If you chose to keep Medicare A&B as your insurance coverage and have selected a Medigap plan to go with it to take care of all 
the gaps in financial coverage, you need to be aware of the two different ways you can receive an increase in your monthly premium. The first way you could receive an increase is simply by having a birthday. As you age, most carriers have a birthday chart of increases by age that is located in your benefits booklet you were sent, when you received your proof of coverage card. This is usually pretty straightforward.
The second way to receive an increase is when the carrier has their annual review by the State Department of Insurance (DOI). This review focuses on the funding of the Medigap plan. The carriers’ plans are required to be 100% funded. The DOI reviews how much money is coming into the fund via monthly premiums being paid by members on the plan. For example, cash into the fund. The DOI then examines claims being paid out of the Medigap fund. For example, cash out of the fund. Next the DOI reviews the excess money being held in the fund for future claims. Now this is where it gets interesting, as these carriers are insurance companies; they don’t just sit on the pile of money, they invest it.
If the carrier’s Medigap fund is underfunded the STATE DOI will instruct them on how much to increase the premiums across the board to each individual to get the fund back to 100% funded. In most cases the increase is small and around 2-3%. But the same applies if the carrier’s fund is overfunded.In that case the STATE DOI instructs the Carrier to decrease the monthly premium to each individual due to overfunding. So, the premium can go up, go down, or stay the same, based on this review by the State DOI. This is the process where the government oversight keeps the Medigap fund operators properly funded so that there is always money ready for claims filed by the members of the fund.
Another way the oversight works is that the profit margin for carriers is built in at 3%. This way there is no motive for the carriers not to keep their funds at the proper amounts. So if you receive an increase in your Medigap premium, remember, you can always shop around for a lower monthly premium and switch your Medigap plan to another carrier any month of the year. Most carriers simply ask qualifying medical questions. As long as you do not have any chronicmedical conditions (in other words, you’re healthy), you can switch. At American Retirement Advisors we help clients with this on a regular basis. So if this comes up in the future, give us a call and we will be happy to assist you in shopping for a better rate and making sure you qualify!
(Previous published in the May 2016 Edition of the American Retirement Advisor Newsletter)