When choosing a Medigap insurance company, many people base their decision on price alone. Insurance agents and carriers are well aware of this. Most will jump on the bandwagon to sell you a policy with the lowest price. It’s an easy sale to make. However, when you are deciding on a carrier, there are several other factors that should be considered besides just the Medigap insurance company ratings.
Remember, you generally only get one Medigap open enrollment window. You don’t want to burn that window without doing careful research.
The monthly premiums are easy to compare on Medicare supplements. The benefits for a Plan F will be the same from one company to the next. So that part is easy. But what about the reliability of the insurance carrier and whether their rates are likely to stay low?
Medigap Insurance Company Trends in New Markets
In the insurance industry, we tend to see rates cycle among carriers. With Medicare supplements in particular, we often see an existing carrier open up their product in a new state. When they first do that, sometimes the rates start out unrealistically low.
It’s up to the insurance carrier’s team of actuaries to estimate losses that the company will incur there. They have to decide whether the number of policies they expect to get on the books will help to even out the risk. Some carriers are very good at doing this. Other carriers have sometimes priced themselves too low. The problem with pricing too low is that if the carrier pays out too much the first year in claims, then a larger rate increase will be necessary.
Let’s take a look at why this might be problematic: John is turning 65, and will be retiring. It’s time for him to apply for his Medicare benefits and find supplemental coverage. He has a number of health conditions, including a chronic health condition that will always be with him. During his open enrollment window, he can get approved for coverage by any supplement carrier. He is protected from having to answer health questions on his application by Medicare laws. However, that open enrollment window only lasts 6 months and then it’s gone forever.
Let’s say that John chooses the cheapest carrier on the market without checking any other facts about that carrier. Upon his policy renewal, John gets a 25% rate increase. He feels shocked and upset at the increase. Unfortunately, he now cannot change to another Medicare supplement carrier to save money. The insurance carriers will decline him for the chronic health condition.
The Annual Election Period Does Not Apply
The common question we get to this scenario is: Well can’t he just change to a different Medicare supplement during the Annual Election Period (AEP) in the fall?
The answer is no.
The AEP is for changing your Part D drug plan, or joining or leaving a Medicare Advantage plan. So John could drop his supplement and change over to a Medicare Advantage plan during this time, provided he lives in the plan’s service area and does not have have End Stage Renal Disease. However, Medicare Advantage is a completely different type of coverage. What if John’s specialist doesn’t participate in the Medicare Advantage network?
As awful as it sounds, these are scenarios we commonly see in the Medicare industry. So the best advice we can give you is to check out any insurance carrier thoroughly before enrolling. Work with a licensed independent insurance agency like ours. We can be a one-stop shop to get you all this information.
The things you’ll want to know are the Medigap insurance carrier’s financial rating and also their history of rate increases. Some carriers are well known for having a long history of very reasonable rate increases from year to year. If you know you have a health condition that will prevent you from changing carriers down the line, you will want to seriously consider choosing a carrier with that reputation, even if they are a few dollars more per month up front.
The financial rating comes into play because it gives you an idea of the company’s size and stability. A and B rated carriers are larger and typically have more money in reserves than lower-rated carriers. They can weather a whole lot of claims at once without it seriously affecting their standing. There is strength and security in that, which is important for your peace of mind.
Get Help Finding Medigap Insurance Company Ratings
So do carrier financial ratings matter? Yes, in our opinion they do, and the rate trend history may be even more important. Be sure to check all of these things when initially joining your first Medicare supplement. Our agents use special software to compare financial ratings and rate trends. Get free help from us today!