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Costs of Medigap policies

Each insurance company decides how it will set the price, or premium, for its Medigap policies. It’s important to ask how an insurance company prices its policies. The way they set the price affects how much you pay now and in the future.

Medigap policies can be priced or "rated" in 3 ways:

How it’s priced

Generally the same monthly premium is charged to everyone who has the Medigap policy, regardless of age.

What this pricing may mean for you

Your premium isn’t based on your age. Premiums may go up because of inflation and other factors, but not because of your age.

Example

Mr. Smith is 65. He buys a Medigap policy and pays a $165 monthly premium.

Mrs. Perez is 72. She buys the same Medigap policy as Mr. Smith. She also pays a $165 monthly premium because, with this type of Medigap policy, everyone pays the same price regardless of age.

How it’s priced

The premium is based on the age you are when you buy the Medigap policy.

What this pricing may mean for you

Premiums are lower for people who buy at a younger age and won’t change as you get older. Premiums may go up because of inflation and other factors, but not because of your age.

Example

Mr. Han is 65. He buys a Medigap policy and pays a $145 monthly premium.

Mrs. Wright is 72. She buys the same Medigap policy as Mr. Han. Since she’s older when she buys it, her monthly premium is $175.

How it’s priced

The premium is based on your current age, so your premium goes up as you get older.

What this pricing may mean for you

Premiums are low for younger buyers, but go up as you get older. They may be the least expensive at first, but they can eventually become the most expensive. Premiums may also go up because of inflation and other factors.

Example

Mrs. Anderson is 65. She buys a Medigap policy and pays a $120 monthly premium. Her premium will go up each year.

  • At 66, her premium goes up to $126.
  • At 67, her premium goes up to $132.
  • At 72, her premium goes up to $165.

Mr. Dodd is 72. He buys the same Medigap policy as Mrs. Anderson. He pays a $165 monthly premium. His premium is higher than Mrs. Anderson’s because it’s based on his current age. Mr. Dodd’s premium will go up every year.

  • At 73, his premium goes up to $171.
  • At 74, his premium goes up to $177.
Note

The cost of Medigap policies can vary widely. There can be big differences in the premiums that different insurance companies charge for exactly the same coverage.

As you shop for a Medigap policy, be sure to compare the same type of Medigap policy, and consider the type of pricing used. For example, compare a Medigap Plan C from one insurance company with a Medigap Plan C from another insurance company.

The cost of your Medigap policy may also depend on whether the insurance company:

  • Offers discounts (like discounts for women, non-smokers, or people who are married; discounts for paying yearly; discounts for paying your premiums using electronic funds transfer; or discounts for multiple policies).
  • Uses medical underwriting, or applies a different premium when you don’t have a guaranteed issue right (also called “Medigap protections”), or aren’t in a Medigap Open Enrollment Period.
  • Sells Medicare SELECT policies that may require you to use certain providers. If you buy this type of Medigap policy, your premium may be less.
  • Offers a “high-deductible option” for Medigap Plan F. If you buy Medigap Plan F with a high-deductible option, you must pay the first $2,140 in 2014 ($2,180 in 2015) of deductibles, copayments, and coinsurance not paid by Medicare before the Medigap policy pays anything. You must also pay a separate deductible ($250 per year) for foreign travel emergency services.
  • If you bought your Medigap Plan J before January 1, 2006, and it still covers prescription drugs, you would also pay a separate deductible ($250 per year) for prescription drugs covered by the Medigap policy. And, if you have a Plan J with a high deductible option, you must pay the first $2,140 in 2014 ($2,180 in 2015) before the policy pays anything.