August 28, 2018
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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