Rising Medicare Supplement Premiums in Illinois

John Jaggi, an insurance broker in central Illinois, has witnessed many changes throughout his lengthy career, but nothing quite like this. Recently, over 80 of his clients enrolled in a Medicare Supplement plan by Chubb faced a staggering 45% increase in their premiums last August.

“In my 49 years in this business, I’ve never seen a premium hike applied to everyone at once, rather than at the renewal date,” Jaggi noted. His brokerage was in a rush to seek more affordable solutions for its clients.

This type of insurance comes with deductibles and other expenses not included in traditional Medicare; without it, there’s really no cap on annual out-of-pocket costs.

While a 45% spike is unusual, Jaggi and other brokers assert that double-digit increases are becoming more typical for Medigap insurance. A spokesperson from Chubb did not respond to requests regarding the premium surge.

Currently, over 12 million people—roughly 43% of traditional Medicare beneficiaries—buy Medigap insurance. Some companies depend on various retiree benefits, while about 13% of Medicare enrollees forgo supplemental coverage, which could lead to hefty expenses if serious health issues arise.

Following the substantial increases in the supplement market last year, it seems interest rates are on the rise again. According to the Nebraska-based consulting firm Telos Actuarial, increased rates for Plan G, the most commonly adopted supplement type, varied from slightly over 12% to more than 26% in the first quarter.

“It’s a small statistic over several states, but it suggests that insurance carriers are reconsidering their rates due to escalating claims,” said Brett Machete, a consulting actuary at Telos.

Premium Increases Explained

Premium rates depend on factors like the type of insurance chosen, where the beneficiary lives, and their age. For Plan G coverage, the average monthly premium was about $164 in 2023, though it’s likely increased since then.

“In states like Ohio, Medicare supplements are expected to rise annually by 3% to 5% for several years, but now we see increases between 10% to 15%,” said Amanda Brewton, owner of Medicare Answers Now.

In Alaska, insurers like Premera Blue Cross raised their Plan G premiums by nearly 12% this year, while another company saw an increase of about 13%. As Patricia Mack, an insurance agent in Wasilla, explained, a 65-year-old woman who paid $172 monthly last year will now be paying $192.

Courtney Wallace from Premera pointed out that annual changes in Medicare deductibles and copays impact supplemental plans. She added that the insurer has noted increased usage of medical services among its members, which has contributed to rising claims costs that ultimately affect premiums.

Experts in the field cite several reasons for the climbing premiums, including higher medical service usage, an aging population, escalating labor and medical costs, certain state regulations regarding Medigap plans, and enrollment shifts in private Medicare Advantage plans.

“Five years back, a premium increase of over 10% was rare, but now it’s uncommon to see increases below 10%, and rates above 20% are becoming more frequent,” remarked Challen Jackson, vice president of government affairs at Integrity, a company specializing in life and health insurance.

Mr. Jaggi, co-owner of Jaggi Petrie Insurance & Investments in Forsyth, has finally discovered alternatives for many of his over 80 clients, who have been hit with significant premium hikes from the previously most affordable insurers. It hasn’t been a straightforward process, and expectations are that these numbers will keep rising.

“This is an extraordinary price increase,” Jaggi acknowledged, with many insurers boosting their rates by more than 15% this year.

Policy experts suggest potential remedies, such as capping out-of-pocket expenses for Medicare beneficiaries and providing subsidies for Medigap insurance purchases.

“Traditional Medicare is the only federal program lacking a maximum out-of-pocket limit,” remarked Sen. Ron Wyden, D-Ore., emphasizing the need for updates to enhance protections for older Americans.

Nevertheless, significant Medicare changes requiring Congressional approval seem unlikely in the current legislative climate, especially since implementing out-of-pocket caps could raise federal spending.

Medigap Choices and Challenges

Generally, individuals qualify for Medicare when they turn 65. Beneficiaries can buy a Medigap plan at standard rates within six months of first enrolling in traditional Medicare without needing to answer health questions.

Once that six-month window closes, strict regulations limit choices, and opting for one plan over another usually involves navigating trade-offs.

At least 16 states have “birthday rules,” requiring insurers to allow Medigap plan holders to switch to another plan once yearly, generally around their birthday, without having to go through medical underwriting. These provisions are particularly beneficial for those with existing health conditions.

Additionally, four states—Connecticut, Massachusetts, Maine, and New York—oblige insurers to provide at least one Medigap option to all applicants during the year or within an enrollment period, irrespective of applicants’ health status.

For those facing sky-high Medigap costs, leaving traditional Medicare for a private Medicare Advantage plan with set out-of-pocket limits is another route. However, this usually means staying within a specified network of doctors and hospitals. If beneficiaries change their minds, they only have 12 months to purchase a Medigap plan without medical questions. After that, it can become increasingly tricky.

“Many people don’t realize that enrolling in Medicare Advantage for a year could bar them from a Medigap plan or lead to steep premiums due to pre-existing conditions, effectively locking them into the MA plan,” observed Brian Kaiser, a fellow at the Center for American Progress, which focuses on issues affecting the elderly.

Exceptions exist; for instance, if a Medicare Advantage plan ceases to operate, former enrollees can qualify for a supplemental plan without health questions or increased fees.

According to KFF, around 2.6 million individuals lost Medicare Advantage coverage this year alone as insurers exited the market, and projections suggest over 1 million will lose coverage in 2025. Although many have shifted to other MA plans, about 440,000 migrated to Medicare supplement insurance, sometimes due to a lack of alternative MA options, as noted by George Dippel, president of Deft Research.

Medicare specialists emphasize that every time an insurer enrolls someone without assessing their health status—whether due to a birthday rule or when a Medicare Advantage plan is withdrawn—the insurer likely faces increased medical costs, prompting them to raise premiums across the board.

Brokers also suggest considering two Medigap plans with deductibles just under $3,000 annually, as these have lower monthly premiums than most Medigap plans. However, Mack noted that “many people are wary of the $3,000 deductible.”