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Cost of Medicare Supplemental Insurance

The cost of Medicare supplemental insurance can depend on a number of factors, including your age, your plan, your insurance company, and even where you live. Some of these aspects are out of your control, but there are many important factors surrounding the cost of Medicare supplemental insurance that you can influence. Educating yourself on how Medicare works and how supplemental insurance can make your original policy more affordable is a great first step toward finding the most cost-effective plan for your unique situation.

The Cost of Medicare

Although Medicare has low monthly premiums for general care and no monthly premiums for hospital services, the real cost of Medicare is often in the gaps it leaves in coverage. The original plan is divided into two parts, one for hospital-related services called Part A, and one for general care called Part B. For services pertaining to both parts, your Medicare plan covers only 80 percent of the federally approved amount, leaving a 20 percent coinsurance fee for everything from emergency room visits to trip to your regular doctor. These out-of-pocket costs can make it difficult to pay health expense coverage with Medicare alone, which is why most people need supplemental insurance.

Supplemental insurance, also called Medigap, is coverage you can purchase from a private company that allows you to "fill the gaps" in your original plan. The cost of Medicare supplemental insurance might change your monthly budget, but seniors overwhelmingly find the added benefits to be worth it. Even the most basic supplemental policy covers your Part A and B coinsurance, preventative services and the first three pints of blood drawn in a given year, meaning that just one visit to the emergency room can justify the cost of Medicare supplemental insurance. More comprehensive plans, which might have a higher upfront cost in monthly premiums, can even further justify the cost of Medicare supplemental insurance with the range of services offered, including deductible supplemental insurance coverage and foreign travel emergency insurance.

When to Purchase Supplemental Insurance

One of the most important things you can do to lower your cost of Medicare supplemental insurance is to purchase your plan during Open Enrollment. Open Enrollment refers to a six month period starting from the time you are enrolled in both Parts A and B during which you can purchase any Medigap plan that a company offers without having to apply through medical underwriting. This means that a company cannot consider your medical history, require you to take a physical or charge you a higher rate for any preexisting health condition. If you apply after your Open Enrollment period, you may not be guaranteed the policy you want at the lowest price.

If you apply outside Open Enrollment, a number of factors can affect your cost of Medicare supplemental insurance, including any preexisting conditions you might have, your age, sex and family history. Some companies also lower the cost of Medicare supplemental insurance by offering discounts for factors like your marital status, whether or not you smoke, whether you're willing to pay annually, and whether you're willing to pay electronically. Other factors, such as your zip code, are less obvious but can be just as important. Researching local firms online can help you determine which companies have the best rates for your area.

How Medigap Companies Determine Cost

Medigap companies set premiums in one of three ways: community-rated, issue-age-rated and attain-age-rated. The way your plan is rated affects the cost of your plan now as well as in the future. Companies who use community-rated plans charge the same rate for a particular plan to everyone in their pool regardless of age. So if Mr. Jones, age 75, enrolls in Plan F at a particular company, he will pay the same rate as Mr. Diaz, age 65. The benefits of a community-rated plan are consistency and predictability. Your rate can go up each year based on inflation, but you will never have to pay more because of your age.

An issue-age-rated plan bases your premium on the age you are when you buy your policy. So if you buy Plan N for $150 a month at age 67, you will keep that rate, adjusted for inflation, even as you age. If you had bought Plan N from the same company at age 72, you might pay $180 a month but your rates would not increase as you got older. An attain-age-rated plan offers lower rates when you are younger, but adjusts your premium as you age. Intuitively, these plans often have lower-than-average rates when you are younger, but can have comparatively more expensive rates as you age. No matter which company you choose, researching the various factors surrounding the cost of Medicare supplemental insurance can ensure that you find the best plan for you at the greatest value.


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