Many insurance agents and insurance companies know that price sells. Unfortunately, in the race to the bottom on price, many will sell a policy on price alone. It makes for an easy sale for them. But this can be very costly to you in the long run. The Medigap company rating with companies like A.M. Best plays a vital role in determining long-term rate stability. A low rate today does not guarantee rate stability tomorrow!
Medigap plans are the absolute easiest insurance product to comparison shop. That is because the coverage for any particular plan is identical from company to company. You never have to worry whether you are comparing apples to apples on Medigap plans. The Medigap plan you choose – whether Plan G or Plan F or another plan – offers the same coverage no matter what company name is on your insurance card.
When you are trying to choose from the 25-plus carriers that offer plans in your area, price should not be the lone determining factor. The Medigap company’s rating should be a determining factor. If you are in your Open Enrollment or a Guaranteed Issue period, you have one chance to go with whichever company you want to. There are no medical questions to be answered during this period. You don’t want that fantastic opportunity to be wasted. These are the factors you need to consider when making that choice.
Company Financial Ratings Matter
The leading independent rating company for insurance carriers is A.M. Best. It is the oldest and most widely recognized provider of ratings, financial data and news with an exclusive insurance industry focus.
The ratings can help you determine a company’s size and stability. At Integrity Senior Solutions, we recommend carriers with a rating of B+ or higher for Medigap coverage. These companies will typically be more established and have more money in reserves than companies with a lower rating.
With over 22 years in the Medigap business, we have seen companies come and go. Even some very strong companies, like AFLAC, have entered the Medigap market only to leave it shortly thereafter.
Over the years there have been many small companies that enter new Medigap markets. As of the writing of this article, we have seen three new small companies come in with some really low rates in the last few weeks. Two of those three are companies we had never heard of before.
Consider Both Ratings and Longevity Together
It is important to consider the Medigap company rating with independent companies that rate insurers. It is also important to be aware of the history of the carrier in the Medicare market. Just as we don’t recommend low-rated companies, we also do not recommend companies that are new to the Medicare market.
We have seen many times where even an established company in one state will expand to a new state with unrealistically low rates. Each company has a team of actuaries who determine what the anticipated loss ratio will be for their company. Loss ratio is how much claim money and expenses are being paid out versus how much premium money is coming in. The percentage of expenses to income is the loss ratio. We have software that shows us the current financial ratings and loss ratio of every company in the market. We can share that information with you, saving you hours of research on your own!
The actuarial process of determining what the anticipated loss ratio will be is very advanced and complicated. Some companies nail it. Others miss it by a mile. When they do miss it, it means that the loss ratio is going to be very high. It also means that a large rate increase is very likely coming soon.
Don’t Get Trapped With a Bad Company
Here is a scenario where a high loss ratio and rate increases would be problematic: Mary is turning 65 and in her Open Enrollment period. She has developed a chronic health condition that will always be there. Right now in Open Enrollment, Mary can choose coverage with any Medigap company she desires without having to be underwritten.
Mary chooses to go with the lowest available price on the plan she chooses. She does no research and gets no help from an independent agent. For the first 12 months, Mary’s rate is locked in. But because of the company not pricing themselves appropriately for the market, she gets a rate increase of 20% when her rate lock is over. This increase hits her budget hard because she is on a fixed income.
The problem is – with her chronic health condition – she will likely not qualify to go with a cheaper company to save money. She is outside of her Open Enrollment – which lasts 6 months from Medicare Part B eligibility.
Annual Election Period (AEP) Won’t Help!
Because of the tremendous amount of marketing in the fall about the Annual Election Period, many people assume they can switch plans during that time. Some well-known companies even use misleading advertising and refer to AEP as “Open Enrollment.” It is not. AEP only applies to changes in your Part D drug plan or Medicare Advantage plan. Outside of Open Enrollment or Guarantee Issue periods, the only way to change Medigap plans is to go through an underwriting process. Since Mary has a chronic condition, she is very unlikely to qualify for changing companies or plans.
Mary does have the option during AEP of dropping her original Medicare and going with Medicare Advantage. As long as she lives in the service area of the plan and does not have End Stage Renal Disease, she can make that switch. But Medicare Advantage is a Medicare replacement plan. What if her doctors who provide her care are not in her network under that Medicare Advantage plan?
We get a lot of calls from people looking to leave their Medicare Advantage plan to go back to original Medicare once a bad report comes from the doctor. I cannot remember the last time we got a single call from someone with a chronic health problem who wanted to leave their Medigap for a Medicare Advantage plan. For more on how Medigap plans and Medicare Advantage compare, check out our article at this link.
Don’t Pay More For a Name Brand
At the same time that it is important to look for an established, highly-rated company, there is also no need to pay a higher premium to go with a well-known brand. The number one selling company in America for Medigap plans is UnitedHealthcare. Yet, in many markets and on many plans, we see them charging $30-60 more for the exact same coverage. It costs a lot of money for all that advertising they do. There is no need for you to pay more for your Medigap coverage just to support their outrageous advertising costs.
There is no difference in Medigap coverage because of the name of the company! We often get asked about Silver Sneakers, and UHC offers a Silver Sneakers program with their Medigap plans. The Medigap coverage is the same, but they add this enticement. Here is a snippet from another of our articles that addresses this:
A side note about Silver Sneakers – there are a couple of companies that do offer those memberships for “free” when you take their Medigap coverage. The problem is that those companies are usually $50-60 more per month than other companies for identical coverage. So it is not free. They are just rolling the cost of it into the premium in hopes that you will be enticed and drawn by their well-known brand name company.
It’s not worth it. Save on the premium and buy your own membership. Most gyms offer discount plans for adults age 60 and over. It will cost you way less than the difference in premium. We did our own research. Most gyms we have checked with offer memberships for anywhere from $8 – $22 per month for Seniors, and even less per person for a couple. Don’t pay $60 more for your Medigap plan to get a brand name and membership that is worth less than $22.
All the Medigap plans are standardized by law. A company cannot change any of the benefits of those plans A-N. So whether you have a Cigna Plan G or a Mutual of Omaha Plan G or Aetna Plan G, the benefits are identical.
Are Smaller Companies Safe to Work With?
As we mentioned, it is important to check the Medigap company financial rating of the company you are considering. We can help with this information. You don’t have to automatically disqualify a company that you’ve never heard of. Any company with a B+ or better rating is capable of handling a large influx of claims all at once. If they also have a good rate history, we have no issues with recommending them. My own mother has been with a B+ rated company for 4 years that you’ve likely never heard of. They have paid their claims like clockwork.
A smaller company may not be as well-known to you. One reason is that many of them depend on the agents to get the word out about their plans. They have chosen not to spend millions and millions on advertising. That savings is passed on to you in the form of lower premiums.
Big and Small Companies ALL Pay the Same Way
You may know someone that has a big brand company and loves to brag on how well it pays. That’s no big deal! ALL the companies have to pay well.
When Medicare covers their 80% of your doctor charges, your Medigap company HAS TO pay their 20%. They cannot decline their portion. They cannot dispute their portion.
Medicare passes the claim to your Medigap company seamlessly through a process called crossover filing. It is done electronically. It is one of the main reasons we rarely have to follow up on claims with Medigap plans. Your doctor files, Medicare pays, your Medigap plan pays, period.
Finding the Best Companies for Medigap
That last scenario with Mary sounded pretty awful. But it is not uncommon. By working with an independent agency like ours, we can provide you with the A.M. Best rating of any company. We can also tell you how long they have been in the Medicare business and what their rate history looks like.
We get asked often if we represent all of the available companies in a particular area. While we do offer most companies, we have found that some companies do not meet our high standards on their rate increase history or customer service. We only want the best for our customers.
There are many very strong, very well-known companies that have a long history, including reasonable rate increases from year to year. If you have been diagnosed with a chronic health condition or have a history of it, you will want to find a company that fits that criteria. Even if they are a few dollars more in the beginning, in the long run, it could save you substantially.
As I mentioned, we have special software that allows us to see every company’s rate, financial rating, rate increase history, and history in the market. We can share this with you by utilizing our screen sharing option in real time. We can also provide a PDF comparison for you to look at.
Give us a call and let us go to work for you. Our service is free. No matter what company you choose, you pay the same whether you call the company directly or utilize the many services of an independent agent.
Call us today at 888-228-6119 or use the form to send us a quick message!