Reasons for Differing Medigap Prices
By Nancy DellaVecchia
Medicare supplements, or Medigap insurance, are the supplemental insurance policies that cover medical costs not covered by Original Medicare. All insurance companies that sell Medicare supplements must offer the same policies, which are standardized through the Medicare program. Although regulated, Medigap insurers face the same risks as other health insurance companies and must set their rates based on different risk factors.
Some states place stricter regulations on Medigap insurers than others. In highly regulated states, the premium rates for Medicare supplements tend to be higher than in states with fewer restrictions. Private insurance companies are subject to both federal and state regulations, and some insurers choose not to offer certain plans in states where regulations make their costs higher.
Medigap Premiums and Age
Medigap policies may be rated one of three ways: community-age, attained-age and issue-age. Community-age rated premiums are usually issued under a group policy and do not go up as policyholders age. Issue-age rated policies are individual policies that are based on the age of the person at the time the policy is issued and will also not go up due to age. Attained-age rated policies are rated based on the age of the policyholder, and premiums may be raised as the policyholder ages. Community-age rated and issue-age rated premiums may go up as the result of inflation or other factors.
Initially, attained-age rated policies may offer lower rates, but the rates can become quite high as the policyholder ages. The more stable rates of issue-age and community-age rated policies offer better value for most seniors.
Health Insurance Discounts
The same discounts offered by health insurance carriers on other policies may be available on Medicare supplemental insurance. Non-smokers may receive a discount, and discounts may also be available to those who can show a healthy lifestyle including regular exercise. If the insurance company that carries a person's home and auto insurance also offers Medigap insurance, the person may be eligible for a multi-policy discount.
Seniors with Health Problems
Seniors with chronic health conditions like diabetes, Parkinson's disease and osteoporosis usually pay higher Medigap premiums than healthy individuals. Those whose lifestyle choices make them more likely to have health issues, like smokers, also pay higher premiums.
Different insurance companies may offer the same person different rates on the same Medicare supplement plan, depending on their particular method of rating risks. Seniors may save a considerable amount if they shop around and check the premium rates of different Medigap carriers before deciding which policy to buy.
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