Medigap Costs -- Comparing the Prices of Medicare Supplement Plans

Coverage for Original Medicare, Part A and Part B, generally includes a monthly Part B premium, a Part A hospital deductible, a Part B deductible, and a 20% coinsurance for medical expenses and outpatient services. There's no limit on out-of-pocket spending, and it doesn't cover many services that elderly and disabled Americans typically need, like long-term care, prescription drugs, routine dental or routine vision. On top of that, health-care costs continue to rise.

To help with these costs, many people choose to buy a Medicare Supplement plan (also known as a MedSupp or Medigap plan). If you're considering a Medicare Supplement plan, you'll want to do your homework before selecting a policy that is right for you. Careful research will help you select the plan with the lowest and most competitive Medigap costs.

Medigap plans: standardized benefits, different costs

There are 10 Medicare Supplement plan options available. Each plan has different, yet standardized, benefits and coverage. This means that no matter which insurer you buy from, the benefits of each plan type of the same letter will be the same.

However, while the plans are standardized across insurance companies, the Medigap costs can be vastly different. So even though you'll ultimately be getting the same benefits, it pays to shop around for the best price and select the one with the most competitive pricing.

Enrolling in a Medicare Supplement plan

When you are joining a Medigap plan, the best time to enroll is when you are first eligible, during open enrollment. This is the six-month window that automatically begins on the first day of the month when you turn 65 and are enrolled in Medicare Part B. During this time, you have a guaranteed issue right to enroll in a Medigap plan, meaning that regardless of your health status or any pre-existing issues you may have, the insurance company is required to sell you a plan without charging you a higher price. During your initial open enrollment, you can choose any of the 10* Medicare Supplement plan options regardless of your health status, as long as those plans are available where you live.

If you don't enroll in a Medicare Supplement plan during open enrollment, you may not get the plan you want later on. The insurance company may require you to undergo medical underwriting and can reject you based on your health status.

In general, once your initial enrollment period is over, you can't get it back again and won't have guaranteed issue should you decide to change plans. However, there are certain exceptions that may give you guaranteed issue later. Your age when you initially enroll in a Medicare Supplement plan can be an important deciding factor with regards to the Medigap costs you might pay.

How insurance companies set Medigap costs

Medigap plans are sold by private insurance companies, and each insurer prices its plans differently. When deciding which plan to buy, be sure to consider your age and how the insurance company sets its prices. The way that an insurance company prices (or "rates") its Medicare Supplement plans can strongly impact what you pay later on, even if the Medigap costs are initially low.

There are three ways an insurance company prices its Medigap plans:

  • Under a community-rated or no-age-rated plan, all beneficiaries pay the same Medigap costs and premiums, regardless of age.
  • In an issue-age-rated or entry-age-rated plan, Medigap premiums are based on your age when you first enroll.
  • Under an attained-age-rated plan, your Medigap premiums are based on your current age in a given year.

Depending on your age when you first enroll and the potential for your Medigap costs to increase based on the pricing method, what you pay now and in the future can vary greatly. Each of the three Medigap costs methods can also vary depending on inflation and rising health costs.

If you are trying to switch to a better Medicare Supplement plan, and especially if you are trying to switch because of poor health, find out whether your insurance company considers current health status during Medigap enrollment. You may have guaranteed-issue rights even after open enrollment, depending on your situation and reason for changing plans.

Would you like to take a look at some of the Medicare Supplement plans available in your area? Just enter your zip code in the box on this page to display a list and start comparing plans.

*Massachusetts, Minnesota, and Wisconsin residents offer Medicare Supplement plans that are different from the standardized 10 designs.

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