Question: If Supplement companies selling the same letter plan all cover the same services, reimburse medical providers the same amount, and provide the same access to doctors and hospitals, why are premiums so much different from one company to the next?

Answer: Supplement companies, when introducing a new block of business or getting into a state market for the first time, can set their initial rates at any level they want. 

Increases, after those initial rates are introduced, are regulated. Companies can’t raise premiums just because they want to make additional profit or their stock price to go up. They can only raise rates when they can prove to the Insurance Commission, in the state where the Supplement is being sold, that they’re paying out more than 85 cents in claims for every dollar they’ve collected in premium over a 12-month cycle. The higher that number is over 85, the larger the rate increase that will be approved.

What I tell clients who ask me how much their rates will go up the following year, the next 5 or 10 is this: It depends entirely on how healthy or sick the pool of people insured within the same company, letter plan, and originating state are. If the company X, in Pennsylvania on Plan N or G, paid out 85 cents or less in claims for every dollar they collected in premium the previous year, they can’t increase rates other than the already configured small annual hike Supplements that are known as “Age Obtained” have. These increases range between $3 to $6 from ages 68 to 82, and around $8 to $10 from ages 83-90. The majority of Supplements sold today are “Age Obtained.”

Companies with letter plans that paid 95 cents to $1.10 or more for every dollar they collected in premiums are going to be approved for, and pass on, much higher rate increases. 

Unfortunately, all Supplement companies and letter plans haven’t performed well in the past two years due to multiple factors, the biggest being people are using their insurance more than ever, costs for healthcare services having far outpaced general inflation, and fewer healthy people being enrolled in Supplements because brokers pushed Advantage Plans that pay much higher commissions. 

The lack of profit, and even losses, for many insurance companies is why rate increases on Supplements have been higher the last two years than I’ve ever seen.  Every Supplement company we’ve enrolled our clients with, and we are extremely careful of who we choose to use, announced 12% to 20% rate increases in 2025. Prior, none had ever broken 10%. 

It appears that 2026 is going to bring more of the same. We just learned a few days ago that one of the largest Supplement insurance companies in the country, that brands themselves as AARP, just announced a 10% to 25% increases for Pennsylvania policies effective July 1St.  I expect other companies’ increases to be in line with that and many closer to 20%. Be advised that rate increases won’t occur for everyone on AARP plans in July or January. With Supplements, they begin on your policy anniversary date which could be any month of the year. 

So how do we at The Health Insurance Store decide what Supplement company and letter plan to recommend to our clients when the market is so tumultuous? We have a couple of set rules: First we always go with a company who has the lowest, or close to the lowest, price at inception. 

Secondly, we almost never recommend Plan G because of three reasons: It’s overpriced to start. It’s antiquated. And it’s going to cost tens of thousands of dollars more than N over the next 10 to 15 years while adding almost no extra value.  

Lastly, if there are multiple companies who are priced similarly at inception, we use our experience and knowledge to speculate on who we feel is going to be most competitive for years to come. We’re looking to place our clients with companies with a large number of people insured who have positioned themselves with a healthier pool of people which enables them to spread out the costs of those who are sick and utilize lots of care

. 

Right now, there is a company who we feel has accomplished that by coming into the market with Plan N premiums that were significantly lower than any other. At the same time, their competition was in the midst of back-to-back years of 10% to 20% increases. What happened, and will continue, is that tens of thousands of people who were healthy enough to pass underwriting left more expensive plans and companies to enroll in the company I’m referring to. And because they can discriminate on who they issue a policy, with the exception of those who are new to Medicare Part B, they cherry picked the healthy and declined those who they consider a risk for large losses. 

Supplement insurance companies need lots of low risk, healthy people in their pool of insureds if they want to make profits and keep rates lower for an extended period. 

I highly encourage those who are going to be getting these 15% to 25% or more increases on their Supplements this year to move to a less expensive and what we believe will be a more stable company both short and longer term. Do that soon. Don’t wait until you get formal notification of your increase. My fear is those who “wait and see,” will be diagnosed with a condition where they can no longer pass underwriting to move to a less expensive company and letter plan. And be advised, you don’t need to postpone applying until the Annual Election Period. YOU CAN CHANGE SUPPLEMENT PLANS AND COMPANIES ALL YEAR ROUND! This is especially important if you have Plan C, G, or F. They’re going through the roof!! 

Please go back and read my Aaron’s Advice posts and older Ask the Medicare Specialist Columns on our Facebook group on just how much more Plan G is going to cost versus N over the next 10 years. We’re talking about $20,000! It will be even more for those on C or F! 

Feel free to reach out for quotes or if you have any questions. 724-603-3403 or email me at Aaron@GetYourBestPlan.com.