While overall Medigap premium increases have been moderate over the past ten years, some policies have had much larger than average increases. These increases may cause concern among enrollees and policy makers. To examine potential factors that may be associated with high premium growth, we examined plans that appeared to be “outliers” in terms of Medigap premium increases. We defined outliers as policies in the top 10 percent of premium increases over the period between 2007 and 2010. At minimum, these policies experienced approximately a 65 percent increase in Medigap premiums over the three years, or an average of more than 20 percent annually over these years. In total these plans accounted for 4.5 percent of Medigap enrollment in 2007 and 2.7 percent in 2010. We restrict our analysis to policies that existed in both 2007 and 2010.
One way of examining factors associated with these large premium increases is to analyze whether particular policy characteristics are disproportionately represented in the outlier group. Table 3 below compares a policy type’s share among all policies to its share among outliers. In general, the two distributions of policies are similar. One factor does stand out, however: while newer policies comprise 26 percent of the total sample, they comprise 53 percent of all outliers. Thus, newer Medigap policies that remained in the market during 2007‐2010 were more likely than older policies to be in the outlier group.
Table 3: Distribution of Medigap Policies with the Highest Increases in Premiums Between 2007 and 2010
|Percent of all policies(row # policies/total # policies)||Percent of policies with the highest increases in premiums(row# in top 10%/all top 10% policies)|
|Plan type A||7%||5%|
|Plan type B||6%||3%|
|Plan type C||13%||9%|
|Plan type D||8%||12%|
|Plan type E||3%||4%|
|Plan type F||28%||34%|
|Plan type G||9%||14%|
|Plan type H||2%||1%|
|Plan type I||3%||1%|
|Plan type J||4%||8%|
|Plan type K||1%||1%|
|Plan type L||1%||2%|
Notes: “Older policies” refers to policies issued three or more years before the reporting year. “Newer policies” refers to policies issued fewer than three years before the reporting year. “Group” refers to Medigap policies purchased through a former employer or union. Plan type classification follows NAIC guidance, which means “the standard plans A‐N as required by Section 9E of the Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act. This includes all plans identified as A‐N issued prior to a state’s revisions to its regulatory program and identified as a standard plan at the time of issue. Policies issued prior to the effective date of the state’s revisions to its Medicare supplement regulatory program pursuant to the Omnibus Budget Reconciliation Act (OBRA) of 1990, and no longer offered in a state, should be designated as ‘pre‐standardized.’ Policies not meeting either of these definitions should be designated as ‘other.’”
Source: ASPE analysis of 2007-2010 NAIC Medicare Supplement Insurance Experience Exhibit data.
We also examine whether large shifts in covered lives are associated with being an outlier policy. As displayed on Table 4, policies with large changes (both decreases and increases) in the number of lives covered tend to be disproportionately represented in the outlier group. Of course, there may be interrelationships among key plan factors – for example, policies with large enrollment changes may tend to have lower initial enrollment than other policies.
To further analyze this issue, we estimated a model that allowed us to assess the independent impact of each factor on the likelihood of being an outlier policy. The results confirmed the descriptive analysis. Policies that were contemporaneously experiencing the largest enrollment changes (increases or decreases) were four times more likely than policies with the smallest changes to be in the outlier group. Independently, newer policies were more than twice as likely as older policies to be outliers.
While the available data do not allow for a full analysis of policies with large enrollment changes, one possible explanation for their premium increases is that the changes in enrollment result in significant shifts in the risk profile of enrollees in these policies. In general, MLRs for these policies remained stable during these years despite the large premium increases. While not conclusive evidence, it does suggest that on average, the premium increases to some degree correctly anticipated claims payouts for the enrollees.
Table 4: Distribution of Medigap Policies with the Highest Increases in Premiums between 2007 and 2010 among Categories of Change in Covered Lives
|Percent change in covered lives,2007 to 2010||Percent of all policies||Percent of the policies that had the highest increases in premiums (row # in top 10%/all top 10% policies)|
|‐99 to ‐51%||16%||41%|
|‐50 to 26%||39%||19%|
|‐25 to 0%||21%||9%|
|0 to 24%||10%||6%|
|25 to 49%||5%||4%|
|50 to 99%||4%||5%|
Source: ASPE analysis of 2007‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data