Choosing your Medigap pricing method is a lot like choosing how efficient your new central air conditioner will be. If you have replaced central air recently, you know what I mean. If you have not had that joy yet, the next few lines will save you money in both places.
Last year my home’s air conditioning hit the 15-year mark and was failing and needed to be replaced. I told my wife, “Let’s just replace it with something like we had before.” Our longtime maintenance man recommended that we don’t use their company, but rather a gentleman named Frank, whom he knew personally. Frank was pleasant, and recommended American Standard central air conditioning units as a replacement. When I asked about their efficiency, he said the new units would simply match what I already had. When I asked what that was, he had to go check, which concerned me, because how could he know they were the same if he didn’t know what he was replacing.
As it turns out, my old units were rated 14 SEER, a measure of energy efficiency. Frank’s replacements were only 12 SEER, a step down. In fact, Frank had a hard time finding them, because almost no one makes 12 SEER units anymore.
Less confident in Frank, despite our maintenance man’s strong recommendation, I called around. Every other company quoted 16 SEER or higher, partly because my town now requires it (interesting). After a 3-month process, we ended up at 20 SEER. It cost about 20% more upfront than Frank’s quote, but it cut our electricity bill by roughly 30%, paying back the difference in about two years.
Here is the lesson, and it is the same one that matters with Medigap pricing. The cheapest option today is not always the lowest cost over time, and the person selling it may not tell you that. You have to ask the right questions. That is what the rest of this article is about.
The three ways Medigap policies are priced
A Medigap policy, also called Medicare Supplement insurance, helps pay the out-of-pocket costs that Original Medicare leaves behind, such as deductibles and the 20% you would otherwise owe for many services. You pay a monthly premium for that coverage.
Here is the part that confuses people. Two neighbors can buy the exact same plan, say Plan G, from the same company and pay different amounts. The reason is often the pricing method the company uses.
There are three ways a Medigap policy can be priced:
- Community-rated (sometimes called no-age-rated): age is not used to set the premium, so members of different ages generally pay the same base rate.
- Issue-age-rated (sometimes called entry-age): your premium is based on your age when you buy the policy and does not go up just because you get older.
- Attained-age-rated: your premium is based on your current age and rises as you age.
All three can still go up over time for reasons unrelated to age, such as inflation and rising health care costs. The difference is whether age is one of the dials the company can turn.
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Medigap pricing comes in three types. See which gives steadier costs over time: community-rated, issue-age, or attained-age, and how to choose.
Which Medigap pricing type costs less over time?
Here is the short answer. No single pricing type is cheapest for everyone. But for someone who buys at 65 and keeps the policy through a long retirement, issue-age and community-rated plans often give you more predictable costs over time, and in many cases a lower total cost, even though they can look more expensive on day one.
Attained-age plans are the most common, and they usually start with the lowest premium. That low starting price is appealing. The catch is that attained-age premiums tend to climb the most as you get older, so the plan that looked cheapest at 65 can become the costliest by your late 70s or 80s.
Issue-age and community-rated plans flip that pattern. They often start a bit higher, but your age stops being a reason for increases. Over 15 or 20 years, that steadiness can add up to real savings.
One important caveat: every company sets its own rates, and inflation affects all three types. A well-run attained-age plan can beat a poorly run issue-age plan. So the pricing method is one important factor, not the only one.
How attained-age pricing works, and why it gets expensive
With an attained-age plan, the company looks at the age you have “attained,” meaning your current age, and prices the policy from there.
When you are 65, that math works in your favor. Younger means lower risk to the insurer, so the premium starts low. But the same math turns against you over time. Each year, or in some cases every few years, the premium steps up as you move into a higher age band. Some companies raise the premium yearly; others raise it every few years based on age. California Health Advocates
Then add inflation on top of the age increases. The two together can push attained-age premiums up at a steeper pace than the other types.
This is why a low first-year quote can be misleading. The starting number tells you what you pay now. It does not tell you what you will pay at 80, when your budget may be tighter and switching plans may be harder.
How issue-age pricing works
With an issue-age plan, the company sets your premium based on your age when you first buy the policy. After that, getting older is no longer a reason for an increase.
Buy at 65, and you lock in the 65-year-old rate for that plan. Buy the same plan at 70, and you would pay more, because you entered at an older age. But once you are in, your age stops driving the price.
Issue-age premiums can still rise. Inflation and rising medical costs affect every Medigap policy. The key point is that one major factor, your age, is taken off the table the day you enroll.
For someone who plans to keep the same policy for the long haul, that predictability has value. You trade a slightly higher starting premium for protection against age-based increases later.
How community-rated pricing works
With a community-rated plan, age is not used to set the premium. A 66-year-old and an 80-year-old in the same rating area generally pay the same base rate for the same plan from the same company.
A few details can still affect what you pay. Some community-rated carriers vary the base rate by geographic area, offer household discounts, or charge more for tobacco use. Age, though, is not part of the formula.
This is the least common of the three methods, and in many areas it can be hard to find.
Community-rated pricing has a trade-off. Because age is not a factor, a 65-year-old may pay more than they would under an attained-age plan at first. The benefit shows up later, when your premium is not climbing simply because you had another birthday. Like the others, community-rated premiums can still rise with inflation.
How the costs compare over time
Picture the same Plan G offered two ways. One quote is attained-age-rated and starts low. The other is issue-age-rated and starts a little higher.
At first, the attained-age plan looks like the better deal, because the monthly premium is lower.
Over time, the picture changes. The attained-age premium rises for two reasons at once: your age and general inflation. The issue-age premium rises for only one: inflation. Year after year, the attained-age premium tends to climb faster.
At some point, the two premiums can cross. The plan that was cheaper at 65 becomes the more expensive one, and the gap can keep widening into your 80s. Over a full retirement, the plan with the higher starting premium can end up costing less in total. Where that crossover happens depends on the company and on inflation, but the shape is common: attained-age low and rising, issue-age steadier.
Why the lowest starting premium can be the wrong choice
The trap with attained-age pricing is not the price itself. It is the assumption that you can simply switch later if it gets too expensive.
You often can switch in the first six months. When you first enroll in Medicare Part B at 65 or older, you get a six-month Medigap Open Enrollment window. During that window, companies must sell you any Medigap policy they offer, at their best rate, even if you have health problems. This is the strongest protection you will have.
After that window closes, the rules usually change. Outside of certain guaranteed-issue situations, a company can require medical underwriting. That means it can review your health, charge you more, or turn you down.
So the risk is this. You choose an attained-age plan because it is cheapest at 65. Years later the premium has climbed, you try to switch to a steadier plan, and a health condition makes you uninsurable at a good rate. You are then stuck with the rising premium. Choosing with the long term in mind from the start avoids that corner.
Is every pricing type available to you?
Not every pricing method is offered everywhere. What you can buy depends on where you live and which insurance companies operate in your area. In many places, attained-age plans are the most common option you will see, and community-rated plans can be harder to find.
This is one more reason to compare carefully and ask each company directly how it prices a policy. A pricing method that looks ideal on paper does no good if it is not available to you, or if the companies offering it have a history of steep increases.
How to find out which pricing a policy uses before you buy
You will not always see the pricing method printed in big letters. You usually have to ask. Remember Frank: the person quoting you may not volunteer how the price will behave over time.
Before you sign up, ask the company or a licensed agent three direct questions:
- Is this policy community-rated, issue-age-rated, or attained-age-rated?
- How often, and by how much, have premiums for this plan increased over the past five to ten years?
- Can you show an illustration of how the premium might change at 70, 75, and 80 for someone enrolling today?
Keep one thing in mind. No company can guarantee future premiums. But some carriers can share illustrations or historical rate information, and that history tells you a lot about how a plan is likely to behave.
Comparing those answers across several companies is detailed work, and it is easy to focus on the lowest first-year number and miss the long-term cost. This is a place where unbiased, expert help can pay for itself, because the goal is not the cheapest premium this year. It is the lowest reasonable cost over the decades you will hold the policy, with a company unlikely to surprise you with steep increases.
The bottom line: which Medigap pricing should you choose?
If you expect to keep the same policy for many years, an issue-age or community-rated plan often gives you steadier, more predictable costs, because your age can no longer drive the premium up, and that predictability can translate into a lower total cost. An attained-age plan can still make sense if it starts low and the company has a steady history of modest rate increases.
The key is to compare the pricing method, not just the first-year price, and to do it during your six-month Medigap Open Enrollment window, while you have the most protection and the most choices.
Just like my air conditioner, the cheapest unit on day one was not the cheapest to own. Ask each company which pricing method it uses and how often it has raised rates. That single step puts you ahead of most buyers, and it points you toward the plan that stays affordable when you need it most.
This article is for educational purposes only. It is not personalized financial, tax, legal, or medical advice. Medigap rules, pricing methods, and availability vary by location and can change. Before choosing a policy, confirm the details with Medicare.gov or a qualified, licensed professional.
Note Chapter is an affiliate relationship of Holy Schmidt!. This means if you purchase a product or use their service, we earn a small commission. This does not increase your cost.
Chapter Advisory, LLC (“Chapter”) is a private health insurance agency. In California, Chapter does business as Chapter Insurance Services (Lic. No. 6003691). Chapter is not affiliated with or endorsed by any government entity. While Chapter has a database of every Medicare plan option nationwide and can help you to search among all options, it has contracts with many but not all plans. As a result, Chapter does not offer every plan available in your area. Currently, Chapter represents 50 organizations which offer 18,601 products nationwide. You can contact a licensed Chapter agent to find out the number of products available in your specific area. Please contact Medicare.gov, 1-800-Medicare, or your local State Health Insurance Program (SHIP) to get information on all of your options. Enrollment in a plan may be limited to certain times of the year unless you qualify for a Special Enrollment Period or you are in your Medicare Initial Enrollment Period.
Average potential savings are based on realized premium, co-pay, and out of pocket savings estimates self-reported by consumers that worked with Chapter Advisory LLC to enroll in a Medicare Supplement, Medicare Advantage, and/or Part D Prescription Drug Plan. The average is limited to consumers that chose to self-report. Savings information is subject to periodic updates and corrections. There is no guarantee of savings and any savings may vary by policy type, state, or other factors.
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