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Medicare Supplement Insurance Premiums

Medicare Supplement Rates are determined by several factors that each have several components. The first thing to understand is that Medigap plans are regulated on a Federal and State level.  The Federal guidelines state that there can only be Medicare Supplement Plans A – N, which means that there cannot be a plan Z.  Each of these Medigap policies must provide the same basic benefits and the difference between carriers comes down to the Medigap insurance rates.  There are three states that do not follow these federal guidelines: Minnesota, Massachusetts, and Wisconsin.

Federal & State Medicare Supplemental Rate Factors

  1. Attained Age Rating: this is the most common rating factor used by carriers across the country to determine Medicare premiums.  In brief, this rating means you start out at a lower rate and the premiums increase as your age increases.
  2. Issue Age Rating: means that your Medicare Supplement premiums is based off your age when the policy was issued. It will go up due to loss ratios and inflation but not due to age.  
  3. Community Age Rating: this means that a 65 year old will have the same Medicare Supplement insurance cost as an 85 year old in most cases. The whole community with a Plan F underwritten by a Medicare Supplement carrier will have the same Medigap cost.  These Medigap costs will vary based on the carriers just like the two rating classes above.

Demographic Rate Factors Cost of Medigap Insurance

  1. Date of Birth: Age is a big factor for the cost of Medicare supplemental insurance. The only time this will not be a factor, is in states like Connecticut or Washington where Community Rating is applied.
  2. Proposed Effective Date: Medicare supplemental insurance rates are only good for a certain amount of time. If the state has approved a rate increase then the Medicare Supplement Carrier will be putting those Medigap rates into effect. 
  3. Gender: some states do not have gender Medigap rates (Texas, Washington), but most states do have gender-specific rates.  This means that a male will typically have a higher rate than a female.  Usually a male will pay about $15 more per month than a female of the same age for the same Medicare Supplement Plan.
  4. Tobacco Usage: If you are a tobacco user, in most cases, your rates will be higher.  Some states ask the applicants “have you used tobacco in the last 12 months” in the health questions portion of the application. However, a Medicare beneficiary who is in their Open Enrollment or Guaranteed Issue time period does not have to answer this question meaning that they get non-tobacco rates. 

Another item that should be mentioned — regarding Medicare Supplemental rate increases — is the fact that a loss ratio for a Medigap Provider, usually determines the rate increase percentage allowed by the State Insurance Department. A high loss ratio means that they can get approved for a high rate increase. This week I saw a Texas Medicare Supplement Company give a 40% rate increase on a Plan N.  This carrier offered this plan with no health questions a few years earlier, which means their loss ratio went through the roof; however, this goes to show you that low claims equal stable rates.

Medicare Insurance Premium and Medicare Supplemental Insurance Cost are two totally different factors.  Medicare premiums are set by the federal government, while individual insurance companies with the help of actuaries help determine Medicare Supplement Cost.  This can sometimes be a common misunderstanding.

Please know this list of rate factors is not all-inclusive. There are other factors that can affect your Medicare Supplement rates, but these are the main ones you should know when shopping for a Medicare Supplement policy at Medicare Insurance Finders.  We appreciate your business and for stopping in.  Please feel free to like us on Facebook (MWG Senior Services).

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