How to Not Fall Victim to Insurance Companies Overcharging for Medicare Supplement Insurance

Are you one of the 3.6 million boomers turning 65 this year? If so, it’s almost certain you have spent countless hours researching the Medicare coverage you’re now eligible for. Medicare is a national health insurance program provided by the federal government to those 65 and older and disabled individuals.

And while you may think this insurance will cover you completely, what seniors don’t realize is that Medicare doesn’t cover 100% of your medical bills. Depending on the coverage you choose, you may still be responsible for deductibles and copayments—as well as other charges if you have a serious illness or a bad accident. To avoid, or at least minimize, out of pocket costs, many seniors purchase Medicare Supplemental Insurance, or “Medigap” insurance as it’s commonly known.

Medigap is private health insurance that provides additional coverage to supplement Medicare by paying for some of the gaps in government coverage. There are 10 different Medigap plans, labeled A through N.  Each plan is standardized by the government. This means that all states (except for Massachusetts, Minnesota, and Wisconsin), have standardized coverage, so all plans are identical, regardless of the provider. The only difference is price. And in many cases, some providers are charging double, triple, and even 10 times as much for the same coverage.

But paying a higher price doesn’t guarantee the provider is stronger and more financially stable. In fact, Weiss Ratings, the leading independent provider of financial safety ratings, found many instances where the exact opposite is true. The highest premiums were coming from companies with very low Weiss Safety Ratings. Meaning, they may not have the financial stability to pay your bills should they experience a large volume of claims.

Since premiums vary drastically, and not all providers have equal financial strength, it’s important to do your own research and decide on a plan based on your personal health needs and budget. In some cases, you could save hundreds (and in many cases, thousands) of dollars in annual premiums, simply by shopping around, and having the right information.

While all the data for 2018 hasn’t been compiled yet, Weiss Ratings’ 2017 data shows over 3,500 examples of insurance companies grossly overcharging seniors for Medigap insurance. To give you just a few examples:

• A 65-year-old woman in Idaho shopping for a Plan F (high deductible) could pay $2,004.08 per year from one provider (rated C- by Weiss), or just $244.00 per year from another, higher rated, provider (B- rated). A savings of $1,760.08, or nearly 90%.

• A 75-year-old male living in New Hampshire, purchasing the most comprehensive Plan  F could pay $8,121.96 per year from an A- rated insurer. Or, if he had all the information, he could pay $1,820.28 per year from a B+ rated provider, and save himself $6,301.68 by paying 72% less for the exact same coverage.

• A 75-year-old male living in Pennsylvania, looking for a basic Plan A, might pay $11,801.64 per year if his insurance agent recommends one popular provider (who happens to have earned a low D+ rating), or he could go with the least expensive provider (much higher rated at B+) and only pay $958.00 per year. A whopping $10,843.64 difference… and a savings of 92%!

As you can see, higher premiums DON’T mean you’re getting coverage from a stronger, more financially stable insurance provider. In many cases, Weiss Ratings found lower rated companies charging the highest premiums. So, make sure to not only to consider cost, but also the stability of the providers themselves.

As you embark on your Medicare journey, know that it’s easy to become confused and overwhelmed by the amount of information out there. Don’t be deterred. There are plenty of trusted sources that provide varying degrees of benefit and cost information. Do the research, and then contact a reputable agent. This way you’ll be prepared to have an informed discussion about the benefits you need and the costs involved. 

Seniors wishing to compare Medigap policies and pricing can go to WeissMedigap.com to obtain a personalized report providing comparisons for the actual premium rates for every insurer offering coverage in your zip code, for each of the ten Medigap plans, along with the Weiss Financial Strength Rating for each insurer. Don’t put any of your hard-earned nest egg at risk. Make sure to get all the information before buying your Medigap coverage.