Survey Finds Big Fluctuations In Medigap Pricing

Agents who sell Medicare Supplement insurance might do a double-take at the eye-popping difference in rates available in the same market.

Worry not, agents, your eyes do not deceive you.

In New York City, the difference in 2018 Medicare Supplement insurance rates for a 65-year-old female non-smoker varies by as much as 143 percent.

At the other end of the variability scale, the smallest difference was 13 percent, in Jacksonville, Fla., according to a survey of the nation’s largest markets by the American Association for Medicare Supplement Insurance.

Among 65-year-old male non-smokers, the difference in price from one policy to the next varied by 143 percent in New York City, but by only 20 percent in Boston, the survey found.

Household discounts were not applied.

Private insurance companies offer Medicare Supplement Insurance, also known as Medigap, which is designed to help pay out-of-pocket costs – deductibles and coinsurance – for services covered under Medicare Part A (hospital insurance) and Part B (medical insurance).

"While Medicare Supplement insurance policies are basically standardized, each insurer sets their own rates and the difference between the lowest and highest cost can be significant," said Jesse Slome, director of the association.

The survey underscores why it’s important for agents to shop around for Medigap coverage, and for consumers to shop around for agents.

“Shopping around for an agent is huge,” said Joanne Giardini-Russell, a Medicare-only agent with Boomer Health Group in Brighton, Mich. “When people get a good agent, they do value it. I call the carrier and get an answer in 10 minutes.”

Playing Games With Prices?

Factors insurers use to set Medigap prices include local costs for medical services and state requirements, Slome said.

A hospital in Manhattan might bill an insurer several times what a hospital in an outlying borough might bill for similar services.

Smaller markets are also prone to great price variability.

In Columbus, Ohio, the percentage difference between the lowest and highest Medigap plan rates for women was 97 percent, and for men it was 86 percent, the survey found.

Less surprising was that prices also vary from one market to another so that a man in Washington, D.C., might pay $122.80 per month for a Medigap policy, while that same buyer in Manhattan might pay $482.32 a month.

Consumers should be careful, Giardini-Russell said.

Some insurers “play games” by lowering prices to capture new clients, but if consumers want to switch out of their Medigap policy three or five years down the road they may no longer qualify due to health underwriting guidelines, she said.

Medigap is separate from Medicare Advantage, which is also sold by private insurers.

But while Medigap is designed to supplement traditional Medicare coverage, Medicare Advantage is more of an alternative to traditional Medicare.

The Enrollment Rush

People who turn 65 automatically qualify for Medicare and also need to make decisions about Medigap coverage.

About 340,000 people turn 65 every month in the U.S. and an estimated 14 million consumers already own Medicare supplement policies, he said.

For people who elect to go on Medicare, as millions of people do, the coverage begins the month they turn 65.

But Medicare premiums and especially drug plan benefits change and locking in different options for the coming year occurs from Oct. 15 to Dec. 7.

With primary medical care enrollment season also falling in the last three months of the year, health agents will be overwhelmed so people with questions about Medicare shouldn’t expect a specialist to get on the line right away, Slome said.

“Everybody is looking for Medicare help,” Giardini-Russell said. “Medicare is an interesting product and it’s easy to screw up.”

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].