Your Online Resource for Medicare Insurance: Guiding you along the maze of Medicare

Medicare Supplement Rates

Every month clients and referrals call and ask if they can get a Medicare Supplement quote.  The reason they ask us for a Medicare Supplement quote is that coverage for a Plan F with Mutual of Omaha is the same Plan F coverage with any other carrier.  This makes Medicare supplements a commodity and a very is product for people to get quotes on.  However in this article, we are going to briefly describe the three ways these policies can be “priced” or “rated”.

  1. On community-rated pricing each individual on the Medicare Supplement policy has the same premium regardless of age.  This means that pricing is the same no matter how old you are; premiums may go up because of inflation and other factors but not because of your age.
  2. With issue-age pricing the premium is based on the age you are when you buy the policy.  This means that premiums are lower for people who buy their policies at a younger age.  Example: a 65-year-old's premium is going to be lower than an 80 year olds premium if they both purchase it 5/1/2010.
  3. On attained age pricing the premium is based on your current or “attained” age, so your premium goes up as you get older.  Premiums are lower for young buyers but go up as they get older.  They may be very inexpensive at first, but they can eventually become the most expensive.

How do the Medicare Supplement companies come up with their rates? 

Well, numerous things go into the pricing of these policies.  Administrative services (billing, customer service, and policy issue), claims (loss ratio for different areas), commissions, premium taxes, and profits are all items that are taken into consideration when figuring Medicare Supplement rates.

Some Medicare Supplement companies may have higher rates in certain areas due to a very unhealthy block of business.  For example: if an insurance company has the lowest rate in a certain city, everyone who is guaranteed issue enrolling in a plan will try to go for the carrier with the low rate.  This company tends to attract a lot of unhealthy business usually because their rates are so low.  Once the claims start to pour in the department of insurance allows them to raise their rates to cover the claims.  This is a good example why you should not always choose the lowest priced Medicare Supplement companies and why rate increases occur.