Medigap Costs – Comparing Costs of Medicare Supplement Premiums

Original Medicare comes with a $1,132 hospital deductible and generally a 20% coinsurance for medical expenses. There's no limit on out-of-pocket spending and it doesn't pay anything for many services that elderly and disabled Americans typically need, like long-term care, dental or vision. On top of that, health care costs are rising faster than Social Security income.

To help with these costs, one in five Americans choose to buy a Medigap policy. If you're one of those, you'll want to do your homework before selecting a policy - and the Medicare supplement premium - that is right for you.

Medigap Plan Pricing - Not all Medicare supplement premiums are the same

There are ten Medigap policy options available, each with different, yet standardized, benefits and coverage. However, while Medigap plans are standardized no matter which insurance company you choose, Medigap premiums can be vastly different. So, while you are getting the same benefits, it pays to shop around for the best price.

You may not want to wait until you're older to get a Medigap plan

If you don't enroll in Medigap during open enrollment, you might not get the plan you want later. Or, if you do choose a plan design now based on your good health status, not all health insurance companies will let you switch to a better plan later if health issues arise.

Enrollment in a Medigap plan is guaranteed when you sign up during your initial open enrollment period. That means you can choose any of the ten* plan options regardless of your health status, as long as those plans are available where you live. Your six-month guaranteed-issue open enrollment period begins the first month you are covered by Medicare Part B after you turn 65 years old. There are provisions that may allow you guaranteed issue later. But your age when you initially enroll in Medigap can be an important factor to the Medicare supplement premiums you will pay.

Methods insurance companies use to set Medicare supplement premiums

Be sure to also consider your age and the method for setting Medicare supplement premiums that each company employs before making your choice. There a three ways an insurance company sets its pricing:

• Everyone pays the same regardless of age ("community-rated" or, "no-age-rated" plans)
• You pay based on your age when you first enroll ("issue-age-rated" or "entry-age-rated" plans)
• Rate is based on your current age in a given year ("attained-age-rated" plans)

Depending on your age when you first enroll, and the potential for your Medigap premiums to increase based on the pricing method, this can make a big difference in what you pay now - and in the future. Each method can also be impacted by inflation.

You can check the individual insurance companies for their rules on health status - especially if you are trying to switch to a better plan because of poor health. Some plans are guaranteed-issue even after open enrollment.

* Massachusetts, Minnesota and Wisconsin residents have different Medigap options than the standard ten plan designs.