Insurance companies use one of three rating methods for determining the premiums for their programs:
1) Community-rated – everyone is charged the same monthly premium, regardless of age, who has a Medigap policy. Premiums may go up over time, but if they do, they go up for everyone. For example, Mr. C is 65 years old and pays $150 per month for his plan F policy. Mr. X is 70 years old and pays $150 per month for his plan. Even though Mr. X is 5 years older, he will pay the same thing as Mr. C.
2) Issue-age-rated – the premium is based on your age at the time you buy and are issued your policy. If you buy a policy when you’re younger, the premium won’t change the older you get. The premiums may go up due to other factors (e.g. inflation), but will not go up because of your age.
3) Attained-age-rated – the premium is based on your current age (the premium can increase as you get older). While the premiums are low for younger buyers, they can go up over time as you get older. As with community-rated and issue-age-rated policies, the premiums can increase over time because of inflation and other factors. These plans can be the least expensive initially, however, they can become the most expensive over time.
The pricing system a carrier uses is an essential part of comparing plans. A list of carriers’ premium rating methods (for most states) are below:
- United Healthcare
- American Continental/Continental Life
- Central States
- Royal Neighbors of America
- United American
- Omaha Insurance Company
It’s important to note that other factors can affect the premiums such as geographical rating (zip codes), age at time of application (for attained-age and issue-age carriers), medical underwriting, and discounts for married couples applying together.