Study Finds Huge Disparities in Medigap Rates

Texas, Oklahoma, and Illinois Offer Consumers Best Access to Coverage; Maine, New Jersey, and other States Have More Limited Availability

July 14, 2003
Despite standardized benefits for Medicare supplement insurance (Medigap), consumers continue to face significant disparities among Medigap premium rates for identical plans, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In analyzing more than 5.5 million premium rates among 103 insurers offering Medigap insurance in 2003, Weiss found that premium rates continue to vary dramatically among all Medigap plans, from a minimum of $352 for Plan A to a maximum of $6,659 for Plan J, revealing a 1,792 percent leap in premiums between the lowest- and highest-cost plans. The broad ranges in premium rates for Plans A through J are illustrated below:

"Medigap rates continue to vary for a number of reasons including regional differences in the cost of health care, insurers' underwriting and pricing methodologies, the health status of the target population, and state policies regulating premium rates," said Melissa Gannon, vice president of Weiss Ratings, Inc. "It is important for consumers to shop around to get the best rate for the policy that most suits their needs."

While the national average premium rate in 2003 for a 65-year-old female for all plans A through J combined is $1,412, plan rates fluctuate widely nationwide. In reviewing the rates for a 65-year-old woman, Weiss found the following pricing variances:

In Florida, Plan C costs $3,886 with Physicians Mutual Insurance Company, but only $1,116 with Continental Life Insurance Company of Brentwood, representing a 248.2 percent difference in cost. In North Dakota, the same plan ranges from $895 with American Family Mutual Insurance Company to $1,867 with Physicians Mutual Insurance Company, a 108.6 percent difference.

In Montana, premiums for Plan F vary from a low of $974 with State Mutual Insurance Company to a high of $2,032 with Continental General Life Insurance Company, representing a 108.6 percent difference in cost, while rates in Connecticut run from $1,622 with USAA Life Insurance Company to $2,456 with Bankers Life and Casualty Company, a 51.4 percent difference.

Access to Medigap More Limited in Select States

Consumers in Texas, Oklahoma, and Illinois have the greatest coverage choices available, with 20 to 21 insurers offering some type of Medigap insurance in those states. In contrast, Maine, New Jersey, Rhode Island, Alaska, New Hampshire, Hawaii, and Vermont have more limited access to coverage, since residents in these states have just five to six insurers to consider when purchasing a Medigap policy.

Weiss' study also found that Plans A, C, and F are the most widely available, with 92, 84, and 80 companies offering these plans nationwide, respectively, whereas far fewer insurers, 27, 33, and 21, offer Plans H, I, and J, respectively. On average, 12 to 13 insurers write policies for Plans A, C, or F in any given state, while only one or two provide coverage under Plans H, I, or J.

"Insurers have been unable to offer Plans H, I, and J at competitive prices, so despite the additional benefits that these plans may offer, such as limited prescription drug coverage, consumers have been primarily interested in the basic Medigap coverage available through Plans A, C, and F," commented Ms. Gannon.

Senior citizens shopping for the least expensive Medigap policies with the safest insurers can obtain a Shopper's Guide to Medicare Supplement Insurance ($45 plus S&H) available from Weiss Ratings at 800-289-9222 or by visiting www.WeissRatings.com. The report, based on each consumer's individual circumstances, provides customized comparisons of the actual premium rates offered in his or her county of residence for each of the ten Medigap plans, along with the Weiss Safety Rating for each carrier.

Weiss issues safety ratings on more than 15,000 financial institutions, including insurance companies, banks, and brokerage firms. Weiss also rates the risk-adjusted performance of more than 12,000 mutual funds and more than 7,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.