When researching Medicare supplement insurance policies, you may have questions about the various ratings classes. There are three to choose from: Attained Age, Issue Age and Community Rated. We will examine all three and discuss the nuances of each below.
It’s important to note that each class has it’s own pros and cons. There is not one type that is better than the other two in every situation. In many cases, it boils down to state regulations and historical increases of the insurance company.
Consumers can purchase plans A through N based on their age at issue. This means the insurance provider cannot increase premiums each year based on the fact you’re a year older, but they can increase the rates based on other factors like changes to Medicare or claims experience.
In essence, you’re locking-in a rate based on your age when the policy is issued. However, insurance providers can raise premium rates by class for all policies issued in their state once approved by the Department of Insurance.
An insurance company might increase rates due to significant claims experiences or several other factors. In other words, your rates can (and will) likely still increase each year, but not because of a birthday.
There are some states where all plans must be sold as Issue Age, like Missouri and Florida for example. In most other states, there are only a small handful of carriers still offering this class of supplements – most are Attained Age.
In general, Issue Age Medicare supplement plans will be more expensive at onset. In the long run, you hope to pay less in premiums by avoiding rate increase with each birthday. This isn’t always the case however – so it’s wise to ask you agent about renewal history.
Attained Age supplements usually increase in price each year as you grow older, but not always. There are some insurance companies using age banding – which means you will not receive a rate increase until you reach the next band. In other words, your attained age rate could stay the same from ages 65-68.
When banding is not used, your rates will likely increase a small percentage each year. Attained Age plans are usually less expensive than Issue Age Medigap plans. You’re hoping the less expensive premiums in the beginning will offset future increases when compared with an issue age plan.
Like Issue Age plans, premiums can also increase based on changes to the Medicare program as well rising health care inflation. Put another way, there are two factors that can increase your rates. While this sounds daunting, we’ve seen smaller premium hikes for our clients with many Attained Age plans when compared to Issue Age. Again, renewal history can help to separate the good from the bad.
Only a few companies offer Community rated supplements depending on where you live. United Healthcare (AARP) is one of the more popular Community rated providers. You premiums will not differ by gender or zip code, only the age and maybe the health of the applicant. In large states, you might see different community rates fro different sections of the state – like Pennsylvania for instance.
Community rated Medicare supplements can be beneficial for those who live in expensive areas – like Cleveland and southern Florida, but not ideal for those in rural areas or less expensive sections of large states. This ratings class may not be ideal for women as their premiums tend to be lower than men’s when separated out. There is usually no good argument for a woman in Columbus, Ohio to pay the same as a man in Cleveland in our opinion – so shop wisely.
It is difficult to predict which plan might be most beneficial to you over several years, but it always helps to analyze the trends. Some consumers will like less expensive plans from the onset while others will want to lock-in a seemingly more stable rate. It’s also wise to ask about the various premium discounts available as well.
When choosing a supplemental insurance provider, renewal history is one of the most important metrics in our experience. There is no absolute method of predicting future rate increases, but past experiences can be a good barometer for what may be ahead.
No matter the ratings class, all insurance companies will increase your premiums over time. There is no silver bullet, but certainly some decisions will save you more money over others in the long run. We help our clients examine all of their options so they can find the Medigap plan that best suits their needs.
Category: Medicare Supplements