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When Low Medicare Insurance Premiums Are Too Good To Be True

As a habit of my chosen profession, I receive daily email alerts on just about everything Medicare and Social Security related. In today’s email of roughly 50+ articles, one stood out to me. Humor me while I stand on my soap box for a few minutes.

The article was regarding another new insurance company getting into the Medicare market. While I love competition, particularly when reputable companies join the Medicare space, I’d like to offer a word of caution. Be very cautious of enrolling in a Medicare Advantage or Medicare Supplement (Medigap) plan with a new carrier offering rates that seem too good to be true!

Rates can be extremely competitive when a new company enters the Medicare market because they are “buying business.” We use this term when a new company with little to no name recognition enters the market place offering a low monthly premium in hopes to attract clients. (Think about those “low introductory rates” offered through cable companies or newspapers when you’re a new subscriber. Similar tactic). Let me share what we witnessed in one of the states we conduct business in:

A well known group health insurance company entered the Medicare market roughly four years ago with a competitive rate of roughly $5 – $10 less a month than their competitors. People flocked to this company, after all, many people in the state knew the name of this company because they are quite large in the group insurance market. Fast forward 2.5 years later, the price increased 40% on their Medicare Supplement Plan G; over the last few years, a typical Plan G annual increase is 3-7%.

Did you know in the Medicare market, a new company is allowed to operate at a loss for two years before they are required to operate at a profit? Perhaps you’re thinking, “I’m OK with that! I’ll just change policies in a couple of years when the rates change.” That could theoretically work…. if you knew for an absolute fact that you wouldn’t become ill or become unable to health qualify for another plan during that time. We talk to seniors around the country that ask us if they can switch their plan for a variety of reasons. I never look forward to the calls when I need to inform a prospective client that I’m unable to move them to a plan that could work better for them because they can’t health qualify.

I’m going to get off my soap box only after offering these final thoughts:

Would you buy the cheapest parachute if you were jumping off a plane? I’m going to guess your answer is ‘no’. Knowing the first plan you select when starting Medicare might be the only plan you’ll ever be on, what company and plan would you want to be “stuck” with?

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