Large Differences in Medigap Plan Premiums Exist Nationwide, Analysis Finds
There are "dramatic variations" nationwide in premium amounts for "identical coverage" under Medigap plans, according to a Weiss Ratings analysis of more than 800,000 premium rates among 129 insurers nationwide offering plans this year, the Baton Rouge Advocate reports. Benefits under the 10 Medigap plans -- each of which has specified coverage levels to supplement Medicare -- have been standardized since 1992, but the plans' premiums vary by up to 300% in some cases (Griggs, Baton Rouge Advocate, 9/7). The average national premium for Medigap Plan C coverage is $1,689 a year, but prices across the country range from $616 to nearly $6,271, the analysis found. Premiums also vary widely within local markets (Opdyke, Wall Street Journal, 9/8).
For example, for a 65-year-old woman in Baton Rouge, La., Blue Cross and Blue Shield of Louisiana pays a $1,087.20 annual premium for Plan C coverage, while Medico Life Insurance charges a $3,174.12 annual premium for the same coverage. The size of an insurer's market share is a factor that contributes to the pricing disparity, as larger market shares allow insurers to spread risk over a larger pool of members and reduce administrative costs.
Other contributing factors include insurers' underwriting methodologies, the health status of the target population and state policies regulating rates. Insurers' pricing methods also contribute to the disparity. Some plans increase premiums as members grow older, while others price policies based on member age when a policy is first purchased or charge the same premium for every member, regardless of price (Baton Rouge Advocate, 9/7).
The substantial pricing variations "come as a surprise to seniors, who don't spend a lot of time learning about the options until they have a need for the answer," Tricia Neuman, a Kaiser Family Foundation vice president and director of its Medicare Policy Project, said.
Martin Weiss, chair of Weiss Ratings, said, "Consumers often just spot-check a few insurers and end up paying more than they should." According to the Journal, the report highlights the "challenges that retirees and their family members now face in navigating the big pricing disparities of Medigap plans," which offer "just a small taste of what families will soon experience" when they have to choose from a "host of new plan options" when Medicare drug coverage is provided through private insurers in 2006 (Wall Street Journal, 9/8).