3 Rating Methodologies for Medigap Plans
3 Rating Methodologies: Attained-Age, Issue-Age and Community
There are three rating methodologies that insurance companies can use when they sell Medigap policies – attained-age, issue-age and community rating. A rating methodology just means the method by which a company sets and changes their rates over time. 3 Rating Methodologies for Medigap Plans
The rating methodologies can be confusing and misleading, so it is important to have some understanding of them when you are comparing Medigap policies from different companies, particularly if you are turning 65 and starting with Medicare.
Attained-Age Rated Medigap
Attained-age rated Medigap policies are, by far, the most common among the three. In some geographic areas, these are the only types of policies even offered, at least on certain plans.
The rates on attained-age policies are based on the age you have “attained” the time you purchase the policy and the rates change based on your age as you get older over time.
For this reason, attained-age policies are generally cheaper than issue-age or community rated when you turn 65 or first start Medicare. Sometimes, they can be significantly cheaper. But the rates will go up as you get older.
Issue-Age Rated Medigap
Issue-age rated policies are the 2nd most common among the rating methodologies. This is also known as “entry-age rated”. In other words, your rate is based on your age at the time you enter the policy. So if you sign up for an issue-age policy as a 65 year old, your premium should always be lower than someone who started with the same policy at 70 years old.
The premiums on issue-age rated policies do not increase based on your age. However, the premiums do go up regularly due to inflation, changes to Medicare, and other factors.
There are some states which require companies that offer Medigap plans to offer them as issue-age policies (examples include Georgia and Florida).
Community Rated Medigap
Community rated policies are plans where everyone is grouped together, regardless of age, gender or health. On these plans, everyone within a certain geographic area pays the same premiums regardless of your age and whether you are male or female.
Community rated policies are often higher in costs. While the premiums do not go up based on your age, they do go up over time (just like issue-age rated) due to inflation, changes to Medicare and other factors as determined by the insurance companies.
So, Which Rating Methodology is Better?
It is difficult to give a “catch-all” answer to this question, since the plans vary so much from state to state. But, here are few important bullet points to keep in mind when comparing Medigap policies, especially as it pertains to their rating methodologies.
- All three types of rating methodologies go up over time. If an agent or company tells you their plans do not go up in price, be very wary.
- There are some states that offer plans of only one certain type of rating methodology. Before you even give this much thought, find out if your state is one of those. That may simplify the decision process for you.
- Attained-age rated is much more prevalent in states where companies are allowed to decide from any of these three. Since older people cost insurance companies more money, they prefer to charge older people more premiums.
- Be cautious of issue-age or community-rated policies that have that classification but give some sort of discount that goes away each year as you get older. Even though they may be rated as issue-age or community-rated, if they are still going up each year as you get older (plus any inflation-based increases), there is no difference from attained-age rated.
- Overall, the most important thing, when comparing Medigap plans, is to pick a reputable company (highly rated) with competitive pricing – if not the best price for your age and zip code, one of the best. The most accurate predictor of which company will be lowest priced in 5 or 10 years is which company starts with the lowest price.
3 Rating Methodologies for Medigap Plans
3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans 3 Rating Methodologies for Medigap Plans
About the Author
Garrett is the founder/President of Secure Medicare Solutions, a leading, independent Medicare insurance agency. Since 2007, Garrett has worked with tens of thousands of people turning 65 or already on Medicare to understand, compare and choose Medicare insurance that fits their specific needs and situation.
His latest project is 65Medicare.org, an online hub for people just starting with Medicare, which is focused on distilling difficult Medicare questions into easy-to-understand resources.
Garrett resides in North Carolina with his lovely wife, Celeste, and three spirited children.View All Articles