Why Medigap Premiums Can Be Predictable Now—and Unpredictable Later

Key Takeaways

• Medigap premiums may start out stable but can increase due to factors like age-related pricing and inflation, impacting long-term affordability.

• Choosing a Medigap plan within the PSHB context requires careful consideration of pricing models and how they may change over time—even if initial costs appear predictable.

Understanding the Role of Medigap in PSHB

As a Postal Service annuitant or family member enrolled in the Postal Service Health Benefits (PSHB) Program, you may be weighing the option of adding a Medigap policy to help fill in the gaps left by Original Medicare. Medigap plans are designed to cover deductibles, copayments, and coinsurance that Medicare Part A and Part B don’t pay for. While many assume these plans offer long-term financial predictability, the reality is more complex.

Even though your PSHB plan may coordinate well with Medicare and reduce some of your out-of-pocket costs, you might still consider Medigap for additional peace of mind. But here’s where the fine print matters: while premiums may look manageable now, they can become unpredictable over time.

How Medigap Premiums Are Structured

Before evaluating their stability, it’s crucial to understand how Medigap premiums are set. Insurers typically use one of three pricing structures:

Community-Rated (No Age-Rated)

• Everyone pays the same premium, regardless of age.

• Increases generally only happen due to inflation or other external economic factors.

Issue-Age-Rated

• Premiums are based on your age when you first purchase the policy.

• The younger you are at enrollment, the lower the premium.

• Premiums do not rise due to age but may increase due to inflation.

Attained-Age-Rated

• Premiums start low and increase as you age.

• Most common pricing model.

• Subject to inflation and age-related hikes.

Many PSHB enrollees who opt for Medigap may not realize that these pricing models are not guaranteed to remain stable. Attained-age-rated plans, for instance, might feel affordable at 65, but by 75 or 80, the monthly costs can increase substantially.

Short-Term Predictability vs. Long-Term Risk

In 2025, many enrollees are comparing Medigap premiums that appear relatively stable—especially if they’re enrolling at age 65. However, this short-term stability can be misleading. Here are the key reasons:

• Annual Increases: Even with a stable pricing model, premiums often increase annually to keep pace with rising healthcare costs.

• Aging Factor: In attained-age-rated plans, your premium will rise as you age, and this is not capped.

• Geographic Influence: Rates can vary by state or ZIP code, and relocation in retirement may alter your premium structure.

The costs you project at the time of retirement might not hold after five or ten years, especially if your health status changes or the economic environment shifts.

Coordination with PSHB and Medicare

For Postal Service annuitants, the interaction between Medicare and the PSHB Program already provides some protection against high out-of-pocket costs. In 2025, most Medicare-eligible annuitants are required to enroll in Medicare Part B to maintain PSHB coverage, unless exempt. Many PSHB plans also include:

• Reduced deductibles when combined with Medicare

• Lower copays for in-network providers

• Integrated prescription drug coverage through Medicare Part D Employer Group Waiver Plans (EGWP)

Given this coordination, adding a Medigap plan might seem redundant. But if you’re considering it for additional protection, especially for frequent travelers or those with complex healthcare needs, remember that your PSHB coverage may already reduce the very gaps that Medigap is designed to fill.

Enrollment Timing Affects Premium Predictability

Medigap premiums and eligibility protections are heavily influenced by when you enroll:

Initial Enrollment Period (IEP)

• Starts the month you turn 65 and are enrolled in Medicare Part B.

• You have guaranteed issue rights—no medical underwriting.

Outside IEP

• You may be subject to medical underwriting.

• Insurers can charge higher premiums or deny coverage based on pre-existing conditions.

Enrolling during your IEP offers the most stability in both premium rates and eligibility. Waiting until later may lock you into higher rates that continue to climb each year.

Inflation and Healthcare Cost Trends

In 2025, healthcare costs continue to outpace general inflation. Medigap premiums are not immune to this trend. Carriers frequently adjust rates based on rising medical costs, utilization trends, and administrative expenses. As a result, even community-rated and issue-age-rated plans can experience regular premium increases.

You may find that what seemed like a solid long-term plan becomes more difficult to sustain after a decade of steady increases. And since Medigap plans don’t have an annual cap on out-of-pocket costs like Medicare Advantage or some PSHB plans, rising premiums can hit especially hard if your fixed income doesn’t keep pace.

Switching Medigap Plans Later Isn’t Always Easy

Unlike Medicare Advantage plans, which you can switch during the annual open enrollment period, Medigap plans generally don’t offer the same flexibility. In most states, after your initial enrollment period, switching plans involves underwriting, and approval isn’t guaranteed.

For Postal retirees, this is especially important. If you enroll in a Medigap plan now and drop it later due to rising premiums, you may not be able to reenroll or switch to a more affordable plan later without facing penalties or being denied altogether.

Balancing Premium Stability and Healthcare Needs

Not every Medigap buyer needs the same level of protection. You should weigh the following when evaluating your long-term ability to maintain premiums:

• Chronic Conditions: If you have ongoing health needs, a Medigap plan could save more in out-of-pocket costs than it costs in premiums—at least early on.

• Travel Needs: If you travel out of state often, Medigap can offer more nationwide flexibility than many Medicare Advantage plans.

• Budget Forecasting: Be honest about your future income streams. If you’re relying primarily on a fixed annuity and Social Security, even modest premium increases can become unmanageable.

Should You Consider Alternatives Instead?

Given the PSHB program’s integration with Medicare, some annuitants find sufficient value in:

• Sticking with PSHB and Medicare only: Many PSHB plans already offer strong coordination with Medicare benefits, often making Medigap an unnecessary expense.

• Evaluating Medicare Advantage within PSHB framework: Though subject to provider networks and benefit limits, some enrollees consider these options due to caps on out-of-pocket costs.

That said, you should never add or drop a Medigap plan—or any Medicare-related coverage—without a full understanding of how your PSHB plan interacts with it.

Making the Right Call in 2025

There’s no one-size-fits-all answer. But in 2025, with inflation, changing health needs, and policy shifts all influencing the stability of Medigap premiums, it’s critical to:

• Know the pricing model of your chosen plan

• Understand how that model may affect your long-term affordability

• Consider whether your PSHB plan already meets your needs in combination with Medicare

• Avoid overbuying coverage you may not need

Timing, budget awareness, and honest forecasting will be your best tools in choosing the right level of supplemental coverage.

Long-Term Coverage Stability Starts with Smart Questions

When you consider a Medigap plan alongside your PSHB and Medicare coverage, your biggest asset is your ability to ask the right questions before committing:

• Will this premium structure work for me not just now, but in 10 years?

• What happens if I develop a chronic illness and need to switch plans?

• Am I buying peace of mind—or paying for duplication?

These aren’t just details; they’re central to protecting your financial well-being. If you’re unsure how all the moving parts of Medicare, Medigap, and PSHB come together, it’s time to get professional help.

Speak with a licensed agent listed on this website to evaluate your situation, understand your options, and make informed decisions about whether a Medigap plan truly fits your long-term goals.