Medigap Enrollment Steady, Premiums on the Rise

Medigap continues to be an important source of supplemental coverage for Medicare recipients, with the most popular plans being those that offer first-dollar coverage. This was just one of the many conclusions drawn from a recent Kaiser Family Foundation policy brief that examined Medigap trends, growth, and enrollment.

Medigap is a national source of supplemental insurance that is used to provide beneficiaries with a way to reduce gaps in Medicare coverage and offer more predictability in healthcare costs. According to the policy brief, enrollment in Medigap has remained relatively stable in recent years, going from 9.7 million policyholders in 2006 to 9.3 million in 2010.

Overall, Medigap provided supplemental coverage to nearly a quarter (23%) of all Medicare beneficiaries in 2010; however, the prevalence of its use varied by state. As few as 2% of Medicare beneficiaries in Hawaii had a Medigap policy, whereas as many as 51% of Medicare beneficiaries in North Dakota were enrolled in a Medigap policy.

The 2 most popular plans offered first-dollar coverage and covered Medicare Part A and Part B deductibles completely. According to the brief, Plan F was the most popular plan serving 40% of those in Medigap, followed by Plan C, which served 13% of the Medigap population.

While the enrollment figures have slightly decreased in recent years, premiums for Medigap have been on the rise. Since 2006, the average Medigap premium amounts have seen a moderate increase, going from $158 per month in 2006 to $178 per month in 2010. This average annual growth rate of 3% percent per year, however, is slower than growth rates for Medicare Part B premiums, average Medicare Part D premiums, and Medicare per capita spending.

When analyzing premium trends further, the Kaiser Family Foundation reported that Medigap premiums in noncommunity-rated states varied based on age, sex, and smoking status. Using an analysis of Plan F premiums in 10 states with attained-age and issue-age rating requirements, they found that premiums were 52% higher for beneficiaries 80 years of age compared with those 65 years of age. However, beneficiaries with disabilities who were <65 years of age had premiums that were 73% higher than those who were ≥65 years of age.

Sex also played a role in premium amounts, with rates higher for men. According to the brief, men 65 years of age had premiums 8% higher than women of the same age.

Smokers also saw higher premiums that were an average of 12% higher for those 65 years of age who smoked compared to their nonsmoking counterparts.

When the Kaiser Family Foundation analyzed Plan F premiums and company market share in 6 states with community ratings, they found that beneficiaries were not typically enrolled in the lowest cost plans available to them and were often enrolled in plans with premiums that were much higher. Although all plans provided the same benefits, <10% of beneficiaries in 5 of the states studied were enrolled in 1 of the 2 least expensive plans available. Beneficiaries not only did not seek out the least expensive plans, often the plans they were using were significantly more expensive. The most popular plan in New York had a premium cost that was approximately double the state's 2 lowest cost plans.

The report’s authors included a note about the uncertainty of the future of the supplemental insurance program. They believe use of Medigap could increase if enrollment decreases occur in other supplemental insurance options; however, they noted that Medigap's role could also diminish if legislation changes are made to reduce overall Medicare costs that discourage beneficiaries from using the supplemental program.