Medigap or Medicare supplement insurance is the formal name for private health insurance plans that complement Medicare coverage. Typically, Medicare pays for about 48% of healthcare charges for enrolled patients. Holders can obtain the additional coverage from private health insurance providers or pay from their own pockets. Federal laws stipulate that Medigap insurers must sell standardized policies with similar benefits to customers through a predefined system in almost every state (47 states sell the mentioned standardized products). This prevents private insurance companies from overcharging customers for certain healthcare benefits. Even with that, it is imperative to compare the exact costs of Medicare supplemental policies from different insurance companies. This is because insurers often charge different fees for the same policy, but within the limits stipulated by federal law.
How Do Insurance Companies Set Prices for Medigap Policies
The law gives insurance companies a leeway to decide on how much Medigap policy premiums they charge their customers. This explains the fee differences that exist among insurers for the same level of extra medical coverage. Generally, insurance providers use three criteria to set their costs of Medicare supplemental policies. These include community-rated pricing (No-Age-Related), issue-age-related pricing, and attained-age-related pricing. All clients in the community-rated pricing scheme pay the same premium. This type of Medigap coverage does not take the patient’s age or health status into account.
Insurance companies offer varying rates to clients who wish to purchase Issue-age-related supplemental policies. Typical premium rates vary according to one’s age at the time of application. Younger applicants receive lower rates than older applicants, and an individual’s premium remains constant throughout his membership. However, extenuating factors such as inflation can lead to rates increments.
On the other hand, insurance companies require clients who opt for attained-age-related policies to pay premiums as per their ages. This pricing mechanism takes account of applicant’s age per se and varies accordingly. Therefore, premium rates increase as one grows older, and might eventually become quite dear in old age. This is because extenuating factors also affect the premium rates for this Medigap policy.
Comparing Medicare Supplemental Insurance Costs
It is imperative for customers to compare the costs of Medicare supplemental policies to enable them receive the best coverage as per their income and present needs. Some of the essential factors to consider when comparing the outlay from various Medigap providers include:
- Company Discounts: Medigap Insurance companies offer assorted discounts to prospective clients to beat their competitors. These include discounts to non-smokers, family members, and existing policyholders with insurance coverage from the company.
- Payment Savings: Some insurance companies allow significant savings to customers depending on their payment styles. For instance, policyholders who forfeit higher-deductibles from the onset may receive lower monthly premiums for a given duration. Clients who use automated payment systems such as Debit/Credit Cards may also be eligible for discounts from some insurance providers.
- Age or Community-rated Pricing: Generally, age-related pricing tends to cost more since premium rates swell as one ages. Therefore, community-rated pricing is more appropriate for most clients. Here, the cost of supplemental treatment spreads out to the entire communal pool of members.
- Future concerns: Insurance company premium rates are volatile in nature. Rising inflation can lead to a rise in premiums, while deflation may result in lower premiums.
Medicare is insufficient to cover all of one’s healthcare costs. This underpins the value of Medigap to cater for additional treatment requirements for patients. However, the costs of Medicare supplemental policies under this private scheme are quite intricate to decipher. Fortunately, with information on how insurance companies set their rates, one is able to compare costs from different providers and choose the most appropriate coverage for his/her needs. More Medicare information.