Do any medigap insurance policies pay differently for different providers?

A few medigap policies, called "Medicare Select," offer a two-tier payment system, something like a managed care plan. These policies maintain a network of participating hospitals, doctors, and other medical providers. If you receive care from one of the network providers, the policy pays full benefits. If you get care from a provider outside the network, the policy pays a reduced amount.

Because of these limitations, Medicare Select policies are often a bit less expensive than comparable policies without the two-tier payment system. If a person's regular doctors and other providers, including the hospital she would normally use, are within a Select policy's network, and the network has a substantial list of other nearby providers, then a Select policy may be a good bargain.

What should I know about medigap insurance policy premiums?

The amount an insurance company charges for a particular policy when a person first buys it isn't the only thing to know about that policy's premiums. The other is the terms under which the company may later raise those premiums -- which you can be sure they'll do. Policy provisions regarding premium raises come in three basic varieties:

• Level premiums. This is the best type of policy term concerning premium hikes. These premiums go up only when the insurance company raises premiums on all policies of the same type, and only as much as the state insurance department or commission allows. This means that market forces plus state regulation will keep premiums somewhat in check.
• Attained age. These policies base premiums entirely on a person's age. The company charges the same amount to everyone of the same age with the same policy, regardless of when they buy the policy. As a person ages, the premium goes up by a set amount -- yearly for some policies, in five-year increments for others (when the person reaches 70, 75, 80, and so on). These policies tend to have lower premiums than comparable policies for people at age 65 but higher premiums as policyholders get older. If someone is considering a policy with an attained age term, ask an insurance company representative to show you the premium costs for current policyholders at the next two age increments above the person in your care. The percentage raise in these premiums will tell you what you can expect when she reaches these ages.
• Issue age. The initial premium for one of these policies would be determined by a person's age when she first buys it. From then on, her premium would be the same as for anyone else who first buys the premium at the same age. That means the premium won't automatically rise when the person reaches age plateaus (such as age 65, 70, or 75), as it would in "attained age" policies. The premium will steadily rise but may be held in check somewhat because the insurance company will keep the price competitive in order to attract new buyers.