Why Are Medigap Premiums So Different?

To answer this frequently asked question, you must first understand that Medigap plans are Federally-standardized. With the exception of a few states, the plans are the exact same nationwide. What this means is that, for example, a Plan F with one company is the exact same as a Plan F with another company. So why, then, are the premiums so different from one company to another or from one area/state to another?

There are a few reasons for this, which I have summarized below:

  1. First of all, Medigap plan rates are based on age and gender in most cases. Companies price their plans based on their claims experiences for people in certain “groups” (age, gender, geographical area). Typically, males are more expensive, as are older people. So, this always accounts for some of the differences between Medigap plan premiums. If you talk to your neighbor and he is paying $50/month more than you are, it may be that he is older, is a tobacco user, etc. OR, it may be that he had the plan a long time without comparing lower-priced options.
  2. Another reason that Medigap premiums are so different is that companies “target” different areas, ages, etc., just like any company does targeted marketing. For example, some companies target urban areas, making sure their rates are most competitive in those areas, whereas other companies target more rural areas. Moreover, some companies target different plans – for example, some companies price their Plan G a good bit lower than F and become the most competitively priced option for ‘G’ in their state.
  3. Next, different companies using different pricing methodology for setting their rates. Some companies price their plans using an “attained-age” methodology, meaning that rates are set based on your current age, and they go up based on your age. Still other companies set their rates based on issue-age or community-rating. These plans still go up over time; however, the reasons for the increases are not necessarily your age. NOTE: If an agent/company tells you that their plan will not go up over time, hold on to you wallet! That’s just not the case. If it sounds too good to be true, it is. All Medigap plans are going to go up over time, although the reasons for the increases may differ.
  4. A final reason that Medigap premiums are so different is that, as mentioned above, plans are going to go up over time. If you stay with the same company for a long time, you will inevitably be paying more than someone who has recently signed up for a plan. It is highly advisable to re-evaluate your plan on an annual or bi-annual basis to make sure it is still competitively priced. Since the plans are standardized, you can often save money for equal coverage from a different company by merely comparing options and making a change.

To get a Medigap comparison of plans available for your age, zip code, etc., you can contact us at Medicare-Supplement.US or call us at 877.506.3378.