Over the last few decades as health care costs have skyrocketed, more and more individuals have struggled to pay for increasingly expensive medical attention. One of the most at-risk groups when it comes to rising health care costs is the elderly and the disabled. Many senior citizens, and certain individuals with disabilities, are enrolled in the government funded health insurance program known as Medicare. Medicare is designed to provide senior citizens with affordable health care that they would not be able to otherwise find from private insurance companies.
As costs increase year after year, many senior citizens on Medicare found themselves paying for an increasing number of services out of their pocket. This occurred because there were differences, or gaps, between what their medical attention cost and the amount Medicare was willing to reimburse. As a result of this gap, the Centers for Medicare and Medicaid Services (CMS) started the Medigap program. The program, also known as Medicare Supplemental Insurance, was designed to help Medicare beneficiaries cover the expenses that Medicare was not covering in their healthcare.
These extra policies are not considered a part of Medicare proper, which means that beneficiaries must pay an additional premium to have extra coverage. Medigap plans are developed and overseen by the CMS, but the plans are administered by private insurance companies contracted by the CMS. These companies set Medigap insurance rates based upon the breadth of service provided by each plan.
As of June 1, 2010, the CMS has developed and authorized the following Medigap plans:
- Plan A
- Plan B
- Plan C
- Plan D
- Plan F
- Plan G
- Plan K
- Plan L
- Plan M
- Plan N
The extent of services offered by these Medigap plans varies based upon the plan, with Plan A offering the least amount of extra benefits. Generally speaking the plans offer more benefits as you progress from Plan A to Plan N. The Medigap insurance rates that go along with these plans also differ with lower tier plans having lesser premiums, and more advanced plans having higher premiums.
The private insurance companies that administer the various Medigap plans set plan prices in one of the three following ways:
- Community Rated (also known as “no-age-rated”)
- Issue Age Rated (also known as “entry-age-rated”)
- Attained Age Rated
All three of these plan-pricing strategies takes an individual’s age into account, making it important for beneficiaries to carefully examine any potential plan before purchasing. Beneficiaries need to consider not only what the plan will cost them now, but also what it will cost them in the future.
Medigap insurance rates determined using Community Rated pricing strategies charge everyone with the same Medigap policy the same price, regardless of their age or other conditions. This means that a 65 year old individual will pay the exact same monthly premium as a 72 year old individual. The price of the policy may increase annually based upon inflation or other outside factors, but never because of age.
Issue Age Rated pricing strategies determine monthly premiums based upon the age of the individual when they purchase the policy. Under this pricing strategy, the younger an individual is when they purchase their policy the lower their premium will be. A 65 year old may pay $145 a month for the same plan that a 72 year old has to pay $175 a month for because the other individual purchased their policy at an older age. The monthly premium remains the same each year, unless outside factors such as inflation cause prices to go up. An individual’s premium will never increase because of their age.
Attained Age Rated insurance rates are often the most expensive Medigap policies. The monthly premiums under this pricing plan are determined by the age of the individual when they acquire the policy and will go up each year based upon the policy holder’s age. This means a 65 year old and a 72 year old with the same plan will pay different rates up front, and both policy holders will see their premiums increase with their age. Inflation and other outside factors can also play a role in the increase of premium rates each year.
Medigap insurance rates can offer vital tools for helping many individuals avoid paying their medical bills out of their own pockets. Medigap insurances rates can increase drastically with age depending on the plan an individual chooses, making it very important that Medicare beneficiaries look very closely when shopping for Medigap insurance.