As you shop for a Medicare Supplement Policy, pay close attention to which age-related pricing mechanism the issuer is using because it can have an important financial consequence to you.
If your insurer uses an “Issued Age” method, it means that your premiums are determined by the age you are when you first buy the policy but premiums thereafter are not adjusted upward as you age. Predictably, a person issued a policy at age 65 will have a lower rate than a person who’s 80 because the 65-year old will likely be healthier than the 80-year old and will pay premiums for more years. To illustrate this, a 65-year old woman in Florida buying a popular Mutual of Omaha Plan F would pay annual premiums of $3713.63, but her 80-year counterpart buying the same policy would pay $4961.67.
If your insurer uses an “Attained Age” pricing method, you’ll see your rates increase as you age. For example, a 65-year woman in Missouri buying a Plan F from Equitable Life & Casualty will pay $4142.00 initially for that policy but will see her rate increase to $4423.00 by the time she turns 70 and $5322.00 when she’s 80.
Attained age policies are far more common than issued age ones so if you know you want the comparative rate stability of the issued age plan, you might need to work a little harder to find one.
The distinction between Issued Age and Attained Age gets muddied in some states that demand “Community Rating” by Medicare Supplement issuers. States like New York and Arkansas do not permit insurers to charge different rates to different ages so the premiums are leveled or “community rated” for all policyholders no matter their age of issue or their age attained. Additionally, some insurers use community rating even in states that don’t require it by law.
Notes: Pricing illustrations provided in this article used pricing data supplied by CSG Actuarial and were timely and accurate as of June, 2015. Unless otherwise stated, prices mentioned are annualized premiums and assume a 65-year old non-smoking female with no pre-existing conditions.
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