Medigap Shopping: Closing the Book & Rate Increases

[Midpack]

Hopefully everyone is budgeting for Medigap premium increases due to age, assuming you have an attained age policy - most do, because the premiums start out much lower (and increase faster). This source shows attained age premiums have almost quadrupled between age 65 and 85. Issue age premiums have "only" more than doubled, but they were 50% higher to begin with.

https://askmedicaremike.com/attained-age-community-issue-age/

Attained Age

Attained Age is the most common method insurance companies use to price Medicare supplements.

The price is based on your current age.

So a 65 year old typically pays less than a 70 year old living in the same area.

If you buy an Attained Age Medicare supplement, your premium can increase for 2 reasons:

- Each year you get older
- Inflation and other factors

Community Rated

Community rated is probably the easiest to understand.

Basically it means that everyone in the same area pays the same price. So regardless of your age or gender, you will pay the same price as everyone else living in your area with that plan.

If you buy a Community rated Medicare supplement, your premium can increase because:

- Inflation and other factors

Issue Age

Issue Age is more common in certain states than others. Most areas of the country only have a few options for Issue Age Medicare supplements.

Issue Age polices are based on your age when you first buy the policy.

So if you are 70 years old, but you bought the policy when you were 65 then you pay the same premium as a 65 year old buying the same policy today.

Your premium does NOT go up because you age.

It’s important to understand that buying an Issue Age Policy does NOT mean your premium never goes up. Your premium can still go up for inflation and other reasons.

And you start off paying a higher premium for Issue Age policies compared with Attained Age. So you have to keep that specific policy long enough to be able to see any savings.

I’ve seen some estimates where that breakeven point is around 12 years. So you are going to OVERPAY for 12 years before you ever start to see any monthly savings.

12 years is a LONG time to have the same Medicare supplement policy. And then you have to have that coverage long enough beyond the 12 years to make up for how much you overpaid to start with.

 

[ERD50]

Hopefully everyone is budgeting for Medigap premium increases due to age, assuming you have an attained age policy - most do, because the premiums start out much lower (and increase faster). This source shows attained age premiums have almost quadrupled between age 65 and 85. Issue age premiums have "only" more than doubled, but they were 50% higher to begin with. ....

Nice summary. There's no free lunch!

I don't know if that was inflation adjusted, or the actual $ premiums at the time, which would take some of the sting out of it (quadruple might be more like doubling?).

Regardless, it's a good point for some who insist spending will decrease as they age. Maybe, but there are also areas that will increase. For my planning, I assume a wash overall.

-ERD50

 

[REWahoo]

Hopefully everyone is budgeting for Medigap premium increases due to age, assuming you have an attained age policy - most do, because the premiums start out much lower (and increase faster). This source shows attained age premiums have almost quadrupled between age 65 and 85. Issue age premiums have "only" more than doubled, but they were 50% higher to begin with.

This chart illustrates once again that when it comes to Medigap insurance, "You pay me now or you pay me later" as wdwwildbill pointed out above.

 

[Joylush]

This chart illustrates once again that when it comes to Medigap insurance, "You pay me now or you pay me later" as wdwwildbill pointed out above.

Very helpful. Thanks for posting how these work. My state is issue age and your explanation makes it all make sense better.

 

[CWradio]

Does attained age policy ever stop increasing due to age when you reach a certain age, like 86?
What is the average yearly increase due to age (not inflation) for a attained age Medigap plan? Thanks

 

[teej1985]

Does attained age policy ever stop increasing due to age when you reach a certain age, like 86?

No. This is why UHC/AARP is almost always the cheapest at around age 86. The others keep increasing.

 

[Teacher Terry]

A friend of mine just turned 80 and could no longer afford her medigap plan because it became so expensive and went to an advantage plan.

 

[sengsational]

A friend of mine just turned 80 and could no longer afford her medigap plan because it became so expensive and went to an advantage plan.

Avoiding this situation probably should be front and center in the initial purchase decision, but it seem not to get enough attention. And once the book is closed, the rates are no longer published for new buyers, so the shock of big rate increases end up in the mailboxes of those that can't pass underwriting and out of public view.

 

[Buckeye]

Maybe, but if you have G-HD, your part B costs are limited to $2800. Maybe your course of treatment spans 2 years, so double that. Compare that to paying higher premiums for a regular G plan for your whole life. I think most years one will not get close to the G-HD $2800 max OOP and one can bank most of the premium savings. I think G-HD self selects to a healthier pool and so tends to have smaller medical cost driven increases. The insurers have to justify their rate increases to the state regulators. There are limits as to how little of the premium dollars they can pay out in claims, I think 80%.

I am in Florida, which uses Issue Age pricing. I think that means I pay more in the early years but am better protected from price increases as I age. My G-HD is $52/month (at age 65 start) with United American. This plus the Part B premium is much cheaper than the retiree health insurance we had been buying through my wife's former employer - about 1/3 as much. And that retiree insurance still had a fairly substantial deductible and a hefty OOP maximum. I am looking forward to the cost savings next year when DW is Medicare eligible.

I switched to Plan G-HD with United American. My monthly premium (at 65 in Central FL) is $55, $100 less than my AARP/UHC Plan N. Plan N was too much insurance for my age, my health profile, my financial situation, and the availability of high quality VA healthcare to me

 

[Rianne]

A friend of mine just turned 80 and could no longer afford her medigap plan because it became so expensive and went to an advantage plan.

This is what I'm thinking. I can switch to the cheap Medicare Advantage plan when I'm old enough and am no longer that concerned with high-quality medical care. I want the best when I'm young and active to maintain my lifestyle. When I get older, I figure I'll find a local Geriatric doctor and be done with it. Personally, I'm not concerned about living the longest life. I'm more concerned about living an active life. And it will get to a point when that's no longer possible. I do not want to be running to the Dr every week for treatment.

 

[anethum]

FWIW, I was seriously considering switching from Mutual of Omaha to AARP/UHC due to the 'closing the book' discussions here in several threads over the past year. So I just looked at Plan G rates for Mutual of Omaha vs AARP/UHC for myself at medicare.gov - AARP/UHC was more than twice the cost in premiums. I assume it's because they haven't closed the book on the block since 1992? It all comes out in the wash over time, health care in the US is just not cheap?

Did you factor in the age discount to calculate the final AARP/UHC price?

I started out with MoO and they raised my Plan G rate by double digits when I turned 66. I passed underwriting and switched to AARP/UHC. MoO continued to jack up their rate significantly each year after I got out. My AARP/UHC increases have been much smaller. Last year, MoO closed the book for the plan I had been in, and I have no idea how much my old Plan G would cost now. Their new Plan G under a different name is still not any cheaper than my current AARP/UHC Plan G with the discount factored in. AARP/UHC is obviously doing something right since they're competitively priced (at least where I live) without closing the book. Anyway, I'm now protected by a true birthday rule and I can switch to any insurer without underwriting.

It's absurd that in most states, people are locked in for life if they can't pass underwriting. With any other insurance, people are free to shop around and find the best deal.

 

[Venturer]

I wish my DW and I had of been in this group and known about MOO when we signed up. We both have COPD now and my DW is on oxygen. We both got our MOO suplement statements earlier this week and they will be going up by $40 dollars between the 2. I had already checked about switching before and found out I couldn't pass underwriting. Man it sucks to get old and decrepted but it is what it is.

 

[sengsational]

It's absurd that in most states, people are locked in for life if they can't pass underwriting. With any other insurance, people are free to shop around and find the best deal.

The problem with freedom to switch is that everyone would get the cheapest possible insurance until they got sick, then switch to the best possible for their current condition. That just wouldn't work because you need healthier people in the pool or the insurance for one person would cost as much as treating one person for the condition. This is already a problem with Part-D (rx) and I forsee an implosion, given "everyone" switching to the free plan.

If there is an answer to the Medigap purchase decision it's to give people the whole story...how many times has the mother ship spawned a book of business, how long did it last, and what were the rate increases, not just while they were taking new business, but as long as people were paying the premiums.

 

[CaptTom]

The problem with freedom to switch is that everyone would get the cheapest possible insurance until they got sick, then switch to the best possible for their current condition. That just wouldn't work because you need healthier people in the pool or the insurance for one person would cost as much as treating one person for the condition...

Exactly. But what appears to be happening is that insurance companies have crafted their offerings to create pools of healthier people, and abandon those who become unhealthy.

Which kinda defeats the purpose of insurance. It's like if your auto insurance company could cancel your policy as an oncoming vehicle is approaching you, in your lane.

The reason we have health insurance is in case we get seriously ill.

 

[MichaelB]

The problem with freedom to switch is that everyone would get the cheapest possible insurance until they got sick, then switch to the best possible for their current condition. That just wouldn't work because you need healthier people in the pool or the insurance for one person would cost as much as treating one person for the condition. This is already a problem with Part-D (rx) and I forsee an implosion, given "everyone" switching to the free plan.

If there is an answer to the Medigap purchase decision it's to give people the whole story...how many times has the mother ship spawned a book of business, how long did it last, and what were the rate increases, not just while they were taking new business, but as long as people were paying the premiums.

Insurers are free to segment markets into multiple risk pools , choose which segments they want to address, offer and withdraw specific policies based on those segments, and price each segment differently. The consumer has no chance to come out ahead in this system.

A more consumer friendly system would require each insurer to view the entire state as one market and one single risk pool, and if the insurer wants to do business it would need to offer all MediGap options to the entire state market and allow members to switch between policies in a structured way.

 

[CWradio]

Medicare Advantage plans do not require medical underwriting.
You can change to any plan once a year.
Advantage plans are making a profit. Paul

 

[CaptTom]

Medicare Advantage plans do not require medical underwriting.
You can change to any plan once a year.
Advantage plans are making a profit.

Interesting. So the strategy some have mentioned above, to choose a plan and stay in it until it's closed, then jump ship to an Advantage plan, seems to make sense.

I've been avoiding looking at Advantage plans in too much detail, since I've heard so many negatives, not the least of which is limited coverage areas. But maybe they have their place.

 

[Texas Proud]

Interesting. So the strategy some have mentioned above, to choose a plan and stay in it until it's closed, then jump ship to an Advantage plan, seems to make sense.

I've been avoiding looking at Advantage plans in too much detail, since I've heard so many negatives, not the least of which is limited coverage areas. But maybe they have their place.

I would not describe it as you do... that the PLAN is to wait for the book to close and then jump to an Advantage... I would say that it is to stay on the gap plan for life but IF it gets too costly that there is an option to go to an advantage plan...


I assume that I will be using more of my gap plan later in life so I do not want to switch to an Advantage plan at all... I am willing to pay higher premiums today so I have the gap plan I want later in life... it would be cheaper to go Advantage now and gap later but that is not an option for me...

 

[REWahoo]

As I've mentioned several times, if my Medigap plan gets too expensive I plan to use the one time "get out of jail free" process outlined in this thread: Medigap underwriting loophole?

A summary of the process to get our of your closed book plan and switch to a new Medigap plan - even if you cannot pass underwriting:

Yes, this is used to escape from high premium Medigap plans that have closed. It only works if the person never had an Advantage plan and doesn't have ESRD. Switch to MA for one month during open enrollment and then switch back to original Medicare. Under the MA "trial right", the person is suppose to get their old Medigap plan back but can't because it's closed. This grants the person a Guaranteed Issue right to the Preferred Rate of certain Medigap plan letters. This method can only be used once.

 

[Midpack]

As I've mentioned several times, if my Medigap plan gets too expensive I plan to use the one time "get out of jail free" process outlined in this thread: Medigap underwriting loophole?

A summary of the process to get our of your closed book plan and switch to a new Medigap plan - even if you cannot pass underwriting:

+1. That’s our plan too. We may try to switch Medigap providers this year, assuming we can still pass underwriting - but eventually we’ll have to use the get out of jail free move to Advantage. From what I’ve read, it’s not uncommon for super seniors to move from Medigap to Advantage late in life, and just staying…

 

[Teacher Terry]

If you only wanted hospice or comfort care because you are really old or your condition is terminal it might be worth it to switch to advantage at that point.

 

[CRLLS]

If you only wanted hospice or comfort care because you are really old or your condition is terminal it might be worth it to switch to advantage at that point.

Advantage plans themselves do not cover hospice. Strangely , you are covered by traditional Medicare.

From Medicare.gov:

Medicare Advantage Plans cover all Medicare services
Medicare Advantage Plans provide all of your Part A and Part B benefits, including new benefits that come from laws or Medicare policy decisions. Plans must cover all emergency and urgent care (both physical and mental), and almost all medically necessary services Original Medicare covers. Medicare Advantage Plan benefits exclude clinical trials and hospice services. But if you’re in a Medicare Advantage Plan, Original Medicare will still help cover your costs for hospice care, and some costs for clinical research studies.

I don't know the details on how much Medicare covers or if there is another deductible. Could it be that Medicare covers the 80% of reasonable charges? IDK. YMMV