We often have customers come to us after receiving a letter in the mail informing them about a Medicare Supplement rate increase. Medicare supplement rate increases usually average somewhere between 3% and 10% per year. And sometimes Medicare supplement rate increases even happen twice in the same year! Years of costly rate increases can be an economic hardship, to say the least. Unfortunately, rate increases are impossible to avoid, but there is a way to mitigate them. We recommend reviewing your Medicare supplement periodically with a qualified broker who you trust. Bobby Brock Insurance is a brokerage agency you should get to know. We can help you review your Medicare supplement insurance options.
Medicare Supplement plans, also known as Medigap, are standardized. Standardization requires that the benefits of each plan be identical, however, the premium each carrier sets for their Medigap plans varies. Standardization makes comparing Medigap policy premiums easier. The brokers at Bobby Brock Insurance use special software that compares the rates for all Medicare supplement policies, so you can review them side by side and get the lowest premium. We also have inside information about which plans tend to increase more quickly.
So how can you minimize increases in your Medicare supplement premium? Well, this article provides some key factors that influence Medigap premiums. Knowing these reasons will give you a better understanding of why you pay what you do and why you continuously see your premiums go up. There are three pricing methods insurance companies use to determine your Medigap premiums. They are:
Attained-Age Pricing: Rates are based on your current age and will increase every year as you age. This is the most common pricing plan.
Example: Mrs. Rodriguez purchases Medicare supplement Plan G at age 65. Her monthly premium is $105. At age 66, (with a 6% increase) it is $111.30. By age 70 it is $139.37. Mrs. Pearson is 85 and because she is older than Mrs. Rodriguez, currently pays $160 per month for her Plan G. When she is 86 she will pay $169.60. When she is 87 she will pay $179.78 and so on.
Issue-Age Pricing: Rates are based on your age at the time of purchase. Rates can increase for the collective claims in the policy, but not your age.
Example: Mr. Smith purchases his Medigap Plan F at age 65 and pays $162 per month. Mr. Robertson waits until age 72 to purchase his Plan F and pays $184 per month.
As you can see from the example, issue-age plans come with high prices. With an issue-age plan, a 65-year-old would pay roughly the same rate as an 80-year-old on any other pricing plan.
Community Pricing: Your age doesn’t affect what you pay. However, inflation, utilization, and factors such as tobacco use can. With a community-rated pricing plan, you would pay an identical rate to both those who are your junior and senior.
Example: Mr. Liu is 72 and his Medicare Supplement Plan N costs $164 per month. Mrs. O’Doyle is 86 and has the same Plan N and also pays $164 per month.
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It is important to keep in mind that not every type of pricing plan is available in every state. For example, Arizona has a law against Medicare supplement insurance companies increasing rates because of age. Therefore, attained-age plan pricing is not available there. In Mississippi most Medigap policies are attained-age. The same is true in Georgia, North Carolina, Texas, and Indiana. We can help you determine which pricing method will work best for you and which are available in your state. Give us a call at (877) 877-5505.
In addition to these pricing methods, other factors go into determining your monthly premium and how it increases over time.
Inflation and the rising cost of healthcare supplements:
As the overall cost of health care rises, health insurance companies must increase premiums to cover increased claim costs. It is not unusual for a premium to double over six to ten years, due to a combination of age increase and claims history.
Underwriting for a Medicare Supplement:
Except for a person aging into Medicare, an applicant has to go through medical underwriting (meaning they have to answer health-related questions) before their application can be approved. The Medigap insurance company will look at their health history to determine how much or how little they could potentially utilize the benefits of their Medigap policy. Supplemental insurance is not required to be a guaranteed issue under the Affordable Care Act. Your application may be approved as applied for at a preferred rate, a standard rate, or your application for coverage could be declined.
Not everyone who applies for Medicare after the enrollment period will be subject to underwriting. For example, when a person loses their group plan, Medicare Advantage plan, or other qualifying coverage, they are entitled to a guaranteed issue Medicare supplement plan. But not all plans are eligible. Plan F, the most comprehensive of all of them, is one plan that is eligible for guaranteed issue eligible.
Plan F has always been the plan of choice because it provides first-dollar coverage. First dollar coverage means that your insurance company will pay your Medicare-approved health care expenses without your paying copayments or deductibles. Plan G is not currently eligible for guaranteed issue, but that changes in 2020.
For example, when AT&T discontinued group insurance for retirees, the retirees had guaranteed acceptance rights for a Medigap Plan F. In most states, the law requires Medigap providers to accept people who lose their qualified coverage, into Plan F. It’s a good thing people in poor health have this right, but it can have an adverse effect on the premiums for everyone in that particular plan in that state.
Excessive claims affect the premiums for the healthy and unhealthy. This is because a person cannot be singled out for a rate increase due to their health, and they cannot be canceled because of their claims. Rate increases are distributed equally to everyone in the plan.
Note: In 2020, there will be a change in the law. Anyone born before January 1, 1955, will be able to keep their Plan F or apply for a new one with any insurance company. Plan F will no longer be the guaranteed issue plan. Plan G will become one of the plans eligible for guaranteed issue. Plan F and Plan G are identical except that Plan G does not pay the Medicare part B deductible.
Lax underwriting for a Medicare Supplement:
Another reason premiums increase could be due to what we refer to as “lax underwriting”. Sometimes carriers, in an effort to attract more insureds, will make it easier for people to pass their underwriting. The result is more claims for the Medigap plan in that state, and thus more premium increases.
Now that you know some of the factors that go into the pricing of your Medicare Supplement premiums, you should understand a bit more why your rate increases. It helps a lot to work with a trusted Medigap agency like Bobby Brock Insurance. The brokers at Bobby Brock Insurance provide you with 50+ years of Medicare experience, and we have access to special software to help navigate all types of plans and their premiums. No matter where you live, we can provide you several options for a plan that could help you save money.
Comparing Medigap insurance companies by rate increases is something we do very well. Let Bobby Brock Insurance help you eliminate the guesswork! You don’t have to take the time to call all the Medicare Supplement insurance providers in your state. With a simple call to 877-877-5505 or a visit to bobbybrockinsurance.com, you’ll quickly get information about how to find the lowest premium.
So make a call to Bobby Brock Insurance today! It’s free! Call (877) 877-5505, or reach out via our online form to get things started. Or you can visit us on the web to get more information about our Medicare Supplement plans.