Do Medicare Supplement Insurance Ratings Matter?

When choosing a Medicare Supplement insurance carrier, too many beneficiaries base their decision on the premium alone. It’s no secret, so insurance agents and the carriers themselves are aware of this habit. Most of them will reinforce your decision because it’s the easiest way to make the sale. Not us.

When you’re deciding which Medicare Supplement insurance carrier to enroll with, there are a few factors besides premiums that you should be looking at. Remember, you only get one Medigap open enrollment period, so you don’t want to waste that opportunity by forgoing careful research.

The benefits are easy to compare since they’re the same across each plan. For example, Plan G from Company A will have the same benefits as Plan G from Company B. That fact also makes it easy to compare prices, as so many people do. What takes a little more time to look at are the carrier ratings. The ratings reflect the carrier’s reliability and whether or not the initial premium you get will stay that way. Let’s take a look at new market trends.

Medicare Supplement Carrier Trends in New Markets

We often see rates cycle among insurance carriers. An existing insurance company will begin to offer Medicare Supplements in a new state, and they’ll usually start those premiums at unrealistically low rates. If you see a premium significantly lower than all the others, this is a red flag, and you should investigate further as to why.

The low rate isn’t a mistake. The insurance carrier’s financial teams take into account any potential monetary losses and decide if the expected number of enrollments will take care of those losses. Some carriers do this well, and others end up setting the premium too low. When this happens, the insurance company has to pay out too many claims within the first year. This has a trickle-down effect because what they have to do next is increase your plan’s premiums.

This is problematic for the beneficiary. For example, let’s say you are turning 65 and you’re ready to enroll in Medicare. You decide that a Medicare Supplement is the best option for you because you’ve got quite a few health problems, including some chronic ones. During your Medigap open enrollment period, you get to choose any Medicare Supplement you want without having to answer health questions. This opportunity lasts for six months, starting on your Medicare Part B effective date.

You did what many people do, and you chose the cheapest insurance company on the market. And then, when it was time for your plan to renew, you noticed a 25% rate increase! You’re shocked, to say the least. Unfortunately, your chronic health condition prevents you from changing your Medicare Supplement plan, so you’re forced to keep the policy and pay the higher premium. Ouch.

What About AEP?

AEP, the Annual Election Period, is a time of year when you can change your Medicare plans. Not all of them, however. Many people mistakenly believe that they can change their Medicare Supplement plan during AEP. Unfortunately, that’s not the case.

The Annual Election Period is only meant for Medicare Advantage and Medicare Part D plans. You can change your current plans or enroll in one of those two options for the first time. 

True, if you find yourself in the situation we described earlier, you could use the AEP to switch from your Medicare Supplement plan to a Medicare Advantage plan. You could choose any Medicare Advantage plan in your service area, and if you enroll, your new plan would take effect on January 1, and your Medicare Supplement plan would be terminated. (You can’t have both.) You’re allowed to do this even with your chronic health condition because Medicare Advantage plans do not ask about pre-existing health conditions.

But should you?

That’s not an easy question to answer. Most of the time, we recommend that anyone with serious or chronic health conditions try to keep their Medicare Supplement plan, even if the premium goes up. The reason we suggest this is because these plans allow for more flexibility and have more predictable costs. You can see any provider that accepts Medicare, whereas Medicare Advantage plans make you choose from a specific network. Also, if you enroll in a Medicare Supplement plan like Plan G, you know your out-of-pocket costs will only be as much as the Part B deductible, which is the only thing Plan G doesn’t cover. On the other hand, you may end up paying thousands of dollars in deductibles, copays, and coinsurance expenses under a Medicare Advantage plan.

Pay Attention to Medicare Supplement Insurance Ratings

The easiest way to ensure you enroll with a solid insurance carrier is to work with an experienced Medicare advisor. We look at a carrier’s ratings thoroughly before suggesting them to our clients. This takes the time and effort off your plate, so you have much less work to do.

Our team looks at the carrier’s financial rating and their history of rate increases. We suggest enrolling with carriers that have a long history of reasonable rate increases. The financial rating gives us an idea of how large the carrier is and whether or not they are a stable company. “A” and “B” rated carriers are larger and have more money reserves than those with lower ratings. They can withstand paying many claims without it impacting their rating.

So, do Medicare Supplement insurance ratings matter? You bet they do. Be sure to ask your advisor at Local Medicare Specialists about these ratings when you’re shopping for your Medicare Supplement plan.