If you are turning 65 or signing up for Medicare Part B for the first time, you may be considering a separate plan to fill in the gaps in your Original Medicare plan coverage. Something you may be wondering about Medicare Supplement Insurance plans, or Medigap, is how Medicare supplement rates are determined. Insurance companies have three ways to price, or rate, plans.
This is based on your age or, in other words, the age you have attained. All people of the same age pay the same price for their policies. In the beginning, these are the least expensive plans. For example, Betty and Charles are both 65, so they pay the same premium to be in the same plan. Christina is 69, so her premium for the same plan is higher. Each year they all have an automatic increase in premium based on their age, in addition to rate increases across the board for reasons such as inflation.
This is based on the age you are when you sign up, your age at issuance of a policy. These premiums do not go up as you age, although, like all supplement policies, they will go up due to inflation and other factors. Here is an example : Mike, age 72, who started a plan when he became eligible at age 65, pays less than Brianna, also 72, who started the same Medigap plan a few of years later, at age 68. Their premiums are based on the age they were when their policies were issued, and have increased over time due to allowable factors, but not because they have grown older.
These policies, also called no-age-rated plans, have the same pricing for everyone. The premium does not go up based on anyone’s age, though they also can go up for other reasons.
Each year insurance companies look at their total losses and decide how to spread out their risks for the next year. They cannot raise Medigap premiums for the people who had higher expenses or reduce them for individuals who had little or no expenses. They have to look at groups as a whole to determine what Medicare Supplement Rates should be. Your inevitable rate increase will be determined by the total amount of claims being paid out for your particular plan’s policy holders.
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