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Field Work

Medigap Premiums Differ by Thousands

  • A 65-year-old woman in Houston can pay $5,300 a year for Medigap’s Plan C policy or she can buy a policy with exactly the same coverage from another insurance company for $1,700 a year.
  • A 65-year-old Hartford, Connecticut, man can spend anywhere from $2,900 to $7,400 annually for the most popular and comprehensive Medigap policy – Plan F.
  • The price disparity for Plan A for a 75-year-old man in Manchester, New Hampshire, is also large: anywhere from $1,820 to $6,301.

These are fairly typical of the enormous differences in the premiums that consumers across the country are paying for their Medigap policies.

The price disparities are “extraordinary and unable to be justified purely by the coverage that they’re offering,” said Gavin Magor, director of ratings for Weiss Ratings Inc., a consumer-oriented company that assesses insurance companies’ financial stability.

A nationwide analysis by Weiss shows that the premiums vary widely within each group of plans – Medigap Plans A, B, C through N – despite the fact that the coverage in each group is dictated by the federal government and does not change from one insurer to the next. Every company selling a Plan F policy, for example, must offer exactly the same coverage. (The exceptions are Massachusetts, Wisconsin, and Minnesota, where the states regulate their Medigap plans.)

If two people are buying a Chevrolet Camaro in Houston, “you would not expect one person to pay two or three times more than the other one,” Magor said.

Medigap is an added layer of insurance to supplement Medicare for people over 65. The additional coverage helps them with the copayments, deductibles, skilled nursing, and other charges that Medicare does not pay for.

Weiss supplied the data for this article by comparing Medigap premiums sold in each zip code and separately for men and women and for different age groups. The company based the analysis on premiums at more than 170 insurance companies.

There are a few viable explanations for the disparity in premiums. Urban and rural zip codes in the same state may be priced differently, in part because medical costs tend to be higher in the cities. And some insurers might be able to offer lower premiums, either because they are more efficient or are trying to be more price competitive to gain market share.

But Magor said that none of these explanations can fully account for the enormous price differences within zip codes. Many insurers are overcharging for their Medigap policies, he said.

A spokeswoman for America’s Health Insurance Plans, which represents health insurers, said she could not comment on Weiss’ information without the organization doing its own analysis of the data.

Paying too much for a Medigap plan can have a material impact on a retiree’s life.

The risk of over-paying over a long time period is a real concern, because once a senior buys a policy, it’s very common to stay with the same plan and the same insurer for years. An additional $4,000 in annual premiums paid over 10 years – when a lower-priced policy is available – would cost $40,000. “$40,000 is a huge amount of money that could be used as they please, whether it is increased savings, investments, or general living expenses,” he said.

The lesson in these dramatic price disparities is that Medicare beneficiaries can save hundreds or thousands of dollars by doing due diligence and the hard work of shopping around.  However, Medicare patient advocates also note that this becomes increasingly difficult as people get older and develop cognitive problems.

Consumers should remember to get quotes from two or more insurance brokers. A single broker probably does not represent every insurer that sells Medigap policies in their particular state or zip code. Multiple quotes can be eye-opening and an effective way to compare price quotes from a larger number of insurers. Magor said the other alternative – calling every insurer in a state that sells Medigap – is impractical.

When consumers shop for policies, they can also arm themselves with data so they understand their options and ensure that they don’t over-pay.  One way to do that is through a service provided by Weiss. Individuals can enter their age, sex, and zip code online. The firm charges $99 for a list of the policies and prices for sale in the area, as well as other information.

Shopping for health insurance is time-consuming, unpleasant and complicated. But the potential savings make it worthwhile to do the research.

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11 Responses to Medigap Premiums Differ by Thousands

  1. Brian says:

    Another alternative is to use Medicare’s online Medigap Policy Search at https://www.medicare.gov/find-a-plan/questions/medigap-home.aspx You just enter your zip code, and they list all Medigap policies in that zip code along with the range of monthly premiums and other information. In my zip code the range of premiums apparently aren’t as broad as mentioned in the article. For instance, the range of Plan F premiums range between $124-$222/mo.; Plan C premiums range from $123-$253/mo. The premiums seem to vary periodically but, the online tool provides a good ballpark estimate to start from. We’ll be looking for Medicare and a Supplement plan starting late next year, but we’re getting up to speed now.

  2. Tom in Texas says:

    There’s a reason folks stay with the same Medigap plan year after year. When you first sign up for Medicare, you can pick any Medigap plan. You’ll be accepted with no questions asked. Later on, you’ll have to go through underwriting if you want to switch companies. Pre-existing condition? Forget it.

  3. vbm in ny says:

    Our experience is that only one company offers an F option in our county. So we have no choice at all. The premium is about $280 a month and going up.

  4. M Krosse says:

    Kim gives free advertising to Weiss Ratings Inc for their $99 packaged rip-off of seniors and completely misses the FREE identical service at https://www.medicare.gov/find-a-plan/questions/medigap-home.aspx

  5. Roberta says:

    You can get in touch with your local Area Agency on Aging and ask for help from one of the SHIP or SHINE counselors. They know all the plans that are offered in your area. These counselors are all volunteers, background checked, fingerprinted and certified. This service is free. They can also look at drug plans and Advantage plans and do plan comparisons for you.

    There are going to be a lot of changes to the drug plans and Advantage plans for 2019. Make sure to check your plans before the end of Medicare Open Enrollment -October 15- December 7. There will be changes.

  6. FinancialDave says:

    I am not sure what a Medigap plan has to offer over a Medicare Complete Advantage Plan, but other than what Medicare deducts from my Social Security for plan B, I pay absolutely zero other premiums (except $39 for dental).

    • Another Dave says:

      Medicare Advantage plans restrict the doctors and medical facilities you can use to only those that are “in network.” Medigap plans have no network restrictions – you can see any doctor that accepts Medicare patients.

  7. Garrett Ball says:

    The Medigap tool on the Medicare website has not proven itself to be accurate, since Medicare has no oversight over Medigap plans. Medigap plans do not submit rates to Medicare or have their rates approved by Medicare. Additionally, the Medicare site does not take into account 1. gender, 2. tobacco use, 3. age – all factors which determine your rate. It only provides a range and a list of companies that offer plans in your zip code.

    Moreover, the list of companies is not accurate. In my zip code, for example, a review today shows 4 companies that no longer offer Medigap plans, and there are several that do offer them that are not listed on Medicare’s site. Also, the range given for Plan G, for example, shows $94-209 – in reality, the range is $82-273. It can be a general guide, but it is irregularly updated and should not be relied on as fully complete or accurate.

    The Weiss service for $99 certainly can help someone compare options and, possibly, save them more than the $99 investment. Using an independent broker is a 3rd option that can provide a complete/updated list and has no $99 associated cost.

  8. I don’t get the pricing differences. Don’t the insurers have to pay 85% of their premiums to claims or something like that?

    • Garrett Ball says:

      It’s actually 80% for individual plans, but that rule only applies to regular, “under-65” health insurance plans. Medigap plans were not changed by ACA and are not subject to ACA provisions. Current Medigap MLR rules allow for 65% MLR (medical loss ratios), so that leaves companies more “wiggle room” and makes it more imperative that consumers accurately compare.

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