Medigap Premium Rating Methods

Three Ways Companies Price Medigap

Insurance companies use one of three methods to determine your premium. The method used significantly affects how much you pay now and in the future.

1. Community-Rated (No-Age-Rated)

Everyone pays the same premium regardless of age.

How It Works

• 65-year-olds pay the same as 85-year-olds
• Premiums increase only due to inflation and claims experience
• No increases solely because you get older

Pros

• Predictable - no age-related increases
• Better value as you age
• May cost less over lifetime

Cons

• Higher initial premiums when younger
• Less common (fewer companies offer this)

2. Issue-Age-Rated (Entry-Age-Rated)

Premium based on your age when you first buy the policy.

How It Works

• Your age at enrollment sets your base rate
• Premium never increases due to age
• Only increases for inflation and claims

Pros

• Lower premiums if you buy young
• Predictable - age doesn't affect future rates
• Good value if you keep the policy long-term

Cons

• Higher initial cost than attained-age
• Can't make up for buying at older age

3. Attained-Age-Rated

Premium increases as you get older.

How It Works

• Your current age determines your premium
• Rates increase as you age (typically annually)
• Plus inflation and claims increases

Pros

• Lowest initial premiums
• Most companies use this method
• More choices available

Cons

• Premiums increase significantly over time
• Can become very expensive in later years
• Hardest to budget for

Premium Comparison Example

Starting at age 65 with Plan G:

• Community-rated: $180/month (stays $180 except inflation)
• Issue-age-rated: $165/month (stays $165 except inflation)
• Attained-age-rated: $140/month at 65, $165 at 70, $190 at 75, $220 at 80

By age 80, the attained-age policy may cost more than the other methods!

Which Is Best?

Community-rated or issue-age-rated:

• Better long-term value
• More predictable costs
• Worth considering even if initial premium is higher

Attained-age-rated:

• Good if you want lowest initial premium
• Okay if you plan to switch policies later
• Most common option available