Community-Rated Pricing For Medigap Plans

By: Edward Neeman
Published: Tuesday, February 19 2019
Last Updated: 4 years ago

When it comes to cost, there is a wealth of information surrounding the different expenses you’ll need to plan for once you become eligible for Medicare. For the most part, the federal government sets the standard rates for premiums and out-of-pocket expenses, but that’s only for Parts A and B.

There are also private insurance companies that offer Medicare plans and benefits, which means you’ll have to do a little bit of research and comparison. For Medigap plans, in particular, there is something known as community-rated pricing, which is one of the 3 different pricing models you can choose from. Also known as no-age rate plans, here’s a look at why this cost type may be your best option.

What Is Community-Rated Pricing

Community-rated pricing for Medicare Supplement plans is a model that helps determine the cost of your policy. If you sign up for a community-rated Medigap plan, then you’ll be paying your premiums based on the area that you live in rather than your age, which is also why some people refer to these plans as no-age rated plans.

Community-rated pricing means that each individual who buys a Medigap policy in that area and who buys the same policy as his or her neighbor will pay the same monthly premium. So, when you sign up for the exact plan your neighbor has, you pay the same monthly premium as your neighbor regardless of when you sign up. This differs from age-rated and issue-age rated plans which primarily use your age as a determining factor of pricing, and may seem premium increases as you get older.

How Does It Work?

Let’s take a look at a real-world example to give you a better understanding of how it works. We’ll start with Mr. Smith, who buys one of the no-age Medigap plans at $165 per month. Mr. Smith is 65. He still pays $165 per month at 72, unless there were other factors such as inflation which caused the community-rated Medigap plans in his area to rise.

Mrs. Johnson us 72. She chooses to enroll in a no-age Medigap plan in the same area as Mr. Smith. She only pays $165. Since community-rated Medigap plans are rated based on the community in which you live and not what age you are when you enroll, both Mr. Smith and Mrs. Johnson pay the same rate for their Medigap plan.

The Benefits of Community-Rated Medigap Plans

There are plenty of benefits to enrolling in community-rated plans, but none more important than it’s a fixed-rate model. When we retire, our income is often fixed, and we tend to bring in less money than when we were working. For that reason, it’s never a good idea to enroll in a plan that may begin to increase as we get older.

Staying with a fixed rate for your Medigap plan is crucial to not only allow you to better plan for future expenses but is actually cheaper in the long run. One of the reasons that people opt for age-rated or issue-age rate plans Medicare Supplement plans is that they may cost more up front. However, as the year's pass, your no-age Medigap plan premium will remain the same, while other options may quickly rise in price.

What Are Some Drawbacks of No-Age Rated Medicare Supplement Plans?

One of the biggest drawbacks to no-age rate Medicare Supplement plans is the cost of your monthly premium can still go up. However, the only time your Medicare Supplement plan premium will go up in price is because of inflation. On occasion, there will be other factors that will increase your monthly premium. Overall, community-rated Medicare Supplement plans are the cheapest Medigap plans to buy.

Other Pricing Factors For Medicare Supplement Plans

As mentioned previously, there are two other pricing factors for Medicare Supplement plans. These would be issue-age-rated plans and attained-age-rated plans. We will discuss both a little more in detail now.

Issue-age-rated plans are plans which charge based on the age you were when you signed up for the Medicare Supplement plan. For instance, Mr. Smith was 65 when he signed up for his Medigap plan F. His monthly premium is $145. When he turns 72, his plan will still be $145 per month. That all depend on whether there was on inflation or other factors did not increase his plan premium.

Mrs. Johnson was 72 when she signed up for the same Medigap Part F plan. Her premium is $175. Her premium will remain $175 unless there is inflation or other factors causing it to rise. Mrs. Johnson signed up at a later age than Mr. Smith. She has to pay more.

Attain-age-rated plans are the most expensive Medicare Supplement plan to buy. The reason it is so expensive is the cost of the monthly premium will rise each year starting one year from your plans start date. For instance, let's use Mr. Smith and Mrs. Johnson again, Mr. Smith buys a Medicare Supplement plan at 65 for $145 per month. When Mr. Smith turns 66 his plan will go up to $147. At age 72, Mr. Smith can expect to pay $165 with Mrs. Johnson. The cost will rise each year until they pass away.

Find a Community-Rated Supplement Plan With FirstQuote Medicare

If you’re looking to find a community-rated Medigap plan, FirstQuote Medicare can help you get started. With our industry-leading quoting tool, users like you have found success when shopping around and comparing Medicare Supplement quotes. To get started, all you need to do is enter your zip code, and from there, you’ll answer a few questions. Within two minutes, you’ll be able to see your local options and even talk with one of our experienced agents.