Medicare Supplement rates can vary greatly from one company to another. Although plan benefits are completely standardized by the Federal government, companies are at liberty to set their own rates and certainly do so. Because of this, you will find that rates can be as different as hundreds (even thousands) of dollars a year difference from one company to another.
If you are comparing Medicare supplement plan options, rates are the primary thing that you want to look at, simply because coverage is standardized. So it is of utmost importance that you understand, not only that rates do vary from one company to another, but why they vary from one company to another.
The easiest way to understand this is to look at a breakdown of what factors go into Medicare Supplement rate pricing:
- What Rating Mechanism the Company Uses to Set Rates. This is probably the most important factor to determining what a company will charge for their Medicare Supplement plans. There are three different rating methods: community-rated, attained-age rated and issue-age rated. Although rates with all three types of ratings will go up over time (contrary to what some companies or agents may try to tell you), some methodologies are thought to be more stable over time. Community-rated and issue-age rated, according to Medicare, hold their value more stable over time. In practice, though, I have found that, although the rating method has a large impact on initial Medicare Supplement rates, it is not a certain predictor of future rate stability.
- Administrative/Overhead Costs of the Company. Obviously, this factor comes into play, just like it would with anything. If a company does considerably more marketing, has more employees, etc. they are going to end up passing some of those costs on to the consumer. There is no real way to know this in advance, other than general observation, but as always, it is better to be with a larger, more stable company than a “fly-by-night” company.
- Marketing Goals/Factors. Companies set their own marketing/sales agendas. Some companies target certain areas, certain age groups, or certain plans in which they want to make their plans competitively priced. In some cases, you will find that companies set their prices at a high enough level as to make it obvious that they don’t want that business, due to it being what they deem to be an unhealthy or adverse risk for their company.
Overall, there are many choices when it comes to Medicare Supplement insurance. Although plans and companies have a large impact on what their rates are, ultimately the state departments of insurance approve all rates. Because of this, it is essential to your financial health and well-being that you get Medicare Supplement quotes from a variety of companies when comparing plans.