Medicare Supplement Insurance Price Games
Understand how to really look at those Medigap
prices you're being quoted
By the time most people turn 65 years old,they've seen most of the tricks out there on the market.It's surprising and interesting that some Medicaresupplement carriers would still try standard ploys withMedicare supplements given the intended audience but, alas,they do. Let's take a look at some of the pricing games tomake sure we're comparing apples and apples when looking atMedicare supplement quotes.
For most people new to Medicare and Medicaresupplemental insurance, turning 65 or leaving a group plan over age65 is the trigger for benefits. This is true for the vast majorityof new Medicare enrollees. Consequently, if you find yourselfcoming up on a age 65 birthday, your mail box is probably inundatedwith all kinds of Medicare information including the varioussupplement or Medigap offers. They'll most likely show a seniorcouple on the cover clutching tennis rackets and quote some rates inbig letters to you for a few Medicare supplements such as the F plan(most popular). You may be surprised to find a wide range ofpricing even for the same standardized F plan. Keep in mind thatthe F plan is the same from carrier to carrier as the benefits arestandardized by the government. The pricing should be within 5-10dollars of each other at most but that's not necessarily the case.How could this be since they're all dealing with essentially thesame underlying risk?
You can partially point back to AARP's originalpricing over the past decade. Essentially, AARP would offer asliding scale discount for new enrollees age 65. The first yearmight be 30% lower than the eventual price and this percentage woulddecrease over a period of time. Medicare is confusing enough tosomeone brand new to it so a new enrollee doesn't necessarily knowhow this discounted rate works. He or she just sees a rate that is30% lower than the competitors for essentially the same level ofcoverage. There are two ways to look at this. One hand, you cansay that AARP is providing a discount to new enrollees which theycan take advantage of. Or, depending on how their rates match upwith competitors 5 years years later (when the discountdisappears), it smacks of a bait and switch. We're not here to castjudgment but want people who are comparing Medicare supplementinsurance rates to not only look at the rate now (presumably at age65) but over the other age bands. If the rates accelerate as youget older relative to the competition, it's probably not a gooddeal. Keep in mind that you have a open enrollment window at age 65(or when leaving group coverage in addition to a few others) so onceyou've made a decision, it might be difficult to switch Medigapplans later on if health changes. If your discounted Medigap planstarts to go up at a faster clip than the other plans in lateryears, you may be stuck depending on your health. That's the realissue with the discounted rate. That discounted money has to comefrom somewhere and it's usually recouped on the back end since theunderlying risk is the same.
We're also seeing the opposite these days.Carriers which charge a flat amount across all age bands.Obviously, this is much higher for younger people (say at age 65)but less expensive when you're much older. To some extent, thecarrier is betting that the average life span will be less and theywill not be underfunding towards the older age bands. We're notsure how this is going to turn out. Ultimately, if the carriers runinto higher expenses, you can expect premiums to increase much likehas occurred with the supposedly fixed rates of long term care.
Ultimately, look at all the age bands whencomparing Medicare supplement insurance plans. There's somewhat ofa Goldie Lox approach here in that you typically want the strongestcarrier that's priced about in the middle (maybe low of middle).Not too high. Not too low. This provides the most stability overthe long term.