Medicare provides affordable medical insurance that is controlled by government regulations. While this is mostly good news for the millions of Americans who depend on Medicare plans, they don’t offer complete medical cover.
With deductibles and copays, you may find yourself digging deep into your own pockets to pay for medical treatment and medications. This can become exorbitant if you have a serious accident or contract a prolonged illness. Supplemental Medicare plans will cover some or all of these costs when you really need it.
How do supplemental Medicare plans work?
Medicare Part A and Part B, while wonderfully affordable, only cover basic medical costs. In many instances, you will be required to pay the uninsured amount as an out-of-pocket expense. Medicare supplement plans or Medigap will pay for certain medical expenses, depending on the type of policy.
A Medicare supplemental plan is provided by private insurance companies in accordance with strict government guidelines. Under federal law, the Centers for Medicare and Medicaid Services (CMS) has set partially standardized services to be provided by Medicare supplemental plans. Various plans are offered at different rates, depending on the services offered. These are identified by different alphabetical letters (from A to N).
How are Medicare supplemental premiums calculated?
Insurance companies use three basic methods to calculate Medicare supplemental rates. While this is fairly standardized, your premiums may differ from one insure to the next. Generally, you can expect your premiums to be calculated in accordance with these principles:
Community Rated Premiums: This is the simplest method used to calculate Medicare Supplemental premiums. The cost is not based on the age of the insured person. It takes into account general factors, like how much has been paid in benefits during the preceding years and expected increases in medical costs in the future. Your individual circumstances, like age, will not affect your premiums.
Issue Age Rated Premiums: This type of insurance calculates the rate according to the age of the person when the policy is issued. In other words, your age when you initially bought the policy. This is usually beneficial for younger people. If you join at the age of 65, your premiums should be lower than someone who joins at the age of 75. As you get older, your premiums will not increase. However, additional factors may cause rates to increase, like inflation.
Attained Age Rated Premiums: These rates are based on your current age and will increase every year (as you grow older). Like all types of Medicare supplemental insurance, there will also be other factors that may cause your premiums to increase.
Additional Factors Influencing Medicare Supplemental Rates
Depending on your individual circumstances, and the insurance company you choose, there can be a number of factors that will affect how much you pay for Medicare supplemental plans.
Discounts: Insurers will offer discounts to people who are less likely to use their medical insurance. These groups may include non-smokers, women, and married people. Some offer discounts if you pay your premium for a full year in advance instead of monthly or set up automatic bank payments.
Medical Underwriting: If you don’t buy a Medicare supplemental policy during the Medigap open enrollment period, your medical history may affect how your premiums are calculated.
Additional Benefits: An insurance company may offer extra benefits or services, beyond those required by CMS. This will usually mean paying a higher premium.
Where you live: States may have local laws that will affect how your Medicare supplemental rates are calculated.
Get the Most for Your Money
To ensure that you get the best medical care at the best price, you need to compare what insurance companies offer. Simply choosing the cheapest plan, from the cheapest insurer, may not be the best option. You need to ask some important questions:
1. Are your premiums going to increase every year? If so, by how much?
2. Are you adequately covered?
3. What discounts are you entitled to?
4. How much have premiums increased over the last few years for a particular insurer?