Are Medicare Supplement carriers all the same?
I received a question in an email recently I wanted to share.
The question was as follows:
<Charles, I have decided on Original Medicare and supplemental plan G. I did not fall for all the advertising for Advantage plans that promise a lot and deliver little. I have read in your emails and newsletters about those for profit companies that profit highly from Advantage plans.
I understand that Original Medicare is the same to the subscriber no matter the insurance company. But is there a difference between companies such as Supplemental Plan G through Humana or through Mutual of Omaha, other than price?>
This is a great question and an answer I spend a lot of time discussing with my clients when they are choosing a Medicare Supplement carrier.
Here was my answer:
Your objective when choosing a Medicare Supplement carrier should be to select a carrier with the likeliest rate stability going forward.
The reason for this is simple.
Once someone has been on Medicare Part B for more than 6 months, their ability to change their Medicare Supplement requires them to have fairly good health.
If a carrier has an unusually high rate increase, it will cause healthy policy holders to look around for a less expensive policy. This migration of healthy policy holders to other plans will mean the percentage of policy holders with health problems in the original plan will increase.
This will cause the ratio of health care costs per person to increase which will lead to another rate increase and the cycle starts again.
There are two key variables that predict rate stability.
The first variable is how long a carrier had been providing Medicare Supplements.
The reason this is a predictive variable is Medicare Supplement policies cover people from age 65 until their 90s and even into their 100s. However, the health care costs are very different for people in their 80s and 90s than in their 60s and 70s.
For a carrier to have acceptable rate stability, they must be able to accurately forecast what their claims will be.
Carriers are able to much more reliably predict their claims – and thereby set their rates at a level to cover those claims – when they have sufficient claims experience from all ages of policyholders.
Conversely, many newer carriers – who have primarily younger policyholders – will set their rates artificially low in order to attract business but, in doing so, subject their policyholders to high rate increases in the future when premiums collected may not be sufficient to pay claims as policyholders age.
You are likely to pay much less long term with a Medicare Supplement carrier that has stable rates that do not cause healthy customers to leave in order to avoid high premium increases.
The second variable that is a predictor of rate stability is the size of the policy holder base.
A carrier with a large number of policy holders is better able to absorb higher than projected health care costs among segments of its customer base than a carrier with a smaller number of customers.
This variable is also related to the first variable because the carrier with a large policy holder base is going to have a more diversified base in terms of age than a smaller, and likely newer, carrier.
Mutual of Omaha has been providing Medicare Supplements since 1966 when Medicare began. To put this in perspective their first Medicare Supplement policy holder was former President Harry Truman.
Mutual of Omaha has more than 1.5 million Medicare Supplement policy holders. As a comparison, according to their 2016 Annual Report Humana only had 219 thousand Medicare Supplement policy holders.
With the exception of a handful of states, I almost always recommend Mutual of Omaha.
In addition to the variables described above that lead to rate stability, Mutual in most states offers a 12 percent discount to policy holders who are married or live with someone aged 60 or older even if their spouse or roommate does not have a Medicare Supplement with Mutual of Omaha.
And based on the experience of the many clients I have with all Medicare Supplement carriers, the customer service with Mutual of Omaha is unsurpassed by any other carrier.
You can also go online to get a quote for a Mutual of Omaha Medicare Supplement policy and even apply online by clicking the link below.
Remember, Plan G is the plan I recommend.
I would appreciate the chance to help you with your Medicare. Simply click on the link below to schedule a free, no-obligation Medicare consultation.
I look forward to talking with you soon.
p.s. If you know of someone who needs help with their Medicare, please share this with them.