Variation and Trends in Medigap Premiums. Trends in Medigap Premiums

12/16/2011

Average Medigap premiums rose from $127 in 2001 to $177 in 2010, an average annual increase of approximately 3.8 percent. As displayed on Figure 10, annual growth rates were higher early in this decade then in more recent years. As a point of comparison, the average annual change in Medicare spending per beneficiary (without Part D spending) was 5.4 percent during the same time period. In six of the nine years the percent change in Medigap premiums from the previous year was lower than the percent change in Medicare spending per beneficiary (Figure 11).

Figure 10:
Overall Trend of Average Monthly Medigap Premiums (2001-2010)
Figure 10: Overall Trend of Average Monthly Medigap Premiums (2001‐2010)

Source: ASPE analysis of 2001‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data.


Figure 11:
Difference in Trends between Medigap Premiums and Medicare Spending, 2001-2010

Figure 11: Difference in Trends between Medigap Premiums   and Medicare Spending , 2001‐2010

Notes: Graph plots percent change from the previous year. Estimates exclude spending on Part D prescription drugs. 2001‐2010 annual average for Medigap premiums per member: 3.8 percent; 2001‐2010 annual average for Medicare spending per beneficiary: 5.4%

Source: ASPE analysis of 2001‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data.


Monthly premiums for group and individual policies have tracked closely for the past decade. Between 2001 and 2010, the average annual increase in premiums for individual and group policies was 3.8 percent and 4.06 percent, respectively.

There is a wider disparity in the average annual increase in premiums between newer and older policies. Older policies (defined here as policies issued three or more years before the reporting year) increased by an average of 4.7 percent each year, while newer policies (defined here as policies issued fewer than three years before the reporting year) increased by an average of 2.4 percent each year. This difference may reflect the desire of insurance companies to use low premiums to gain new customers. It may also represent the age‐adjustment of premiums, as those in older policies would on average be older and less healthy.

Figure 12:
Average Annual Increase in Medigap Premiums Between 2001 and 2010

 

Figure 12: Average Annual Increase in Medigap Premiums   Between 2001 and 2010

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. Estimates are not weighted by plan enrollment.

Source: ASPE analysis of 2001‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data.


There is some variation in these trends at the state level (Figure 13). The percent change in average enrollment‐weighted monthly Medigap premiums between 2007 and 2010 ranges from ‐0.2 percent in Oregon (from $150 in 2007 to $149 in 2010) to +10.2 percent in Alabama (from $106 in 2007 to $142 in 2010). One possibility is that a portion of this variation represents switching among Medigap plan types. Further analyses reveal similar variation exists within plan types, however. As an example, Figure 14 displays wide variation across states in average premium growth rates for plan F from 2007 to 2010 (see also Appendix E).

Figure 13:
Percent Change in Enrollment-Weighted Medigap Premiums by State (2007-2010)

 

Figure 13: Percent Change in Enrollment‐Weighted Medigap Premiums by State (2007‐2010)

Source: ASPE analysis of 2007‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data.

 


Figure 14:
Average Annual % Change in Medigap Plan F Monthly Premiums, by State, 2007-1010

Figure 14: Average Annual % Change in Medigap Plan F Monthly Premiums, by State, 2007‐2010

Source: ASPE analysis of 2007‐2010 NAIC Medicare Supplement Insurance Experience Exhibit data

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