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Issue-Age Pricing for Medicare Supplement Plans

How does issue-age pricing work?

Some Medicare Supplement (Medigap) Plans are based on issue-age pricing, which means that the insurance company bases the cost of your premium on your age at the time that you buy -- or are issued -- your Medigap policy.

For this type of pricing structure, the premiums are lower for individuals who purchase at a younger age and, like community-rated pricing, the premiums will not go up due to your age. Prices may go up due to other factors, including inflation and rising health care costs.

In the long run, however, issue-age Medigap plans may still end up being cheaper than other types, such as attained-age plans.

Examples of how issue-age pricing works

The following example shows how issue-age pricing for a Medicare Supplement Plan works with two hypothetical beneficiaries:

Mr. Jackson is age 65. He purchases a Medicare Supplement Plan and pays a $155 monthly premium.

Mrs. Milton is age 72. She purchases the same Medigap policy as Mr. Jackson. However, because she is older when she buys it, her monthly premium is $185.

Other factors that can increase Medigap costs

Even issue-age and community-age plans, which do not increase premiums as you age, may still go up in price to adjust for inflating and rising health care costs. Other factors that can affect the overall cost of what you pay include Medicare Supplement Plans with a high-deductible, discounts, and whether your insurer uses medical underwriting (which can cause the premium to go up). In addition, some states offer Medicare SELECT policies, a type of Medigap plan that is typically cheaper because it limits your coverage to a specific network of health care providers.

When deciding whether to enroll in a Medicare Supplement Plan, it is important to look at the policy's pricing model so you can be aware of how much premiums will cost, both now and into the future. Not all insurance companies price Medicare Supplement Plans with issue-age pricing, and the way a plan is priced can mean that you pay more down the road. You should pick the plan that will best fit both your health needs and financial situation in the future.

Source: Choosing a Medigap Policy. Baltimore: Centers for Medicare and Medicaid Services, 2010.

Medicare has neither reviewed nor endorsed this information.

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