Medigap is Medicare supplemental insurance provided by private insurance companies. There are about 10 Medigap plans numbered from A through N which have been standardized by CMS (Centers for Medicare and Medicaid). Even though these plans are standardized, the Medigap rates will vary from private insurance company to private insurance company.
Medigap rates are the insurance premiums you will pay for your Medigap plan. The insurance premiums are normally paid monthly. The difference in Medigap rates arise due to a number of factors. One major factor is the method the insurance company uses to come up with its insurance premium.
There are three main methods insurance companies use when calculating the Medigap rates. These methods are attained age rating, issue age rating and community rating.
When using the attained age rating method, the insurance company will calculate the premium payable based on your current age. The premium payable however increases as you grow older. These policies tend to be the least expensive when an individual first enrolls (presumably at age 65) but the cost increases every year and in the end these policies become very expensive. The increase in Medigap rates however will apply to all individuals in the same category as you.
Issue age rating method is also referred to as entry age rating method. The premium is calculated based on you age when you first buy the Medigap plan. This means therefore your premium does not increase because you are growing older. It is therefore advantageous to purchase plans when you are younger.
The last method for calculating Medigap rates is the community rating method. This is also called the no-age rating method as the premium is the same irrespective of age. The rates are determined based on geographical location.
Besides the method used in calculating premium, Medigap rates may increase as the years go by due to inflation and other factors such as higher claim costs than anticipated and increases in medical costs.
It is a bit difficult to determine what plan and which of the Medigap rates will suit any individual. More often than not, the choice comes down to individual preference. Some people prefer to pay lower premiums in the start while others prefer a more constant premium rate.
To help with getting a lower premium, it is a good idea to apply for a Medigap plan during the open enrollment period. This is because many insurance companies offer discounts during this period to enrollees. It is also a good idea to get a Medigap plan during the open enrollment period as the insurance companies are required to sell you any plan you like despite having a pre-existing medical condition. After the open enrollment period, insurance companies are allowed to use medical underwriting and may limit you choices. This will cause your Medigap rates to be higher.
One last but very important thing to remember is that each plan offered give the exact same coverage regardless of the cost or company offering it. For this reason the price range from company to company should be looked at carefully.