Rate increases are an important factor to consider when choosing a Medicare Supplement.
When buying a Medicare Supplement, your age has a direct correlation to what your monthly Supplement costs will be. As you get older, the type of policy you buy affects your rates in the future. In addition to how old you are, Issue age, Attained age, and Community Rated plans all affect the frequency and amount of your rate increases.
If you have ever searched for Medicare Supplement plans available to you in your area, you have likely seen them categorized according to rate type.
You are probably wondering what this means and what role it plays in choosing a Supplement.
Today we will talk about each of these and what they mean for your monthly premiums, potential future rate increases, as well as how to lower your rate if you get an increase.
How Are Plans Rated?
Insurance premiums are calculated by actuaries who spend months researching trends in medical spending. They look at different demographics, regions, incomes, and costs of living to determine the price of their plans.
Then they take the monthly premiums they collect and compare that to their claims. This is known as the Medical Loss Ratio.
Actuaries then take these figures and decide what their next rate increase will look like.
Each state has its own laws that these companies have to follow, including how and when they are allowed to adjust their prices.
These policies are “rated” according to the laws of each state.
There are three Medicare Supplement policy rate types:
- Attained Age
- Issue Age
- Community Rated
Although there isn’t a plan available that does not have rate increases, choosing the right plan initially will help alleviate some of your costs in the future.
Your current age determines your monthly premium amount on an attained age policy when you purchase the policy.
If you purchase a Medicare supplement plan at age 65, it will have a lower monthly premium than if you buy it at age 72.
Typically you will get a slight increase in your monthly premium each year as you get another year older.
Let’s look at an example:
Georgia purchased a Plan G at age 65 when she was new to Medicare.
Her plan began on October 1, 2021, and her monthly premium was $140.
Because Georgia’s Plan G is an attained age policy, her rate increases to $149 on October 1, 2022, the anniversary of when she purchased her plan.
Your age also determines the monthly premium when you purchase the policy. Getting older does not have as much effect on the rate increases.
Like attained age policies, issue age policies will have lower monthly premiums. Getting older plays less of a role in rate increases.
Where issue age policies differ is that the rate increase is based more on inflation instead of someone’s age.
Let’s look at an example:
Randall and his wife Sally purchased Plan N several years ago when they were new to Medicare Part B.
Randall was 71 at the time, and Sally was 68.
The monthly premium for his Plan N was $111, while the monthly premium for Sally for the same plan was $98.
Because their plans are issue age plans, they have not received rate increases in the past several years.
The insurance commissioner in the state that Randall and Sally live in has decided that insurance companies in the state that offer supplements can issue rate increases due to rising inflation costs.
Their insurance company notifies Randall and Sally that his monthly premium will be going from $111 to $131, and her monthly premium will be going from $98 to $118.
Community rated policies cost the same for everyone in a given geographical location, regardless of age or gender.
If you purchase a community-rated policy, it will cost the same regardless of whether you are a 65-year-old female or a 72-year-old male.
You will not get an annual age-based rate jumps.
They do go up for other reasons, such as loss ratios and inflation.
Most companies that offer a community-rated plan, offer some kind of discount for people who are younger.
Although the rate is the same, someone who is 65 may pay less because of this discount.
Usually, the discount decreases as someone gets older. In some cases, multiple times throughout the year.
Community rated plans still have rate increases. Everyone shares the burden of the premium hike.
The adjustment is based on the actual, undiscounted rate.
Someone who pays less at 65 because of their discount gets a higher percentage increase. The rate adjustment is based on the actual rate, not the discounted rate.
Let’s look at an example:
Jimmy, 73, and his wife Stella, 69, live in Seattle, Washington, where Medicare supplement plans are community-rated.
They both decide to purchase Plan F. Both cost $190 in monthly premiums.
Stella is a female and is younger than Jimmy so she gets a discount for being younger, so the actual amount she pays is only $145 per month.
Their company files for a 10% rate adjustment.
Both Stella and Jimmy get a rate increase, but it is based on the $190 dollars – $19 dollars.
Notice, though, that Stellas’s percent of the increase is higher than Jimmy’s because she pays less. She has a 13% jump while his is only 10%.
Medigap Policy Rate Types and Rate Increases
Not all of these different policy rate types are available everywhere.
For instance, all Medicare Supplement policies in Washington state are community rated, while most in Georgia are issue age.
Many people believe that one policy rate type is more attractive than another because it will be less likely to receive rate increases.
The truth is, several factors play into whether you will get a rate increase on your plan.
As you can see, issue age and community-rated policies can issue rate increases for reasons other than age.
So it is best not to get discouraged if, for instance, the policies available in your area are predominantly age-based.
All this means is that you will get consistent, and likely slight rate increases from year to year, as opposed to sporadic and steeper increases.
The takeaway is that you can expect your monthly premium to increase from time to time for one reason or another, regardless of your policy’s rate type.
The best thing you can do is to contact an independent, unbiased agency that works for your best interest as opposed to the insurance company’s best interest.
They can find you a cost-effective plan with a stable, reputable company that will not raise your rates to the point that your coverage becomes unaffordable.
See this article on how to pick an insurance agent.
Finding a Policy
As I mentioned above, it is highly encouraged that you work with an unbiased broker that works with lots of different carriers.
Not only will they get you the best price possible, but they will also work with you in avoiding rate increases in the future (more about this later).
When choosing a policy, remember to compare the same Medicare Supplement (i.e. Plan G with Plan G).
Avoid companies that are not “A” rated, as they tend to have higher rate increases.
Ask your broker what the company rate increase history looks like, including how they are “rated” (they should have this information).
Find out how ofter your broker shops your rates for you (remember, you can switch Medicare Supplements whenever you want). Your broker should be doing this at least once a year.
How to Lower Rate if You Got a Rate Increase
It is actually a very simple process to do so, as long as you work with the right person. If you have an agent, call your agent.
If you are doing it yourself, make sure to call the company directly. I would take some of the more popular companies you know and see what their rates are.
Remember, the benefits won’t change from one company to the next, as long as you compare letter to letter (N to N, G to G).
If there are significant savings, you’ll want to apply and see if you qualify. Here is an article on what the underwriting process looks like.
You’ll want to start shopping if your rate is more than $30 a month from what it was when you originally bought it.
DO NOT FILL OUT AN ONLINE FORM TO GET A QUOTE – unless you know this broker or brokerage.
If you do, your phone will blow up with phone calls since most of these places sell your information to the highest bidder.
Just work with an agent – it’s easier. Or call us!
As you can see, Medicare Supplement policies have different policy rate types that determine what your monthly premium will be, as well as when and why you will receive rate increases.
Not all policy rate types are available in every area of the country.
Getting a good plan with a good company is the best way to keep your rates as affordable as possible throughout the years.
If you have any questions, use the search tool at the top of this page or on the home page.
Or, if you would like further detail on any of the topics we discussed, please fill out a contact form and submit your question.
If you prefer to speak by phone, call us at 888-209-5049.
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