age, your premium is based on your age when you bought the policy and does not increase as you get older. Premiums may still increase because of inflation or other economic factors, but will not change because of your age.
- Community rating: With community rating, everyone, regardless of age, is given the same rate up to a benchmark age. Some insurance companies may offer discounts for every year you are younger than the benchmark age.
Health insurance companies may also consider smoking versus non-smoking rates and household discount rates between about 3.5 and 13 percent, which apply when two people in a household (who do not need to be the same age) enroll into the same plan. (Please note: Some states, like Florida, may not offer household discounts.)
Some insurance companies offer “Medicare Supplement Select” plans at lower rates, which may limit your network options when it comes to doctors and hospitals covered under your plan. Medicare Select policies are not required to pay any benefits if you do not use a network hospital for non-emergency services and Medicare will still pay its share of the cost.
As with most things Medicare-related, finding a plan that suits your budget can be difficult. At ARC Benefit Solutions, our licensed health insurance agents can help walk you through your options to ensure you have the coverage you need at a price that works with your budget. If you’re interested in a consultation with one of our client advisors, contact us today for a no-obligation quote!