Premiums for Medicare supplemental insurance, or Medigap insurance, skyrocketed between 1995 and 1996, according to a new state-by-state report released today by the national health consumer group Families USA. On average, the company with the largest Medigap sales, Prudential, increased premiums by 23 percent.
These 23 percent increases rose nine times faster than Social Security benefits (2.6%) and more than double the Medicare inflation rate. Of the 35 states examined, the Prudential policies increased by 30 percent or more in 11 states, and between 20 and 30 percent in 15 states, according to the report.
"The sharp increases in Medigap insurance premiums are a threatening prospect for older Americans who are simply trying to make ends meet," said Ron Pollack, executive director of Families USA. "When premiums increase twenty, thirty, and forty percent in one year, many of our nation's elderly are going to be squeezed out of the Medigap market."
The Families USA report analyzed Medigap premium increases for Prudential and Blue Cross/Blue Shield in 35 states between 1995 and 1996. These two insurance companies underwrite more than 50 percent of the entire $12 billion dollar Medigap market. Prudential Medigap insurance was sold in cooperation with the American Association of Retired Persons (AARP). The report examined five of the ten standardized plans beginning with the basic plan (A), the two most popular plans (C and F), and two of three plans which offer prescription drug benefits (H and J). The data presented for plans A, C, F, H and J are for the age groups 65, 70 and 80.
"Last year, Congressional leaders had a plan to double Medicare premiums for older Americans," Pollack said. "With Medigap premiums rising so fast, and if Medicare premiums rise, seniors will be forced to make some tough decisions regarding whether they can afford to pay for the basic health care services they need and worked so hard for."
"In California, a state with 10 percent of the nation's elderly population, Prudential premiums for the basic plan shot up by more than forty percent. In terms of real dollars, California seniors purchasing Plan A spent $552 in 1995 and $774 in 1996. These price hikes make it difficult for seniors to buy Medigap insurance," Pollack said.
Medigap insurance is enormously important for older Americans because these plans cover items that Medicare does not. Medigap insurance covers part or all of Medicare's deductibles and co-insurance. Medigap insurance also increases access to health care for the elderly. Older Americans with only Medicare coverage are far likelier than those with additional coverage to describe their health status as poor or fair, and are less likely to visit a doctor or hospital outpatient facility.
"As more and more seniors get priced out of the Medigap market, more and more of the elderly will join managed care plans," said Geri Dallek, health policy director for Families USA. "The problem with this is that a one-size-fits-all formula may not be the right choice for seniors with chronic and disabling conditions."
In 1992, changes in federal law required Medigap insurers to standardize the policies they offered. Plan A contains the most basic package. The data shows that premiums rose much faster, in general, for the more basic plans likely to be purchased by moderate-income seniors.
Blue Cross/Blue Shield raised premiums on their basic package in 25 of the 35 states surveyed. In Texas, the Blue Cross basic plan jumped $174 between 1995 and 1996. Blue Cross raised premiums for their basic plan by more than $100 in Florida, Georgia, Louisiana, Maryland, New Jersey and Ohio, according to the report.
The Prudential/AARP Medigap insurers are the most socially responsible because they charge everyone the same rate regardless of age and health status, according to the report.
The following states experienced the largest Medigap premium increases by Prudential from 1995 to 1996: Hawaii increased 40 percent; Massachusetts, 39 percent; California, 37 percent; Kansas, 36 percent; Maine, 35 percent; Rhode Island, 33 percent; District of Columbia, 32 percent; Ohio and Texas, 30 percent; Florida and Oklahoma, 29 percent; and South Carolina, 26 percent.
Medigap premiums are rising quickly for a number of reasons. Some of the more significant reasons are: hospital outpatient charges for Medicare beneficiaries are not capped; and HMOs are enrolling younger and healthier seniors, leaving the older and sicker seniors in the Medicare fee-for-service system. Prudential/AARP sponsored Medigap plans are at a disadvantage in the marketplace because they community rate their policies, thereby attracting older and sicker enrollees. Blue Cross/Blue Shield policies often do not offer community-rate policies.
