How Much will a Medicare Supplement Cost?

Medicare Supplement (Medigap) CostFor most seniors, the number one factor considered when evaluating Medicare Supplement plans is the cost of the monthly premium.  Monthly premiums for supplemental insurance plans are not regulated, so what you pay is completely dependent on the plan you choose (e.g., Plan A, B, C, etc.) and the insurance company you contract with.

Medicare supplemental insurance companies are allowed to establish premiums. They do so based on actuarial formulas.  As a result, plan costs vary.  In other words, if you are shopping for a Plan F policy, the same plan from company A may cost less than it does from company B, even though both Plan F policies provide the exact same benefits.

How Insurance Companies set Medicare Supplement Prices

Supplement plan prices vary widely because each insurance company decides how it will set the premium amounts for its policies. Here’s how insurers rate policies:

  • Community-rated: This is also known as “no-age-rated,” because regardless your age the premium is the same. Community-rated premiums increase with inflation and demographic information, but they ignore age.
  • Attained-age-rated: These policies are less costly at the beginning but increase automatically as you age. Premiums will also increase with inflation and other risk factors.
  • Issue-age-rated: Also known as “entry-age-rated,” because your premium rate is based on your age when you purchase the policy.  Your premium will be the same as the other seniors your age in your geographic area.  Premiums will increase with inflation and other factors, but not due to your age.

As you can now see, it’s critical that you ask your Medicare Supplement agent how an insurance company prices its policies.  This factor will affect how much you pay both now and in the long term.

As with most other products, health insurance plans are affected by inflation and rising health care costs.  Unless you live in a state that regulates rates, like Florida, you should anticipate that your premium will increase each year.  That’s why it is critical to compare rates each year.

What you pay for a Medicare Supplement may also be determined by your gender, where you live, and these common rate setting factors:

  • Non-smokers
  • Married people who buy two policies
  • Those who pay their premiums using electronic funds transfer
  • Those who pay their premiums yearly
  • Medicare SELECT policies that require you to use specific network providers
  • High-deductible option for Plan F
  • Uses medical underwriting or bases the premium rate on your medical history if you don’t have a guaranteed issue right or are not in your Medigap open enrollment period

What to Ask When Shopping for a Medicare Supplement

Many insurance carriers offer Medicare Supplement plans.  It’s important to shop and compare.  Just make sure you’re not comparing apples to oranges.  In other words, if you’re looking for a Plan A, make sure you are getting rate quotes for a Plan A from each company you call.  If you are using an independent Medicare agent, they will provide the comparison data you need.

Here’s what you should ask about each policy you compare:

  • How is the policy priced (community-rating, issue-age-rating, or attained-age-rating)?
  • If the policy is attained-age-rated: How often will the premium increase due to my age?
  • How much is the premium amount for someone my age (advertised rate may be for an individual who just turned 65)?
  • How much has the premium increased over the past five years?
  • Do you offer any discounts (non-smoker, married couples, etc.)?

As you would expect, the more coverage the policy offers the more you’re going to pay.  However, due to the fact insurance companies compete for your business, premiums vary significantly.  It pays to shop and compare.

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