How Are The Premiums For Medigap Individual Health Insurance Rated?

Health Insurance

Retirement is a great experience for most as they can finally slow down and rest after working hard day in day out for the rest of their lives. Every senior has different plans for how they want to spend their retirement. Some may wish to relax and live a simple life afterward. In comparison, others might want to start a business or travel the world once they are retired from work.

With that being said, there is one confusing aspect of life after retirement, and that is enrolling in Medicare and choosing the right Medigap individual health insurance for yourself. Insurance agencies such as The Benefit Link are an excellent source of information for seniors regarding choosing the right Medigap plan.

Since there are many different Medigap plans and offer varying levels of benefits, you might think the coverage should be the essential criteria you need to consider. However, it is more important to consider how a plan’s premium is being rated when choosing a Medigap plan. And this article will explain the different ways Medigap premium is rated.

How do health insurance companies rate Medigap premiums?

There are three premium rating methods that health insurance companies use to rate Medigap plans. These rating methods consider different criteria for rating the programs, so without further ado, here is how insurance companies rate Medigap Plans:

Community rated Medigap plans: The community rating method is also known as No Age-Related pricing. It is a standard method used to rate Medicare Supplement health insurance plans by insurance providers. As the name suggests, this criteria considers the policy premium price currently being charged to all policyholders and doesn’t consider your age or health condition.

So unlike other forms of rating methods, policies that use community rating don’t increase their premium prices as you age. With that being said, inflation can affect the cost of your annual premium payments when you buy a Medigap Plan that uses community rating.

Issue age-rated Medigap plans: Unlike community-rated Medigap plans, this rating method relies solely on the individual’s age at the time of enrollment in the Medigap insurance plan. Medigap plans rated based on issue age rating are generally more expensive when you get them. However, some people prefer them because they allow the holder to lock in the premium policy rate.

So, in general, if you have a Medigap plan that is issue age-rated, you can expect the premium rate to remain the same throughout the duration for which you hold the program. That makes issue age-rated plans ideal for individuals who want to predict their next insurance premium payment. With that being said, similar to the community rating method, inflation and other similar factors can affect the premium payment cost even with the issue age rating method.

Attained age-rated Medigap plans: Attained age-rated Medigap plans use the age at which you enroll into Medigap plans, and the premium cost will increase at a specific rate every year as your age increases. Attained age-rated Medigap plans are usually less expensive at the start than issue age-rated Medigap plans. So they are an attractive option for those looking to start with a low premium Medigap plan.

Or, if you are sure that your income may increase over time, you can opt for attained age rate Medigap plan to manage the increasing premium rate as you get older efficiently. Like the other two premium rating methods, the Attained-age-rating method is also vulnerable to inflation and other factors that can cause an increase in the premium cost.

Medigap is meant to make your health insurance affordable. As long as you are aware of the premium rating methods mentioned above, you can make a better decision for yourself.

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