Medigap prices
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Premiums
Even though Medigap plans are standardized, premiums vary from company to company. Some companies base premiums on an individual's age; others don't. Some charge more for smokers, and others offer a variety of discounts. A few companies charge everyone the same price, regardless of age or marital status. Many companies charge younger people with Medicare more than they charge people 65 and older for the same policy. Most companies increase premiums each year.
How insurance companies set prices
There are 3 ways that insurance companies set prices for Medigap policies.
- Attained Age Rating — This is the most common way that policies are priced in California. Attained age rated policies go up in price as you age, simply because you get older. Some companies increase the premium each year as you get older; others increase the premium every 4 years based on your age.
Example: An insurer charges each 75-year-old person more than it charges each 70-year-old, instead of spreading the cost between all 70- and 75-year-olds. The Medigap policy will go up in cost due to age, in addition to the increased cost of medical care. - Issue Age Rating — These premiums are based mostly on your age when you buy the policy. Unlike Attained Age Rated policies, Issue Age Rated policies do not go up just because you are another year older.
Example: If you buy the policy when you are 65, the premium will be less than if you buy the policy when you are 80. The premium cannot increase due to age, but it can go up due to other reasons such as inflation. - No-Age Rating or Community Rating — This is the least common way that policies are priced in California. No matter how old you are, the policy costs the same. With this structure, younger people may pay more than what they would pay for other policies, and older people may pay less.
No matter which type of pricing your Medigap insurer uses, the price of your policy will probably go up each year because of inflation and rising health care costs.
Policies whose prices rise based on both age and increased medical costs usually raise prices faster and at a steeper rate than those that don't charge separately for age.
Remember that companies do not have to sell you a Medigap policy except during open enrollment or in a guaranteed issue situation. So if you buy an attained age rated policy whose price goes up faster than another type of pricing, you may not be able to switch (except in special circumstances) to another company, depending on your health history.
Compare policies and premiums from different companies before making a decision to buy. You can find information about companies selling Medigap plans in California and some sample premiums for those plans in the Department of Insurance's "2007 Guide on Medicare Supplement Insurance."
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Page updated April 23, 2008