Attained Age Vs Community Rated Vs Issue Age
Attained Age vs Community Rated vs Issue Age
Medicare supplement policies offer coverage that is standardized. But the price they charge for that coverage can vary greatly. One of the reasons for the price being different is the way they rate their policies.
There are 3 main methods Medicare supplement companies use to price their policies.
- Attained Age
- Community rated
- Issue Age
Let’s review what they are, how they impact you, and then we’ll get into which one is probably best for you.
Attained Age
Attained Age is the most common method insurance companies use to price Medicare supplements.
The price is based on your current age.
So a 65 year old typically pays less than a 70 year old living in the same area.
If you buy an Attained Age Medicare supplement, your premium can increase for 2 reasons:
- Each year you get older
- Inflation and other factors
Community Rated
Community rated is probably the easiest to understand.
Basically it means that everyone in the same area pays the same price. So regardless of your age or gender, you will pay the same price as everyone else living in your area with that plan.
If you buy a Community rated Medicare supplement, your premium can increase because:
- Inflation and other factors
Issue Age
Issue Age is more common in certain states than others. Most areas of the country only have a few options for Issue Age Medicare supplements.
Issue Age polices are based on your age when you first buy the policy.
So if you are 70 years old, but you bought the policy when you were 65 then you pay the same premium as a 65 year old buying the same policy today.
Your premium does NOT go up because you age.
It’s important to understand that buying an Issue Age Policy does NOT mean your premium never goes up. Your premium can still go up for inflation and other reasons.
And you start off paying a higher premium for Issue Age policies compared with Attained Age. So you have to keep that specific policy long enough to be able to see any savings.
I’ve seen some estimates where that breakeven point is around 12 years. So you are going to OVERPAY for 12 years before you ever start to see any monthly savings.
12 years is a LONG time to have the same Medicare supplement policy. And then you have to have that coverage long enough beyond the 12 years to make up for how much you overpaid to start with.
Monthly Premium example for Attained vs Issue Age
If you buy an Issue Age Medicare supplement, your premium can increase because:
- Inflation and other factors
Types of Rate Increases
Medicare Supplement Rate increases due to Age
As we get older, we tend to have more health conditions that need treatment. So Medicare supplement companies will raise your rates a little bit each year you get older. Usually this is a small increase of that is only a few percentage points.
This type of rate increase happens in:
- attained age Medicare supplement policies
Medicare Supplement Rate increases due to Inflation
The cost of medical care in the United States has increased significantly over the past 20+ years. As the cost of healthcare goes up, the cost of the claims paid by your Medicare supplement also increase.
Insurance companies have rate increases nearly every year on every kind of Medicare supplement policy to keep up with this extra cost of paying claims.
Insurance companies must submit proposals with the state’s department of insurance for approval. The state reviews the proposal and decides how to respond. If they approve it, then you will be notified by mail of the increase.
This type of rate increase happens in:
- attained age
- Community rated
- Issue age
Which type is best?
Many people like the idea of Issue Age policies because the premium is less likely to increase. But it’s not that simple. In most states, there are only a few options for issue age policies. And when that happens, they tend to be quite a bit more expensive compared with attained age options.
Because it’s so much more expensive at first, you have keep that same policy long enough to be able to see the savings. I’ve seen that timespan be as high as 12 years, which is a REALLY long time to have the same Medicare supplement policy.
Most people shop their coverage every few years.
Unless you live in a state like Florida or Idaho which has more Issue Age options. For that reason, I think most people are better off financially going with Attained Age Medicare supplement policies.
But in the end, all 3 types of Medicare supplements will have rate increases over time. So it’s smart to choose a company with a competitive premium right now that also has a history of fairly low rate increases. I can make this whole process much more transparent for you so you can decide.