Medicare Supplement Cost Structures

Medicare is a form of health insurance that is available to United States citizens who are 65 years old or more, as well as to certain people with disabilities or end-stage renal disease. The basic program is set by the American government to cover very specific situations, such as hospital stays, outpatient procedures, laboratory tests, and some medical equipment like canes and walkers. This primary program may be enough for some people, but others may feel that they need more coverage to help pay for the expenses which are not covered. Thus, they may choose to purchase Medicare supplements (also sometimes called Medigap), which are private plans that help to fill the 'gap' between the reimbursed expenses and the total cost of procedures.

These supplemental plans are labeled A through N, and cover different things for different amounts. The policies cost a certain amount per year and the cost structures fall into three distinct categories, based on factors such as age and number of years that you have collected Medicare. While the Medigap plan may be roughly the same between providers, the rate type may differ from company to company. It is vitally important to research your options as much as possible when choosing a supplement plan; not only should you carefully consider which plan is right for your needs, but also which company in your area will offer a premium or 'rate' that is fair for you. Here is a breakdown of the different types of pricing policies that providers use.

Community-Rated (aka No-Age-Rated)

This policy charges the same monthly premium to everyone who has purchased it, regardless of their age. The amount you pay each month will not go up due to how many years you have been in the program (though it may increase due to inflation or other economic factors). Whether you're 65 or 74, everyone will pay the same. These structures are usually advantageous for everyone, especially seniors who are choosing a plan later in life; however, depending on the company, these can be much more expensive for people who are buying Medigap early on in their retirement.

Issue-Age-Rated

The Issue-Age-Rated policy charges based on the age you are when you buy the supplement plan. Premiums will be lower if you are younger when you purchase it, and won't change as you age. So, for instance, someone buying Medigap at the age of 66 may be quoted a $150 premium at the time of issue; they will pay $130 for as long as they have the plan. But someone buying the same package at the age of 72 will have a premium of more, perhaps $180, per month, but it will not change once they've purchased it. It is obviously cheaper to get these types of supplements early on.

Attained-Age-Rated

This policy issues premiums based on your current age, which then go up as you get older. They are quite low for younger purchasers, which is advantageous for some, but over the years they will eventually become the most expensive. Your age at time of issue is also a factor, so it is not a good rating policy for older people who are looking into buying supplemental insurance. As an example, someone who is 65 will initially pay a $120 monthly premium (lower than the initial prices for the other two price structures); but when she turns 66, it will increase to $126, then $132 at age 67, and so on. A person who is 67 and buys the same plan will pay $132 per month at first, and it will increase every year as well.

Due to the fact that there are ten separate Medigap supplement plans, many or all of which may be offered by every private insurance provider in your state, pricing can vary from place to place. It's difficult to give an idea of how each of these rating structures will affect your premiums for the different plans. Deciding to purchase a Medigap policy is a process, and must be researched thoroughly in order to ensure that you are getting a plan that will offer the very best coverage for your needs and also be rated fairly, with premiums you can afford. Shop around to the various providers in your state, and make an informed decision; taking the time to consider all of your options will let you enjoy your retirement years knowing that you're covered for any situation that might arise.