By the time most people turn 65 years old, they’ve seen most of the tricks out there on the market. It’s surprising and interesting that some Medicare supplement carriers would still try standard ploys with medicare supplements given the intended audience but, alas, they do. Let’s take a look at some of the pricing games to make sure we’re comparing apples and apples when looking at Medicare supplement quotes.

For most people new to Medicare and medicare supplemental insurance, turning 65 or leaving a group plan over age 65 is the trigger for benefits. This is true for the vast majority of new Medicare enrollees. Consequently, if you find yourself coming up on a age 65 birthday, your mail box is probably inundated with all kinds of Medicare information including the various supplement or medigap offers. They’ll most likely show a senior couple on the cover clutching tennis rackets and quote some rates in big letters to you for a few medicare supplements such as the F plan (most popular). You may be surprised to find a wide range of pricing even for the same standardized F plan. Keep in mind that the F plan is the same from carrier to carrier as the benefits are standardized by the government. The pricing should be within 5-10 dollars of each other at most but that’s not necessarily the case. How could this be since they’re all dealing with essentially the same underlying risk?

You can partially point back to AARP’s original pricing over the past decade. Essentially, AARP would offer a sliding scale discount for new enrollees age 65. The first year might be 30% lower than the eventual price and this percentage would decrease over a period of time. Medicare is confusing enough to someone brand new to it so a new enrollee doesn’t necessarily know how this discounted rate works. He or she just sees a rate that is 30% lower than the competitors for essentially the same level of coverage. There are two ways to look at this. One hand, you can say that AARP is providing a discount to new enrollees which they can take advantage of. Or, depending on how their rates match up with competitors 5 years years later (when the discount disappears), it smacks of a bait and switch. We’re not here to cast judgement but want people who are comparing medicare supplement insurance rates to not only look at the rate now (presumably at age 65) but over the other age bands. If the rates accellerate as you get older relative to the competition, it’s probably not a good deal. Keep in mind that you have a open enrollment window at age 65 (or when leaving group coverage in addition to a few others) so once you’ve made a decision, it might be difficult to switch medigap plans later on if health changes. If your discounted medigap plan starts to go up at a faster clip than the other plans in later years, you may be stuck depending on your health. That’s the real issue with the discounted rate. That discounted money has to come from somewhere and it’s usually recouped on the back end since the underlying risk is the same.

We’re also seeing the opposite these days. Carriers which charge a flat amount across all age bands. Obviously, this is much higher for younger people (say at age 65) but less expensive when you’re much older. To some extent, the carrier is betting that the average life span will be less and they will not be underfunding towards the older age bands. We’re not sure how this is going to turn out. Ultimately, if the carriers run into higher expenses, you can expect premiums to increase much like has occurred with the supposedly fixed rates of long term care.

Ultimately, look at all the age bands when comparing medicare supplement insurance plans. There’s somewhat of a goldie lox approach here in that you typically want the strongest carrier that’s priced about in the middle (maybe low of middle). Not too high. Not too low. This provides the most stability over the long term.