by Russell Noga | Updated December 9th, 2023
Medicare Supplement Insurance (also known as Medigap) helps to cover the expenses that Original Medicare – Part A and Part B – don’t cover. For millions of Medicare beneficiaries, supplementary insurance helps to make the cost of healthcare more predictable and more affordable.
There are several Medigap plans, and they’re sold by private health insurance companies. Since Medicare Supplement plans are additional insurance, they have a separate monthly premium in addition to the premiums for Medicare Part A and Part B.
If you’re planning on purchasing Medicare Supplement Insurance, there are a lot of factors that you’ll want to take into consideration to ensure you choose an option that best meets your unique needs. One of the key factors that you’re going to want to consider is the cost of coverage.
Insurers set their own rates and use three different pricing methods to determine the rates they charge: age-rated and community-rated. Understanding these pricing methods will help assess Medicare Supplement Insurance plans and choose one that best suits your needs.
In this guide, we’ll provide an overview of community-rated pricing, including what it is and how it works, the benefits, and some downsides, too.
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About Medicare Supplement Insurance
For starters, let’s explain what Medicare Supplement Insurance is and how it works. Medicare is a government-sponsored health insurance program that consists of several parts. Part A and Part B combined are known as Original Medicare.
Part A covers the cost of care and services you’ll receive in a hospital or other inpatient settings, and Part B covers the cost of care and services you’ll receive in outpatient settings, such as doctor’s offices, preventative care, and even durable medical equipment. While both Part A and Part B will cover a lot of your healthcare expenses, it won’t cover everything, and you’re responsible for the costs it doesn’t cover; deductibles, coinsurance, and copayments, for example.
Medicare Supplement Insurance is separate insurance coverage that helps to cover Original Medicare’s out-of-pocket expenses. There are 10 different policies that are named for letters, and they’re sold by private health insurance companies and regulated by the government.
All policies of the same letter must offer the same standard benefits, as required by the government, no matter which insurer provides the coverage and where the policy is issued; for instance, Plan F must offer the same coverage, whether it’s issued by Aetna or Blue Cross Blue Shield, and whether it’s issued in California or Florida.
Since Medicare Supplement plans are separate insurance coverage, you’ll have to pay separate monthly premiums for your coverage, in addition to the monthly premiums for Original Medicare. Insurance companies set the premiums for the policies they offer.
What is Community-Rated Medigap insurance?
When health insurance companies set the rates for the Medicare Supplement Insurance plans they offer, they generally use one of three pricing methods: issue-age, attained-age, and community-rated. The method that an insurer uses affects the cost of your monthly premiums, both when you first enroll in coverage and in the long run.
When an insurer uses community-rated pricing, everyone who resides in the same geographic area and purchases the same policy pays the same monthly premiums, no matter their age, health status, or gender. Unlike issue-age policies, the premiums for community-rated Medigap plans do not increase as you age.
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The Benefits of Community-Rated Medicare Supplement Insurance
Community-rated Medigap plans offer several benefits. One of the primary advantages is that premiums will remain the same for all beneficiaries who reside in the same area and have the same type of plan, no matter their age or the state of their health. As such, you’ll be able to enroll in coverage at any age and pay the same rate as someone who is younger than you.
For example, if you purchase a community-rated plan when you’re 75, you’ll pay the same price as someone who purchases the same policy at the age of 65. If you’re in poor health or you have a chronic condition and require ongoing medical treatment, this can be particularly beneficial.
Another key benefit that community-rated Medigap insurance offers is that premiums tend to be more stable than other types of Medicare Supplement Insurance plans. With other kinds of plans, such as issue-age or attainted-age coverage, premiums increase as you age.
However, with a community-rated plan, rates are based on claims that all beneficiaries who reside in the same geographic location file. Therefore, it isn’t likely that rates will increase as a result of factors that could affect you individually, such as your age or the state of your health.
The Disadvantages of Community-Rated Medicare Supplement Insurance
While community-rated Medigap plans do offer distinct benefits, there are some downsides, too. For one thing, rates may be higher than they would be for other kinds of Medigap plans for younger beneficiaries because the rates for all policyholders are the same, no matter their age or the state of their health. If you’re younger, you could end up paying a higher rate than you would if you were to purchase an age-rated or issue-attained Medigap plan.
Another possible downside that can be associated with community-rated Medigap plans is that there’s a chance that rates could be unstable, whereas premiums for other types of plans can be more stable. Since rates are based on claims of the whole community of policyholders, rate increases can end up being higher from one year to the next.
Is Community-Rated Medigap Insurance the Right Choice?
To determine if a community-rated Medicare Supplement Insurance plan is the right option for you, you’ll want to consider several factors, including your age, the state of your health, and your budget. For instance, if you have been diagnosed with a chronic condition or you’re older, a community-rated Medigap plan could be a good choice for you since the premiums for your policy will be the same. On the other hand, if you’re younger and in good health, an age-rated or an issue-age policy may be a better option.
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Frequently Asked Questions
What are Community-Rated Medigap Plans?
Community-Rated Medigap plans are a type of Medicare Supplement insurance that charges the same premium to all beneficiaries regardless of their age. This means that everyone enrolled in the plan pays the same monthly premium, regardless of whether they are 65 or 80 years old.
Who is eligible for Community-Rated Medigap Plans?
Eligibility for Community-Rated Medigap plans is based on being enrolled in Original Medicare (Medicare Part A and Part B). You must be at least 65 years old to apply for a Medigap plan, and in some states, individuals under 65 with disabilities may also be eligible.
When can you enroll in a Community-Rated Medigap Plan?
You have a six-month Medigap Open Enrollment Period that starts when you are both 65 or older and enrolled in Medicare Part B. During this period, you have guaranteed issue rights, meaning insurance companies cannot deny you coverage or charge you more due to pre-existing conditions.
What are the best Medicare Supplement Plans for Community-Rated plans?
The best Medicare Supplement plans for Community-Rated pricing will depend on your specific healthcare needs and budget. Plan G and Plan N are popular options for many beneficiaries due to their comprehensive coverage and competitive pricing.
What does Medicare Supplement Plan G cover?
Medicare Supplement Plan G covers most of the gaps in Original Medicare, including Part A and Part B coinsurance, hospice care coinsurance, and the first three pints of blood. It also covers skilled nursing facility care coinsurance, Part A deductible, and 80% of foreign travel emergency costs.
What does Medicare Supplement Plan N cover?
Medicare Supplement Plan N provides similar coverage to Plan G but requires beneficiaries to pay certain cost-sharing amounts, such as a copayment for doctor’s visits and emergency room visits. It does not cover the Part B excess charges.
What is the difference between Medicare Supplement Plans and Medicare Advantage?
Medicare Supplement plans work alongside Original Medicare and help pay for out-of-pocket expenses not covered by Medicare. Beneficiaries can see any healthcare provider that accepts Medicare.
Medicare Advantage plans, also known as Medicare Part C, are private health insurance plans that replace Original Medicare. They often include prescription drug coverage and may offer additional benefits like dental and vision. However, beneficiaries may need to use a network of providers and follow plan rules.
Can you switch from a Medicare Advantage plan to a Community-Rated Medigap plan?
Yes, you can switch from a Medicare Advantage plan to a Community-Rated Medigap plan during certain enrollment periods. The Annual Enrollment Period (AEP) and Medicare Advantage Open Enrollment Period (MA OEP) are times when you can make changes to your Medicare coverage.
Can you have both a Medicare Advantage plan and a Community-Rated Medigap plan?
No, it is illegal to have both a Medicare Advantage plan and a Medigap plan at the same time. You must choose one or the other, as they provide different types of coverage.
How can you find Community-Rated Medigap plans in your area?
To find Community-Rated Medigap plans available in your area, contact licensed insurance agents or brokers who specialize in Medicare. They can help you compare plans, rates, and coverage options to find the best fit for your healthcare needs and budget. Additionally, you can research online and review plan details on the official Medicare website.
Contact Us for a Free Consultation on Medigap Plans
If you have questions about Medicare supplement plans, call our team at 1-888-891-0229. We offer professional advice on Medigap policies. Our fully licensed agents offer free consultations to give you all the information you need about Medigap. If you want someone to call you back, leave your details on our contact form, and we’ll get a Medigap expert to reach out to you.
Russell Noga is the CEO and Medicare editor of Medisupps.com. His 15 years of experience in the Medicare insurance market includes being a licensed Medicare insurance broker in all 50 states. He is frequently featured as a featured as a keynote Medicare event speaker, has authored hundreds of Medicare content pages, and hosts the very popular Medisupps.com Medicare Youtube channel. His expertise includes Medicare, Medigap insurance, Medicare Advantage plans, and Medicare Part D.