3 Crucial Factors Influencing the Medigap Premium Rates


In the past few decades, it has become increasingly difficult for retired seniors to manage their healthcare expenses. Realistically, in the near future, medical services are estimated to become more and more expensive. Even out-of-pockets costs like Medicare co-insurance and deductibles can hit day-to-day finances in a detrimental way. One way to resolve this problem is by enrolling in a Medigap plan.

Also, known as Medicare Supplement Plans, Medigap is a form of health insurance that manages additional costs that are not covered under Original Medicare. These expenses include co-insurance, deductibles, and emergency medical expenses while flying overseas. Conversely, it doesn’t handle costs involving long-term care, private-duty nursing, vision care, eyeglasses, dental, and hearing aids. A few Medigap plans might reimburse for prescription medications.

Unlike, the Original Medicare plans, which are rendered by federal agencies, Medigap plans are offered by private insurance companies. These plans are only for those individuals who are enrolled in Part A and Part B plans of Medicare. On the other hand, people having a Medicare Advantage plan are not eligible for Medigap policies.

What factors can influence the price of Medigap?
The premiums of a Medigap policy differ across providers and regions. Therefore, before one plans to opt for a Medicare Supplement Plan, it is essential that they identify the several factors that influence premiums and total out-of-pocket costs to settle for the best quote. Continue reading to know more.

Type of Medicare Supplement Plan selected
As Medigap policies are administered by private providers, they set their own premium rates. Apart from states of Massachusetts, Minnesota, and Wisconsin, all the other 47 states propose ten standardized Medicare Supplement Plans. Following are some common features offered by these plans:

  • Co-insurance and co-payments related to hospice services
  • Blood transfusions (first 3 pints)
  • Co-insurance and co-payments for Original Medicare plans (Part A and Part B)

Besides the basic benefits stated above, few Medigap policies may also enable the insured to access additional reimbursements. For example, the Medigap Plan G reimburses the full Part A deductible, entire co-insurance for skilled nursing services, and 80% of the emergency care expenses incurred during foreign travels. Likewise, it also covers Part B out-of-pocket expenses. However, such a comprehensive Medigap plan is expected to be costlier than the other Medicare Supplement Plans.

Insurance provider
As stated earlier, the premiums aren’t uniform across medical insurance providers; therefore, one should always compare the benefits before signing any paperwork. For instance, some providers offer discounted premiums to applicants who don’t smoke.

The cost of premiums may change over the years, depending upon the pricing structure adopted by the provider. The following are 3 major types of pricing structure that every Medigap applicant should be aware of:

  • Issue-age-rated In this particular structure, the insurer will determine the premiums based on an individual’s age. So, the younger the individual, the lower the premium. However, age is the influencer only during the application process. It isn’t responsible for increasing the premium rate in the future.
  • Attained-age-rated– Like issue-age-rated plans, this pricing structure implements a similar approach. However, there is one major difference. Attained-age-rated plans’ premiums will increase as the applicant ages. Therefore, the premiums for these can be comparatively more expensive and inconsistent than other Medigap policies.
  • Community-rated– The community-rated plans work in a completely different way. Here, the region and not the age is considered to be the primary determinant for establishing premium rates. So, everyone ends up paying the same monthly premiums regardless of what his or her age is.

It is important to note that all of the pricing structures described above are significantly impacted by inevitable economic factors like inflation.

Application period
To make the most of the Medicare Supplement Plan, one should submit an application during the 6-month window that begins in the 1st month of the Medicare Part B enrollment. Also known as the Medicare Supplement Plan Open Enrollment, this period is pretty advantageous as an applicant can’t be denied insurance or burdened with steep premium rates due to pre-existing diseases. Although, one might have to face a waiting period if the company policy doesn’t immediately reimburse for a pre-existing health condition.

If one applies after the 6-month enrollment period, then they will have to put up with medical underwriting in which the insurer will scrutinize the past and current medical conditions of the applicant. If the insurance provider senses it is financially risky to provide insurance to the candidate then he/she can be charged high premiums or denied coverage.

Top providers of Medigap policies
The insurance providers stated below are considered to be the most popular companies offering Medigap policies:

  • Humana
  • Blue Cross Blue Shield
  • Cigna
  • United American
  • Mutual of Omaha
  • Continental Life
  • Anthem
  • Mutual of Omaha
  • Manhattan Life
  • Transamerica
  • UnitedHealthcare Medicare Solutions

Top 10 affordable states for Medigap plans:

  • Maine
  • Idaho
  • North Dakota
  • Oregon
  • Montana
  • Georgia
  • Virginia
  • Iowa
  • North Carolina
  • Vermont

Top 10 expensive states for Medigap plans:

  • Alaska
  • Massachusetts
  • Texas
  • Maryland
  • Wyoming
  • New York
  • Nevada
  • California
  • Mississippi
  • Rhode Island
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