What Do I Do When My Medigap Rates Go Up?
Originally published November 22, 2017
Updated February 7, 2019
After you’ve had a Medigap plan for over a year, you probably started noticing that your premium increases every now and again.
You’re experiencing rate increases.
It happens to us all, and it’s inevitable.
Either your insurance agent contacts you, or you get a letter in the mail telling you that your Medigap plan’s rate is increasing. Sometimes, it’s as low as 1%, and other times, it can be as high as 10% or more!
Before long, your plan is way more expensive than it was when you were 65.
There is something you can do about this, but first, we need to understand why this happens.
Why do Medicare Supplements have rate increases?
There are a couple different reasons that your Medigap plan experiences rate increases.
First of all, most Medicare Supplements sold today are on an attained age pricing structure. This means that each year, you’ll have an age-related rate increase on your birthday.
In simple terms, the price of the plan is based on your current age – the age you have “attained.” You can expect the price of the plan to go up each year.
With the attained age pricing structure, most companies have a 12-month rate guarantee, which means the price of your plan will stay the same for at least a year. This can even be extended to two or three years, which means you won’t have an age-related rate increase until you’re 67 or 68.
Here’s an example of a typical Medicare Supplement age increase scenario:
- At age 65, you pay $92.63.
- At age 66, you pay $92.63.
- At age 67, you pay $92.63.
- At age 68, you pay $96.74.
- At age 69, you pay $100.94.
It will continue this way as long as you have a Medicare Supplement.
In addition to these expected age increases, there are additional rate increases that are due to something called “claims experience.”
In layman’s terms, this means that the more claims your insurance carrier gets, the more they have to pay.
Rate increases offset the costs of expensive claims.
And you’re not alone – everyone on the plan experiences the same rate increase as you. Companies aren’t allowed to raise a single person’s rate without increasing everyone’s.
When we look at a company’s rate increase history, it’s very typical to see a 5% increase in the past year or a 3% increase in the past 6 months. You hope that things stay the same, but rate increases do happen.
In addition to claims experience, inflation, new technology, and administration costs can also factor into rate increases.
Most Medicare Supplement insurance carriers will explain this simply by telling you that the rate increase is due to the rising cost of healthcare.
What can you do when Medigap rates go up?
You can’t avoid rate increases. It’s just part of having a Medicare Supplement. However, you do have some ammunition in your back pocket – you can go price shopping!
In the world of Medicare Supplements, every insurance carrier has to follow government regulations, which means each plan must have the same benefits.
For example, a Plan G with Blue Cross Blue Shield has the same benefits as a Plan G with Cigna. A Plan Nwith Aetna has the same benefits as a Plan N with CSI. A Plan F with Americo has the same benefits as a Plan F with CSO. You follow me?
Since every carrier sells the exact same thing, the only relevant differentiator is the price.
Because of that, you have the ability to shop around for the cheapest plan.
There are some other differences between companies, such as their A.M. Best Rating (some carriers have better ratings than others) or how long they’ve been in the business, but this doesn’t really affect you.
Now, you do need an agent who can run quote comparisons for you, but he or she will present you with the cheapest plan available to you. We have qualified agents here at Medicare Allies who can help you with your price shopping.
So, in sum, here’s what you can do when your Medigap plan gives you a rate increase: shop for a cheaper plan!
You can price shop at any time throughout the year, but we recommend doing this around your plan’s anniversary date. You know you’ll be receiving an age increase on your renewal date, which makes it a great time to see if there are any lower cost plans available.
Our agents here at Medicare Allies schedule a renewal appointment with all clients. It’s a great time to catch up, make sure your needs haven’t changed, and we also do the price shopping for you. You’ll never be worried about overspending with us!
Switching Medigap plans requires medical underwriting
The only issue we sometimes run into is if you’re not healthy enough to pass underwriting. You do have to be accepted if you want to switch from one Medicare Supplement to another.
This just means that you have to answer a set of questions about your health. The insurance company’s underwriter will look at your answers to these questions and determine how risky you are to insure.
This is why it’s so beneficial to have an agent who advocates for you. If you have a medical condition, you aren’t automatically disqualified, but there is a chance that some companies won’t accept your application.
Our agents will know the underwriting niches of every carrier (and we have over 25 of them!). We can do the research for you and let you know which carriers will or will be likely to accept you.
You will avoid sending in applications that will be declined anyways. No one needs to deal with that!
Get a Free Policy Review
There is no harm in confirming that your best is the best plan for you. Let us help you by doing a free policy review. If your plan is the right plan for you, we can high-five and know that you’re all set! If there’s a better option, we might be able to save you some of your hard-earned money.
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