Ask Kim
How to Pick a Medigap Policy
I've noticed a wide price range for the same supplemental medicare coverage? How do I decide which company to go with?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
March 26, 2004
I'm about to turn 65 and want to buy a medicare supplement insurance policy. I've decided that Plan F is best for me, but I've seen quite a price range for the same plan. How do I decide which company to go with?
There does tend to be a surprisingly wide price range for medicare supplement policies that provide the same coverage. Weiss Ratings, an insurance research firm, found the average cost of Plan F to be $1,627 throughout the country in 2003, but one company charged as little as $617 while another was charging $4,419. And there can even be big price variations in the same area. Weiss found that a 65-year-old woman in Cincinnati, Ohio, could pay $1,132 for Plan F with one company or up to $2,279 with another.
Unlike other types of insurance, you really don't get anything extra in return for the additional premium. The government created ten standardized medigap plans -- named Plan A through Plan J -- and every plan with the same letter provides the exact same coverage (see the table at the Medicare Rights Center's Web site for details). And since the policies are simply plugging in the gaps that aren't covered by medicare, customer service rarely varies from company to company.
As a result, this is one type of insurance where you can shop by price. After you decide which letter plan you want, as you already have done, go to your state insurance department's Web site for a list of prices available in your area (scroll down on our insurance page for links to each state's insurance regulators). The federal government's Medicare Personal Plan Finder, available at Medicare.gov, also helps you shop for medigap and medicare HMO options in your area. You can also order Weiss Ratings' personalized Consumer Guide to Medicare Supplement Insurance, which lists prices for dozens of policies based on your age, gender and zip code (the report costs $49).
When you get the list of premiums, see how each company prices its policies.
With attained-age policies, premiums will increase as you get older -- typically increasing every one, three or five years (in addition to price hikes linked to health-care inflation, which affects all types of medigap policies).
With issue-age policies, your rate is based on your age at purchase. If you buy the policy at age 65, for example, it's more expensive than if you buy it at age 75. But once you buy the policy, the price won't increase just because you get older (although premiums can rise with health-care inflation).
Community-rated policies are similar to issue-age versions, except that everyone in the same area pays the same price regardless of age (although you may get a discount until age 68 or so).Issue-age and community-rated policies may start out a bit more expensive than attained-age policies, but the prices generally won't increase as much through time. So unless there is a huge price difference between the types of policies, it's generally best to buy the lowest priced issue-age or community-rated policy.
For help picking the type of policy, see the Kasier Family Foundation's Talking With Your Parents About Medicare and Health Coverage or order the Medicare Rights Center's Filling the Medigaps: Tips for Getting Extra Coverage (which costs $5).
