As you are well aware, premiums go up every year with Medicare supplements. It’s inevitable! Or is it?
99.99% of all carriers have age increases. One exception being AARP/United Healthcare- however, (historically AARP/UHC has had higher premium hikes than many others).
The other component is premium increases based on claims. Claims increases are to one person, rather attributed to overall claims within a zip code/demographic. Most states have the same rates in the entire state. However, in places like Florida rates could be one thing in one county and in the neighboring county be completely different!
Reason for the premium increase
Loss Ratio:
The Center for Medicare /Medicaid Services requires that 65% of all premium dollars go towards medical claims- leaving only 35% to cover administrative, processing, and ability to make money.
When a company has substantially more than the 65% loss ratio, you can bet your bottom dollar that you are going to have a hefty increase!
Conversely, when a company comes in lower than the 65% ratio you will experience little to no increase. Although you may still experience a rate adjustment for based on age.
There are even a select few carriers than have actually experienced rate decreases! This is especially prevalent in states like South Carolina and Ohio where Medicare claims history relative to the number of insureds has been much lower.
No More New Business:
Another reason for rate adjustments is companies have to have new business premium coming in to offset claims on the existing “pool” of business.
When a company stops offering plans in your state, your plan is still active but new business premiums cease to help offset claims thus premiums will continue.
What if my insurance reintroduces new “introductory” rates? This happens from time to time. Carriers will have lower introductory rates for your age compared to what you are currently paying. This is particularly true with the larger Medicare Supplement providers. The 3 largest Medicare Supplement providers are AARP/United Healthcare, Mutual of Omaha, and AETNA. No, Blue Cross/Blue Shield is not on the list because each BCBS is state specific (i.e, Blue Cross/Blue Shield of NC, Blue Cross/Blue Shield of SC, Blue Cross/Blue Shield of GA, etc).
Carriers often have subsidiary underwriters. Using Mutual of Omaha as example they have several different/subsidiary underwriters under the Mutual of Omaha umbrella (ie Mutual of Omaha, United World, Omaha Insurance, United of Omaha, etc). When rates continue to have rate adjustments, they can stop accepting new business under one underwriter and reintroduce new rates under another one of their underwriters in order to maintain competitive “new business rates”. When a company starts to have significant rate adjustments under one , people that can qualify for another supplement, will move. People that have developed health conditions will not be able to qualify for another supplement and be forced to continue on with existing coverage. With a smaller and “unhealthier” risk pool rates will continue to rise!
Your Medicare Supplement plan should be reviewed at least every 2 years. If you have experienced rate increases and would like to learn more or shop rates, please feel free to call me at (828) 513-5045 x 1.
Regards,
Beau Singletary
