When you hear about Medicare premiums, it is usually about Medicare Part B premiums. This article is about Medicare Supplement premiums.
You need to understand Medicare supplement premiums before you make a final decision on purchasing a Medicare supplement or Medigap plan. You need to understand how a company is going to raise its premiums. You may not be able to afford it in the future. It is also important to know if you are covered for a particular illness after your purchase.
The Medicare premium you can afford today, you might not afford tomorrow. Your income and assets can decrease. The premiums can increase.
There are several ways that insurance companies change Medicare supplement premiums.
- Level Premiums
- Attained Age
- Issue Age
- No Age Rating
The Medigap insurance rate is something you need to consider when you choose a Medigap plan.
Level Medicare Premiums
With level premiums, your Medicare supplement premium does not go up when you reach a certain age.
Does this mean that your Medicare premiums will not increase?
No, the premium will increase when the insurance company raises premiums for all the Medigap policies of the type you have. The advantage is that the market forces regulate the increase in premium. The insurance commission in your state also regulates the rates.
Attained Age Medicare Premiums
Your age is basis for your Medicare supplement premiums. The company charges the same rate to everybody who is the same age. The premiums increase with your age. For some policies, the medicare premiums increase yearly. For other policies, the premium increase when you reach a certain age. For example, the premium changes when you are at 65, 70 and 75 years of age.
Attained age policies tend are cheaper when you are 65. They are more expensive when you reach 70 or 75.
To give you a realistic picture about how much an attained age policy will cost you, do the following:
- Ask how much the policy will cost at your present age.
- Ask how much the policy will cost at the next age levels
- Determine the percentage increase in premium.
- Calculate how much your policy will cost at the next two age levels.
Issue Age Medicare Premiums
Your age when you first buy this type of policy determines the Medicare supplement premium. As long as you keep the policy, you will always pay the same price as someone else who buys the policy at the same age you did.
So, assume you bought an issue age Medigap policy at age 65. Then five years later you will be seventy. The premium charged at age 70 is the same as someone who buys the policy at 65.
Your premiums still steadily increase. However, market forces regulated the premium. The insurance company ideally keeps the premium competitive to attract new policyholders.
No Age Rating Medicare Premiums
Some companies sell policies which charge the same amount regardless of age. These are also known as community rated policies. This is because the geographical area in which you live determines the cost of the Medicare premiums.
These policies are usually more expensive initially. So it costs more for people ages 65 to 75 as compared to other policies. It then cost relatively less for people over 75.