Why Did My Medigap Premium Increase?

Medigap plans, also known as Medicare Supplement plans, are a great option for many Medicare beneficiaries. They offer great, predictable coverage but come with a higher price tag than other options. In addition, that price tag tends to climb higher and higher each year.

Is there anything you can do about the rising cost of your Medigap plan? Maybe. Let’s talk about how Medigap prices are set, why they increase, and what options you have to lower your Medicare premiums.

How Much Do Medigap Plans Cost?

Insurance companies can choose to use one of three ways to set their premiums.

Attained Age Pricing. The attained age pricing method is what many insurance carriers currently use to set their Medigap premiums. This method sets your rate depending on your current age. As you get older, your premium increases. Other things like the cost of healthcare and inflation can also impact your rate.

Issue Age Pricing. As the name implies, issue age pricing sets your premium based on the age you are when the policy is issued. Your premium will not go up as you age, though it can still get increased due to inflation and healthcare costs.

Community Rated Pricing. The community pricing method is not used as often. In this method, everyone pays the same premium, regardless of age. On a Medigap plan, someone who is 65 will pay the same as someone who is 85. As with the other two types of pricing methods, inflation and the rising cost of healthcare can still cause these policies to increase in premium.

Let’s take a closer look at the attained age pricing method, as this one is the most commonly used in Medigap plans. As you now know, the older you are, the higher your premium. Other factors will also impact how much you pay for coverage. In general, men pay more than women, and tobacco users pay more than non-users. People living in areas with a higher cost of living pay more than those living in more rural areas.

Lastly, your premium will also depend on which of the Medigap plans you choose. Of the three most popular plans, Plan F is more expensive than Plan G, which is more expensive than Plan N. The more coverage, the higher the cost.

When Do Medigap Premiums Increase?

Your Medigap plan will likely increase every year, regardless of which pricing method the insurance company uses. Usually, it’s only increased once per year. This could be on your plan’s anniversary date, your birthday month, or at the start of the year. Carriers can choose to increase the premium anytime they’d like.

Insurance companies are not allowed to raise their rates for no reason. They must go through an approval process where they submit their request to the state. They must prove that at least 80% of the premiums collected are being spent on medical care or expenses that improve the quality of care.

Ways to Lower Your Medigap Premium

As your Medigap premiums continue to rise, you may wonder how you can decrease those premiums. There are several ways to do so.

Remember, Medigap plans are standardized coverage. That means that no matter where you purchase one of the letter plans, its coverage and benefits are the same. Plan N from Company Y in Arizona is the same as Plan N from Company Z in Nevada. That’s why it’s always important to shop for coverage.

Let’s say you enrolled in Plan G when you turned 65. You’re now 69, and your premiums have gone up significantly. Even if you don’t want to give up your Plan G, you can still shop for the same plan with other carriers. A different company might be offering better rates than you’re currently paying. The “catch” to this is that in most states, you must be healthy enough to pass medical underwriting to switch your Medigap plan. The application will ask a series of health questions, and you may need to do an interview. If you are unhealthy, have had recent surgeries, or have serious chronic conditions, you may not be able to change your Medigap plan. Some states have unique rules, so it’s always worth asking your local insurance agent about any opportunities you might have.

Another option is to switch to a Medicare Advantage plan. There are pros and cons to doing so, and you’ll need to be sure you understand how these plans work before deciding to make the change. In many cases, they can greatly reduce your premiums and out-of-pocket expenses. They also offer extra benefits you won’t find in a Medigap plan.

If you’d like a quote for other Medicare health plans in your area, call the Local Medicare Specialists today! We can review your current coverage and let you know about any cost-saving opportunities.