04/17/2025
ALERT!!! MEDICARE SUPPLEMENT POLICY HOLDERS! HISTORICAL RATE INCREASES THIS YEAR WITH MANY COMPANIES. SOME STATES WORSE THAN OTHERS.
Why are medicare supplement premiums raising so much?
Medicare supplement premiums are rising significantly due to several interrelated factors primarily linked to increased healthcare costs and utilization trends following the COVID-19 pandemic, along with broader systemic changes in Medicare itself.
Key Reasons for Rising Medicare Supplement Premiums
1. Increased Healthcare Utilization and Costs Post-Pandemic
• During the initial years of the COVID-19 pandemic (2020-2021), many people deferred elective surgeries and routine medical care, which temporarily reduced healthcare utilization and costs. However, in 2021 and 2022, there was a surge in medical care demand as postponed procedures and treatments resumed, leading to higher-than-expected claims and costs for insurers. This rebound in utilization significantly increased the expenses that Medicare supplement insurers had to cover, prompting premium hikes to compensate for these costs.
2. Projected Price Increases and Utilization Consistent with Historical Experience
• The Centers for Medicare & Medicaid Services (CMS) attributes increases in Medicare Part B premiums and deductibles to projected price changes and assumed utilization increases that align with historical trends. Since Medicare supplement plans cover many out-of-pocket costs related to Part B services, increases in Part B premiums and deductibles directly influence supplement premiums.
3. Financial Losses and Market Withdrawals by Insurers
• Medicare Advantage plans and supplemental insurance providers faced financial losses due to underestimating the surge in healthcare utilization and costs. Additionally, reductions in federal payments to these plans have pressured insurers financially, leading some to exit less profitable markets. This market contraction reduces competition and can drive up premiums for remaining plans.
4. Broader Medicare Cost Increases
• Medicare Parts A and B premiums, deductibles, and coinsurance amounts have increased for 2025. For example, the standard Medicare Part B premium rose by $10.30 to $185 per month, and the deductible increased by $17 to $257. Part A inpatient hospital deductibles and coinsurance also increased. These cost increases in core Medicare components translate into higher costs for Medicare supplement plans, which cover many of these out-of-pocket expenses.
5. Changes in Medicare Advantage Plans and Benefit Adjustments
• Some Medicare Advantage plans have reduced benefits to offset lower government payments and increased costs, which may indirectly affect the attractiveness and cost structure of supplemental plans as beneficiaries navigate coverage options
In essence, the sharp rise in Medicare supplement premiums is a reflection of the increased healthcare costs and utilization post-pandemic, mandated increases in Medicare Part B premiums and deductibles, and insurer responses to financial pressures and market dynamics
