Medigap operates as a form of supplemental insurance to Medicare. On its own, Medicare leaves gaps in coverage, causing the benefactors to pay copayments and deductibles out-of-pocket. These charges and fees can become quite costly over time. For this reason, Medigap was created to cover those extra expenses.

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This additional insurance can greatly reduce your medical expenses, so what’s the catch?

Medigap policies are all standardized by the federal government. This means that if an insurance company offers “Plan A,” and a different insurance company offers their “Plan A,” then they both offer the exact same coverage and benefits; the plans do not change from company to company. What does change however, is price.

This is critical when deciding if Medigap is the right route to take, because private insurance companies are allowed to price their rates however they want. Certain determinants can be based on tobacco use, gender, health history, previous insurance claims, and so on.

On the surface, the initial instinct of most Medigap buyers is to purchase the plan they want that has the lowest premium. However, that’s not an easy criteria to pinpoint since different insurance companies can determine how they price their premiums. While some companies may have lower premiums initially, these can rise greatly. There are three different ways to do this: community, issue-age, and attained-age ratings.

Community Rated

Under this rating system, all people are charged the same rate regardless of their age or gender. This means that a 67 year old will pay the same monthly premium as someone who is 80. These premiums are usually set based on the average age of policyholders. For this reason, premiums are usually higher for younger seniors and lower for older enrollees.

Issue-Age Rated

This rating is determined based upon the person’s age when the plan was issued. For example, two people sign up for Medigap at the same insurance company on the same day. One person is 67 years old and the other is 70. The 70 year old will pay a higher monthly premium than the 67 year old. This however does not change with time, so when the 70 year old turns 77, they will still be paying the monthly premium they were at age 70. This is usually the best pricing to enroll in for younger seniors.

Attained-Age Rated

This rating increases with the individual’s age. For example, the 67 year old who signs up under this pricing system will pay a higher premium when they turn 70.

Attained-age ratings is why it is so important to determine the pricings financially. Historically, attained-age ratings are the most inexpensive in the first years, but can increase significantly as time goes on.

For this reason community ratings are the most suitable to older candidates, who want to be priced fairly; issue-age is best for younger seniors; and attained-age is much more dependent on income and when you sign up.

Keep these pricings in mind when deciding a Medigap policy. The most inexpensive monthly premium is not always the most inexpensive choice.

Derek Nahigyan is the content writer for

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