Medicare Supplement Plans, also called Medigap policies, are policies that cover out-of-pocket expenses when Original Medicare has gaps in coverage. You can enroll in one of these policies and pay a monthly premium. The private insurance companies that offer these plans are allowed to price them differently depending on a few factors. Below, we will discuss how issue-age-rated Medigap policies are priced.
How Medigap Policies Work
Original Medicare, meaning Medicare Parts A and B, covers many inpatient and outpatient healthcare services. However, it does not cover 100% of these services. For example, Medicare only covers 80% of many outpatient services and stops covering inpatient services after a certain amount of days in the hospital. This means that the patient is responsible for 20% of all outpatient services and 100% of the cost of the hospital stay after the cut-off point. These costs can quickly add up. Fortunately, the Centers for Medicare and Medicaid Services (CMS) authorized Medigap policies to help bridge these gaps.
Medigap policies are policies sold by private insurers in order to provide coverage to cover the gaps and reduce out-of-pocket expenses. You enroll in a Medigap policy, pay a monthly premium, and are covered in the event that you incur expenses. The Medigap policies are sold by different companies and priced differently. However, these policies themselves are based on ten templates outlined by the federal government. The companies must abide by the template, but they can price the plan according to the competitive market rate.
This method of pricing takes into account the age at which you purchase (or are “issued”) the Medigap policy. If you buy at a younger age, your premium will be lower than someone who buys at an older age. The advantage of this type of pricing is that the price does not go up with your age every year as it does in an attained-age-rated plan. However, the disadvantage is that if you bought this plan when you were older, it will cost you more than if you had bought it.
Medigap policies are very important for keeping costs down. While enrolling in a policy does add another monthly premium, it will save you money in the long term. For more questions on which Medigap policy is right for you, contact us at (662) 844-3300 today.