Ever wondered how your Medicare supplement premium is determined? Several factors influence your Supplemental Insurance cost like usage, age, location, and more. In this blog, we will discuss how Medicare premiums are determined and why Supplemental plans are seeing a steep increase this year when previous increases over the years have been very stable. Lastly, we will discuss what you can do in light of these premium increases.
How are Medicare Premiums Determined?
Insurance companies use three main methods to determine Medicare Supplement premiums:
- Community-rated: In eight states, everyone in the same group pays the same price regardless of age or gender. Price increases occur for the entire group.
- Issue-age rated: In four states, pricing is based on your initial age, gender, and tobacco use. Premiums can increase due to group increases or attained age (explained below).
- Attained-age rated: Most states use this system, where your initial premium is based on age, gender, tobacco use, and zip code. These plans typically have lower initial premiums but increase annually due to aging. Additionally, group increases can further raise costs.
It’s important to remember that insurance companies can’t just raise premiums to make more money. They must demonstrate justification for any increase, typically by showing claims exceeding premiums (more money going out than coming in). State insurance commissioners then review and approve or deny the requested increase.
Why Did the Supplemental Insurance Cost Increase?
There are many reasons why insurance costs increase. This is typically based on usage throughout the previous year across all beneficiaries. Insurance rates increase every year. Supplement rates increase by 5-8% on average, so they have always been stable. However, this year, Supplemental insurance costs have increased significantly because of the COVID-19 Pandemic. During the pandemic, many people chose to delay their surgeries, outpatient visits, and even routine office visits out of an abundance of caution. However, in 2023, healthcare providers saw a significant rise in these procedures. This lull in usage during the Pandemic years and the stark increase in 2023 are the main drivers of Supplement rates increasing. Like basic economics, an increased demand will drive up the price of any service or product. What we see here is the market accounting for this drastic change and increasing premiums accordingly.
Navigating Medicare Supplement Premium Costs
Navigating Medicare supplement premium costs doesn’t have to be overwhelming. By understanding how premiums are determined and what factors contribute to your supplement premium, you can make more informed decisions about your Medicare supplement plan. However, you don’t have to stick with your current Supplemental plan if your new premium doesn’t fit within your budget.
If you’re a current customer, you should’ve received an email identifying lower-cost plans based on your zip code and age. That email also includes a health questionnaire to determine if you qualify for switching plans through medical underwriting. You have a good chance of switching if you’ve answered no to all of the questions. Lastly, schedule a call with one of our Medicare guides to answer questions, confirm pricing, and apply for a new plan.
If you’re new to Medicare School, give us a call or schedule an appointment online for help exploring your plan options.
Explore Supplemental Insurance Costs with Medicare School
Don’t let rising Medigap premiums, keep you from receiving great coverage. At Medicare School, our Medicare guides will help you explore any lower-cost options available to you. Remember, there is no upfront cost to find out if you qualify for a new plan and if you’re not able to switch, there will be no affect on your current coverage. Give us a call or schedule your appointment online today!
