Why Does a Medicare Supplement from One Company Cost More Than Another?

Why Does a Medicare Supplement from One Company Cost More Than Another?

Medicare Supplement insurance companies set their own monthly premiums, so the cost of a Medigap plan will differ from company to company. Medicare Supplement costs may vary significantly from one insurance carrier to another, even if their plans provide exactly the same benefits. And, any insurance carrier can change its rate structure from one year to another. That is why it is so important to stay up on what different insurance companies are charging for their Medigap policies, so that you can change to another insurance carrier, if necessary.

When can you change Medicare Supplement insurance plans?

In California, we have the Birthday Rule, called the California Medicare Supplemental Insurance law. A person who has a Medigap policy can switch to a different insurance plan or provider within the 30 days following their birthday each year. They can purchase a Medigap policy without medical screening or a new waiting period, as long as the new policy has the same or lesser benefits as the old policy. So, you have an opportunity each year to shop your current plan for a better premium.

What factors affect how much Medicare Supplement insurance costs?

Most insurance companies use one of the following three types of pricing structures:

  • Community Rated – With this pricing structure, everyone who buys a specific standardized plan (such as Medicare Supplement Plan F) pays the same premium, regardless of age or health status.
  • Issue-Age Rated – With this pricing scheme, your premium is based on the age you were when your plan was issued to you. This generally favors younger enrollees, because your premium won’t increase based on your age, for as long as you are enrolled.
  • Attained-Age Rated – These plans offer a graduated premium structure that typically increases over time. Premiums may be low for younger enrollees, but they may be the most expensive for older enrollees.

Other factors that determine your premium cost

  • When You Enroll – The best time to buy a Medigap policy is during your 6-month Medigap open enrollment period. Generally, you will have the most choices available and the lowest costs if you join a Medicare Supplement plan when you are first eligible.
  • Your Gender – Some insurance companies offer lower rates for women because statistically women typically live longer and will pay more for their coverage over their lifetime.
  • Where You Live – Insurance companies consider average wealth in any area and charge what they believe residents can afford to pay.
  • Your Age – If you purchase a Medicare Supplement when you are first eligible, usually at the age of 65, you’ll pay less than if you had waited until you were 75.
  • Households Discounts – Some insurance companies entice couples to take out a Medicare Supplement plan with the same insurance provider by offering a discount.
  • How You Pay the Insurance Company – Some insurance companies will charge more for quarterly, semi-annual or annual payments. Others may offer a discount if you pay electronically, rather than by check or credit card.
  • Inflation – Due to inflation and rising health care costs, you will typically see your Medicare Supplement premiums increase every year.
  • Whether You Use Tobacco – Your Medigap premium will be more expensive if you use tobacco.

When can you sign up for a Medicare Supplement plan?

The best time to buy a Medigap policy is during your 6-month Medigap open enrollment period. During that time you can buy any Medigap policy sold in your state, even if you have health problems. This period automatically starts the month you’re 65 and enrolled in Medicare Part B (Medical Insurance).

Medicare Supplement insurance companies are generally allowed to use medical underwriting to decide whether to accept your application and how much to charge for your Medigap policy. But during your open enrollment period, an insurance company cannot do any of the following, even if you have a disability or health problem:

  • Refuse to sell you any Medigap policy it offers
  • Charge you a higher premium than they charge others who are 65 and older
  • Delay the start of your coverage

Still have questions about Medicare Supplement costs and plans? Call us at Benefits by Design Insurance Services at 415-524-8959 or email pamm@benefitsbydesignca.com. We can run a quote for you so that you can find out what is the most cost effective plan to meet your Medicare Supplement needs.

Benefits by Design Insurance Services is a full service health insurance and employee benefits broker, offering custom tailored coverage solutions for your business or family. We are located in the San Francisco Bay Area and provide the expert advice for group and individual health insurance, Medicare, life, long term care, and travel insurance decisions.