Long term effects–3 ways US Government says companies can increase premiums.
What do you mean three rate structures? Below you’ll see just how companies can, by US Government regulations, structure their rates. This is important when looking at long-term. Things that may work now may not work for you financially in the future based on these rate structures.
Put simply, everyone on a certain Plan with the company is charged the same premium across the board. This means a 65-year old on Plan N will be paying the same as a 95-year old on Plan N. Your premium is not based on age at all and will never increase because of age. The prices in these plans can be low, but, that is because there is a discount applied to the early years. Each year, part of that discount disappears and your rate is higher. I know, for a fact, that in Indiana, there is one company offering this type of structure.
These plans are priced each year based on the age you have attained at your most recent birthday. This means you receive whatever rate increase due to inflation of the company as well as a rate increase for having a birthday (there is no getting around that!). If you start one of these plans at a young age, the premiums are usually the lowest. However, due to the multiple rate increases, they can quickly become the most expensive. Keep in mind that you do have the option to change plans at a later date, but you have to medically qualify if you’re out of your initial guaranteed-issue window. At last count, I think 48 companies still offer these in Indiana. Most of the companies that offer attained-age polices are the ones you see commercials for for the most part.
The third category of premium pricing is Issue-Age. Simply put, you are paying a premium based on the age you were when the policy was issued. The premium may change due to medical inflation of the company, but it will never increase because of age. These plans are typically priced a little higher than attained-age policies, but will get out-paced in increases by the attained-age policies. In Indiana, there are 6 (yes, six) companies that offer this structure.
For more information on which companies offer which structures, you can see the Indiana Department of Insurance website. I do have to warn you that the premium comparisons on the site are not accurate (some haven’t been updated in a while, and thus seem more competitively-priced than they actually are).