Medicare Supplement, or Medigap, plans are sold by private companies and can help pay for some of the deductibles, copayments, and coinsurance that Original Medicare doesn’t. Medigap insurance is not health insurance, but it is instead insurance to cover the costs associated with utilizing Original Medicare insurance. This is beneficial for seniors who are concerned about unexpected medical costs that may suddenly put a large financial burden on an already stretched budget.
Although they are standardized by the federal government and identified by letters A-N, Medigap costs can vary. Each insurance company can choose the way it sets pricing for its Medicare Supplement plans. Medicare Supplement plans can be priced in three ways:
- Community rated
- Issue-age rated
- Attained-age rated
With this type of policy, everyone who carries coverage within a certain category pays the same amount without regard for age. Essentially, all people who are part of a specific plan are considered a community, and the community pays one price regardless of additional factors.. Premiums may go up for other reasons, but age is not a factor.
Issue- age rated
An age-rated policy, also known as an entry age-rated policy, takes age into account, but only when you sign up. With this type of policy, the policy’s cost is rated for the age at which you purchase the policy, but it does not change as you get older. This means that different people with the same policy may have different costs because they signed up at different times in their lives.
The premium for attained-age policiesincreases with your age. These plans may seem attractive to young policy buyers, but may end up being the most expensive in later years.
Aside from age, what can cause Medigap costs to rise?
Even though age won’t cause Medigap costs to rise in some plans, there are other factors typically associated with age that can lead to rising Medigap costs. Inflation is one of the ever-evolving threats to finances in retirement. While getting older won’t change your Medigap costs, inflation can have a detrimental effect on Medigap coverage costs.
Additionally, rising medical costs may change the amount you spend on healthcare. This can be very dependent upon where you’re located and how much medical care you require each year, but it is something to consider in your healthcare budgeting.
If you’ll be signing up for Original Medicare soon, you may want to consider the potential out-of-pocket costs you may incur. While Original Medicare offsets many costs of medically necessary services and supplies, your cost-sharing responsibilities may still be higher than you’re comfortable with.
Medigap May Help
Once you have Original Medicare, are 65 and enrolled in Part B, you’ll enter your Medigap Initial Enrollment Period. During this time, you can purchase any Medicare Supplement plan sold in your state without medical underwriting. After this period ends, you may be charged more or refused coverage for pre-existing conditions.