How Medicare Supplement Rates are Set

By Melissa A. Brown
eMedicareSupplements Contributor

A Medicare supplement insurance policy, or Medigap plan, might be the best tool for you to supplement the coverage you have from original Medicare. Once you have decided if this is the right choice, you will need to decide which policy is best for you.

Many seniors ask how prices are set for Medigap policies. The truth is, insurance companies set their own monthly rates for Medicare supplement policies. There are three basic ways a company might choose to establish their rates:

• Community-based rates: These rates are the same no matter how old you are. Premiums are affected by inflation and other community factors, but never by your age.
• Issue-age-based rates: Premiums are based on your age at the time you purchase the policy. This means that you will pay the same amount as other members your age.
• Attained-age-based rates: Premiums increase as you grow older.

Whether the premiums are based on age or community factors, you are almost guaranteed that they will increase each year. Some companies raise their rates more substantially than do others, so it often pays to investigate each insurance company before choosing to purchase a policy.

Remember that open enrollment is the only time an insurance company is obligated to sell you a Medigap policy, unless you can prove continuous coverage, so be sure to purchase your plan at that time.

In general, Medicare supplement policies vary greatly in premium rates. You will find different rates for the same policy through different insurance providers. For this reason, it is paramount that you compare pricing before purchasing a policy.

Make sure you are comparing the same policy, such as Medigap Plan F, at two different companies. The Medicare website at www.medicare.gov has some useful tools that allow you to compare Medicare supplements available in your area.