Two halves of one decision
Securities are offered through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. Insurance products, including Medicare Supplement policies, are offered through licensed affiliates. This material is general information and is not individualized investment, tax, legal, or insurance advice, and is not a recommendation of any plan, carrier, or policy.
Most writing about Medigap stops at the first half: which letter covers what, and when you can enroll without medical underwriting. That material matters and we cover it in Medicare Supplement planning before you retire, including the six-month window that is the only genuinely irreversible part of the subject.
This page is about the second half, which gets far less attention and is where the money quietly goes. Once you know which letter you want, you still have to decide who to buy it from, and that decision is being made with almost no information if the only number on the table is this year's premium.
Choosing the letter is a coverage decision. Choosing the company is a thirty-year pricing decision wearing the same clothes.
What is identical, what is not
Medigap benefits are standardized by federal rule. A plan sold under a given letter must provide the benefits assigned to that letter, which means the coverage question is settled once you pick one. Massachusetts, Minnesota, and Wisconsin standardize differently; Illinois uses the letter system.
What is not standardized is everything else: the premium, how often and by how much it has been raised, the method used to set it, the company's financial condition, and the service you get when a claim is confusing. Those differ materially between carriers selling the identical policy.
Two practical consequences follow. Comparing coverage between carriers for the same letter is wasted effort. And a price difference between two carriers for that letter is not buying you anything different today, which makes the question of why it is cheaper worth asking.
Rate-increase history
Medigap premiums rise. That is expected: claims costs rise, and a block of policyholders ages. What varies is how much, and how consistently, a given carrier has passed that through.
A carrier can enter a market with an attractive premium and then raise it steadily, or hold increases closer to the underlying cost trend. Over a retirement that may run thirty years, the difference between those two paths can exceed the difference in starting premium several times over, and none of it is visible in a quote.
The question to ask is specific: what have your rate increases been in Illinois for this plan letter over the last several years? Carriers and brokers can answer it. A refusal, or a vague answer, is itself a data point. State insurance departments also publish filed rate information, and the Illinois Department of Insurance is the place to look.
The three pricing methods
Underneath the premium sits a method, and it determines how the price behaves as you age. There are three, and the one you are buying is a question with a factual answer.
| Method | How the premium is set | How it behaves over time |
|---|---|---|
| Community-rated | Everyone with that policy pays the same regardless of age | Changes with general rate increases, not with your birthday |
| Issue-age-rated | Based on your age when the policy was issued | Does not rise because you aged, though general increases still apply |
| Attained-age-rated | Based on your current age, recalculated as you get older | Rises as you age, on top of general increases |
All three are legitimate and all three are sold. Which methods are available can vary by state. Any premium is subject to the terms of the policy issued and to approved rate changes.
The reason this matters is that an attained-age policy is often the least expensive option at 65 and the comparison reverses later, because the price is climbing for two reasons at once rather than one. None of that makes it the wrong choice; it makes it a different choice, and one that should be made knowingly rather than discovered at 80.
Financial strength
A Medigap policy is a promise to pay claims for as long as you keep it, which for someone buying at 65 could be three decades.
Independent agencies including AM Best and S&P publish financial strength ratings that assess an insurer's ability to meet its ongoing obligations. The ratings are free to look up and are not the same as a review of the product or the price. What they speak to is the company behind the contract.
Worth knowing: the rating is an opinion from a rating agency rather than a guarantee, agencies use different scales, and a rating can change. It is a reasonable input to a decision about a long-dated contract, not a substitute for one. Guarantees are subject to the claims-paying ability of the issuing insurer.
What to ask, and of whom
Three kinds of help exist for this purchase, and they are not interchangeable.
- An independent agent or broker can quote the same letter across multiple carriers and is generally compensated by the carrier whose policy is placed. Ask how many carriers were quoted and which ones.
- A captive agent represents one company, which is not a problem provided you know it and compare elsewhere.
- Your State Health Insurance Assistance Program offers free counseling with no sales involvement. In Illinois that program is run through the Department on Aging.
Five questions cover most of what matters. What have your increases been in Illinois for this letter over recent years. Which pricing method is this policy. What is the carrier's current financial strength rating. How many carriers did you quote for this letter. And am I inside my guaranteed-issue window, or will this application be underwritten?
That last one is the question to ask first, because it is the only one with a deadline attached.
Where the premium sits in the plan
A Medigap premium is not an insurance decision that happens to cost money. It is a recurring withdrawal from the retirement paycheck, for life, that rises over time.
That means it belongs in the cash-flow projection alongside the Part B and Part D premiums, with an assumption about growth rather than a flat line. It also means the funding question matters: an HSA can pay Part B, Part D, and Medicare Advantage premiums but not a Medigap premium, which is a real after-tax difference between the two Medicare paths and is covered in using a health savings account in retirement.
And the withdrawal that funds the premium is itself taxable income, which can affect the taxable share of Social Security and the Medicare premium tier two years out, covered in coordinating income, Medicare, and investments. None of that changes which letter is right. It changes where the money to pay for it should come from.
Serving Oak Lawn
Oak Lawn is anchored by Advocate Christ Medical Center, one of the area's largest employers, and that shapes the conversations that come from this community. Health-system and municipal retirees arrive weighing retiree health coverage against Medicare, pension elections, and rollover decisions, usually at the same time and usually on a deadline.
For Oak Lawn clients the work is Medicare enrollment and supplement timing set against the retirement date, retirement income planning that puts the premium into the cash-flow projection rather than beside it, investment management, and tax-aware withdrawal sequencing in coordination with your CPA. Medicare Supplement policies are placed through licensed affiliates.
Richard Casolari, Financial Advisor, Investment Advisor Representative, CFP®, has spent roughly fifty years in financial services, much of it with households in exactly this position. The practice is founder-led and based a short drive away in Palos Heights.
Fees, charges and expenses are detailed in the Cetera Wealth Services LLC's ADV Part 2A. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Wealth Services LLC nor any of its representatives may give legal or tax advice.
Securities offered through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. Insurance products are offered through licensed affiliates.
This material is for general information only and is not a recommendation of any insurance plan, carrier, or policy, not a recommendation to buy or sell any security or insurance product, and not a solicitation in any jurisdiction where the advisor is not properly registered. Any insurance benefit is subject to the terms, conditions, limitations, and exclusions of the policy issued, and guarantees are subject to the claims-paying ability of the issuing insurer. Financial strength ratings are opinions of independent rating agencies, use differing scales, and are subject to change. Medigap plan availability, premiums, rate filings, enrollment rules, and state protections change and are revised; confirm current details at Medicare.gov, with the Illinois Department of Insurance, or with a licensed professional before acting. This material has not been reviewed or endorsed by the Centers for Medicare and Medicaid Services or any government agency.
