Buying Medigap Supplemental Health Insurance: Cost Comparisons

Health insurance companies price their Medigap policies by setting their own monthly premiums. Knowing how a Medigap insurance company prices its supplemental health insurance policies for seniors is important for understanding how much your Medigap plan will cost now and in the future.

Medigap policies are priced or "rated" in three different ways: Issue-age rated, community rated (or "no-age rated"), and attained-age rated.

1. Issue-age rated: Your Medigap premium is based on your age. Premiums are lower for seniors if you buy Medigap health insurance at a younger age, and won't change as you get older. While a premium may be adjusted for inflation and other factors, it will not be adjusted for your age.
2. Community rated (or "no-age rated"): All new members are charged the same monthly premium, without regard to age at the time of a Medigap policy purchase. While premiums may be adjusted for inflation and other factors, they will not be adjusted based on a policy holder's age.
3. Attained-age rated: Premiums are set based on your age (the age you have "attained"), and increase as you get older. While attained-age rated premiums may be the least expensive when you're younger, they may ultimately be the most expensive as you get older. Premiums may also be adjusted for inflation and other factors. While most Medigap supplemental senior health insurance policies offer similar coverage options, you are likely to find a significant difference in prices. Some private supplemental health insurance companies charge much more for the exact same policy offered by another company.

It's important to do your research before you buy a Medigap policy, so you understand just what a policy is offering in comparison to other policies. You should also consider the type of pricing (numbers 1, 2, or 3 above) a company uses to determine its health insurance premiums.

Other factors that can influence the pricing of your Medigap supplemental health insurance policy include:

• Discounts for non-smokers, females, and married people; as well as discounts for making your Medigap payments through automatic funds transfer.
• Whether your insurance company offers a different premium if you do not have guaranteed issue rights; and whether it uses medical underwriting to determine your premium.
• If your insurer requires "high-deductible" coverage for Medigap Plans F and J. In this case, you must pay for the first $1,900 (2008 figure) of medical costs normally covered by Medigap before your Medigap coverage kicks in. A separate deductible also applies for foreign travel emergency ($250 in 2008).

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