Factors That Affect Medigap Insurance Rates
The rates or premiums charged by Medicare Supplement insurance companies for the identical Medigap or Medicare Supplement benefits can vary greatly. For example, there can sometimes be hundreds of dollars difference in monthly premiums for the same Medicare Supplement Plan F coverage. Some prospective clients assume the higher-priced plan MUST be better in some way, but the truth is that the only difference is that one plan charges more than the other.
A Medicare Supplement Insurance company that is new to a state and offering a plan there for the first time might charge lower premiums (initially, at least) because there are no claims pending against their policies. Once claims begin to come in, however, the company will quickly gather facts and figures to justify a rate increase with that state’s insurance department.
Some companies ask fewer (or even zero) health questions, and that sounds great at first. The long-range problem is that plans like that are most attractive to people with severe health problems, those who have been turned down repeatedly by other companies. It usually doesn’t take many $100,000 to $1,000,000 claims for insurance companies to either begin adding health questions, raising their premiums, or both.
One additional factor can be the financial stability of the Medicare Supplement insurance company itself. Whenever a company has investments that turn sour or the company is overextended in some way, that company may conclude that the only recourse left to it is to raise premiums on existing policyholders. That short-term thinking usually results in healthy policyholders leaving for lower rates with other companies, prompting the original company to file for even higher and more frequent Medicare Supplement rates increase.
In conclusion, it’s always safer in the long run to select a Medicare Supplement insurance company that is both financially secure and given to sound underwriting procedures. When it comes to claims vs. premiums, there really is no free lunch.