How are Medigap premiums set?

Dear Holly, 

Great question! While Medigap policies with the same letter offer the same benefits, the monthly premiums can vary from company to company. When choosing a Medigap, it’s important to ask how the insurance company sets its premium. 

The following factors may affect the cost of your Medigap and which Medigaps are available for you to purchase: 

• Where you live 
• Your age 
• Your health status 
• Your gender 
• If you smoke 
• If you are married 
• When you first became eligible for Medicare 

Be aware of how Medigap companies can use age when setting premiums. In some states, companies are only allowed to use age to set premiums in certain ways. Depending on your state, premiums may be: 

• No-age-rated (also known as community-rated): Premiums are the same for everyone living in a specific area, regardless of age. These are generally the least expensive over your lifetime. 
• Issue-age-rated: Premiums are based on the age you were when you first bought the policy. The younger you are when you purchase a Medigap, the cheaper your premium. (Note: Premiums will still increase over time due to inflation, but not due to your age). 
• Attained-age-rated: Premiums are initially based on your age when you purchase a policy, and they increase as you get older. Meaning you pay a different price at age 65 than you do at age 70. These premiums may be the lowest when you first buy them, but they are generally the most expensive over your lifetime. 

It is usually a good idea to buy your Medigap policy during your Medigap open enrollment period or when you have a guaranteed issue right because during those times insurers are required to sell you a policy and your premium can’t vary based on your health status.  

Hope this helps!  

– Marci