About factors that Impact your Medicare Supplement. First is turning 65 can become a little exciting. Then it registers that your healthcare bills will be taken care of by Medicare. But we only wish it was that simple. Please don’t be disappointed. Medicare certainly gives you relief by covering many (if not all) of your healthcare costs. However, attaining the desired coverage can be a little challenging for many.
Since Medicare doesn’t cover all health costs, many choose to get additional coverage through various other Medicare plans. Medicare Supplement, or Medigap, is one of them.
Medicare Supplement is a type of health insurance designed to build upon your Medicare. It helps to reduce (if not eliminate) your out-of-pocket costs. There are ten different types of Medicare Supplement policies. They are all standardized, meaning you get the same coverage for each policy in all areas where it is available. However, their rates can vary.
To help you develop a better understanding of this supplemental health insurance. Today we’re going to talk about the various factors that impact your Medicare Supplemental rates.
9 Factors That Can Affect Your Medigap Cost
It can be frustrating not to have a quote for your desired Medicare Supplement policy available anywhere online. But, that’s because there are no standard or fixed Medigap premium rates. Multiple factors impact your Medicare Supplement cost. Please consider this to determine how much you need to pay. As well as how to improve your Original Medicare coverage through a Medigap policy.
Here are the nine factors that can be used to determine your Medicare Supplement premium rate:
1. Time of Enrolment
The time of your enrolment in a Medicare Supplement plan is the first and foremost consideration in determining your premium rate, sometimes for even determining your eligibility (in late enrolment cases, insurance providers have the right to deny coverage). The best time to enroll in a Medicare Supplement plan is during the Medigap Open Enrollment Period.
Medicare Supplement Open Enrollment Period starts from the day when your Medicare Part B becomes effective and lasts for a period of six months from then. Joining a Medigap plan during this Open Enrollment Period guarantees the provision of coverage and the best rates.
Simply put, an insurance provider can’t deny you coverage for preexisting health conditions or charge you a higher premium if you join a Medigap policy during the six-month open enrollment period. Once that period is over, the insurance provider gets the right to deny coverage or charge higher premiums based on your health condition.
This is another reason why health insurance experts emphasize getting thorough knowledge about Factors That Impact Your Medicare before you turn 65, so you know all your options and the ins and outs of each and can avail of them at the right time.
2. Where You Live
Medigap plans may be standardized when it comes to coverage. However, their prices can vary across various states. For example, a 65-year-old woman living in Texas pays about $123 on average as the monthly premium for Medigap Plan F. However, a woman of the same age in Florida pays $195 for it, whereas that in New York is required to pay about $306 for the same plan.
This factor is beyond your control; that’s just how Medicare Supplement works. This is pretty much like how general healthcare and living costs vary across different states.
3. Your Gender
Men may be generally seen as the stronger sex, but research shows that women take the lead when it comes to health and longevity. Women tend to be healthier and outlive men. There is an average of 5 years gap in life expectancy of men and women in America.
You may not pay much heed to it in your everyday life. But, insurance companies do. Your gender impacts your Medicare Supplement rates in most states (a few exceptions, though). While there is no set rule, women pay about $10 to $30 less than men for their Medigap monthly premium on average.
For example, as mentioned above, a 65-year-old woman living in Florida pays about $195 per month, on average, for Medicare Supplement. But, the average monthly premium cost for a man of the same age in Florida is $206.69. For Medigap Plan G, a 65-year-old woman pays about $169 per month in Florida. But, a man of the same age pays around $176 per month for the same plan.
Gender doesn’t cause a staggering difference in your Medicare Supplement rates, but it does have an impact on them in many states, making it worth mentioning. However, as highlighted earlier, not all states have gender as a determining factor for Medigap rates. New York is one such state where Medigap rates do not vary due to gender.
4. Your Age
Depending on what method (discussed later in the post) the insurance company you’re working with uses to set their rates for Medigap policies, your age may play a role in determining how much you pay for your additional health coverage every month.
In cases where it does, the basic rules are just what you expect them to be. The older you are at the time of enrolment in a Medicare Supplement plan, the higher your premium will be. For example, the Medigap rates for a 65-year-old individual will be lower than the person enrolling in the plan at the age of 70.
However, there is one exception to the rule. Medigap rates are lower for people who age into Medicare as compared to those who become eligible for Medicare due to receiving Social Security Disability Insurance (SSDI) for 24 months. In this scenario, younger people (those who receive SSDI are under 65) may have premiums as much as three to four times higher than those who qualify for Medicare (and Medigap) due to age, i.e., turning 65.
5. Your Use of Tobacco
We all know that using tobacco is injurious to health and can put you at a higher risk for many health issues. For this exact reason, it can affect your Medicare Supplement rates too. People who use tobacco in any form or via any method can have up to 10% higher Medigap monthly premiums than those who do not.
6. Your Payment Schedule and Method
This may come as a surprise to many because choosing from various payment schedules and methods is often presented as an additional advantage by various insurance providers. It’s one of their tactics to attract people. However, in reality, the payment schedule, and even the method, you choose to pay for your Medicare Supplement plan can affect how much you will have to pay.
Insurance providers generally prefer monthly payments. While you may be allowed to pay quarterly, bi-annually, or annually, some carriers will charge you more if you choose any of these payment schedules.
In addition to this, the payment method you choose may also affect the amount you pay.
It’s not uncommon for older adults to struggle with using computers and smartphones. Due to this, many choose to avoid online payments. But, this is exactly what your Medigap insurance provider may prefer and even give you a small discount for.
Since processing electronic payments is much faster, easier, and cost-effective than payments made via checks and credit cards, some insurance providers offer discounts on premiums to encourage their clients to pay electronically. This isn’t a standard practice that everyone follows, though. So, make sure to confirm with the insurance provider you’re (considering) working with if they have any preferred payment method and offer any discount for using that.
7. Rate Increase History of the Carrier
While you can’t be 100% sure of how your Medicare Supplement plan rates will change in the future, looking at a carrier’s rate increase history can give you some idea and help you make an educated guess about how you can expect your rates to change in the coming years.
In general, a Medicare Supplement carrier offering slightly higher rates but has a low increase history makes a better choice than the carrier that may be offering highly competitive rates at present but has a high rate increase history.
8. Household Discounts
Some Medicare Supplement carriers also offer household or family discounts to attract more clients. This most often applies to spouses. If one partner buys a Medicare Supplement policy, the provider may offer a discount for the other partner (or both) to encourage them to enroll with the same carrier.
The exact amount of discount varies across various carriers. It may also depend on the plan you’re choosing to enroll in, but you can expect to pay anywhere between 5% and 15% lower for your Medicare Supplement policy with a household discount.
Some carriers even offer discounts for health insurance policies outside of the Medicare network for younger members of the family that do not qualify for any Medicare plan.
9. Rate Locks
Many Medicare Supplement carriers offer a rate lock policy for the first year of coverage. Rate lock simply means that your insurance rates remain the same for the said period, which, in this case, is 12 months.
If the carrier you’re working with has a rate lock policy, you can prevent any increase in your Medicare Supplement rate for one year.
Medicare Supplement Pricing Methods Can also Impact the Cost.
As mentioned earlier (in the age factor), your Medicare Supplement plan cost can also be impacted by the company’s pricing method.
There are three fundamental Medigap pricing methods. These are:
i. Community-Rated
Also known as the “No-Age-Rated” pricing method, this guarantees the same rate for Medicare Supplement policies for beneficiaries of all ages. In other words, if a Medigap plan is community-rated, your rates for it won’t vary because of your age. Even if you’re 70 or 75, you will be paying the same premiums as someone aged 65.
While this is an advantage for older adults, the younger ones, i.e., those aged 65, remains at a disadvantage, at least initially, with this pricing method as they would likely have to pay higher premiums than others their age might be paying in other areas (or plans) with non-community pricing. Having said that, the cost tends to balance out with increasing age, as your rates do not increase as you grow old.
It’s important to note that factors other than age, such as tobacco use or general inflation, can cause an increase in your premium rates with community-rated plans as well.
It’s also worth mentioning that the community-rated pricing method doesn’t sit well with most beneficiaries, which is why it is increasingly becoming less common. As of late 2021, the pricing method was practiced in eight states across the US. These included Arkansas, Connecticut, Massachusetts, Maine, Minnesota, New York, Vermont, and Washington.
ii. Issue-Age-Rated
This Medicare Supplement pricing method works the complete opposite of the community-rated method. In this case, your age at the time of enrollment in a Medigap plan plays a vital role in determining your cost. Therefore, it’s also often referred to as the “Entry-Age-Rated” Medigap pricing method.
Issue-age-rated plans are beneficial for younger individuals as they get better (read lower) rates than older individuals. The rates also do not increase with your increasing age. Other factors may impact your health insurance cost, but not your age.
One downside of this Medigap pricing method is that since companies know that age of the beneficiary won’t impact the cost, they may set higher premiums from the very beginning to compensate for their potential losses.
Four states require Medigap carriers to use the issue-age-rated pricing method. These include Arizona, Florida, Georgia, and Idaho. If a carrier in any of these states doesn’t want to use the issue-age-rated Medicare Supplement pricing method, they have the option to use the community-rated method instead.
iii. Attained-Age-Rated
This is the most common Medicare Supplement pricing method used by insurance providers. It involves calculating the premium according to a beneficiary’s current age. This means your rates will increase as you grow older.
This pricing method will offer the lowest rates to those enrolling in Medicare Supplement at the right time. However, the plans rated this way can eventually become the most expensive ones. The premium will increase every year based on your age, in addition to many other factors. Despite this, the attained-age-rated Medicare Supplement pricing method is the most popular and considered better than the other two methods because it lets you benefit from low premiums, at least in the initial years.
Which Medigap Pricing Method Should You Look for?
None. The purpose of discussing Medigap rating methods is to educate you on how your plan rates can be determined. This shouldn’t be a factor in your checklist when searching for the right Medicare Supplement plan. Mostly, you won’t even have the option to choose between various pricing methods. Various states have specific requirements for how carriers should price their policies.
Moreover, regardless of what pricing method is used to rate a policy, your premiums will increase over time. This will eventually even out all the pricing techniques. So, we can’t really say that one pricing method is better than the other. Prices for all increase with time.
How to Get the Best Medicare Supplement Rates, Then?
Wondering how you can get the best Medicare Supplement rates if all the pricing methods ultimately even out? Consider the rate increase history of the company and your premium to find the best option for yourself.
Some factors that impact your plan cost are not in your control, such as your age, location, and gender. However, there are many that you can somewhat control or influence. These include your time of enrolment, tobacco use, and payment schedule (and method). Make sure to enroll at during your Medicare OEP, to avoid late enrollment penalties. Avoid or quit tobacco use before you become eligible for Medicare, and choose the payment schedule and method preferred by your provider.
You can’t entirely control your Medicare Supplement rates. But, these are some of the ways you can ensure to get the best possible rates for your supplemental health insurance. Speak to one of our licensed agents for more information about your coverage options.