The cost of buying Medicare supplement insurance (Medigap) can vary greatly from state to state – but it apparently isn’t as expensive in Rhode Island as it is in some other part of the country. According to a national study by Florida-based Weiss Ratings, Inc., Rhode Island joins North Dakota, Colorado, Iowa and Montana as states with the lowest average Medigap premiums.
The study found that consumers buying Medicare supplement insurance in Florida and New York are often being charged up to twice as much as consumers in Utah and Maryland. Other states with the highest average Medigap premiums are California, Arkansas, Connecticut and Wyoming.
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Congress created 10 standardized plans – from the no-frills “A” plan to the top-of-the-line “J” plan – in 1992. Despite the standardization, the Weiss study – which factored in 38,000 quotes from 113 insurers – found that premium costs often vary widely on identical policies for the same individual. The variances were found not only from state to state, but from city to city and insurer to insurer.
“When Congress mandated standardized Medigap plans, it was widely expected that these price discrepancies would disappear or diminish,” said Martin D. Weiss, chairman of Weiss Ratings. “But they persist, with some companies still apparently overcharging consumers.”
To illustrate the cost discrepancies, Weiss points out that a 65-year-old female in Salt Lake City would pay $504 for Plan A with Regence Blue Cross Blue Shield of Utah, but that same individual would pay $1,360 for Plan A in Miami with Bankers Life & Casualty, nearly three times more.
Even in the same location, reports Weiss, prices vary greatly. In Lafayette, Louisiana, for example, United American Insurance Company would charge that same 65-year-old woman $2,048 for Plan F, while Golden Rule Insurance Company would charge $1,096 for the exact same plan.
In looking at individual Medigap plans, the study found that Florida has the most expensive premiums for seven of the ten standardized plans (Plans A through G). Plans H and I are most expensive for residents of Arizona, while residents of Alabama are charged the most for plan J.
In contrast, average quotes in Utah are lowest for the same seven of the ten plans, while New Jersey has the lowest average quotes for plans H and I. Washington, D.C. residents pay the lowest prices for Plan J.
“Insurance companies attribute the price differences to two factors: the varying costs of medical care in different regions and the fact that some companies commit to long-term price stability, while others do not,” said Weiss. “The more pertinent factor is that some companies are aggressively bidding for new business, while others are simply charging inflated prices.”
Weiss said that to avoid making a costly mistake, consumers should shop around for the best prices possible.
Life insurers
bounce back in ’99
The nation’s life and health insurers enjoyed a 15.4 percent increase in overall net profits in 1999, indicating that the 1998 profit decline was a temporary interruption in a five-year upward trend, according to another Weiss Ratings study.
Nearly all product lines, according to the study, followed the general trend including individual life (up from $6.1 billion to $7.4 billion), individual annuity (from $4.4 billion to $5.3 billion), group life (from $1.1 billion to $1.6 billion), and group annuity (from $3.6 billion to $3.9 billion).
The only major exception was group health, which ranked as the weakest sector for the second year in a row with a $555.7 million loss in 1999 and a $148.3 million loss in 1998.
Life insurers posting group health losses, according to Weiss Ratings, include: Prudential Insurance Company of America (New Jersey), with a loss of $522 million on $2.6 billion of group health premiums; General and Cologne Life Reinsurance Company of America (Connecticut), with a $133 million loss on $231 million of premiums; and Employers Life Insurance Company of Wausau (Wisconsin), with a $52 million loss on $215 million of premiums.
“Although the overall industry is doing quite well, companies with group health business continue to be plagued with the same problems that are widespread in the managed care industry,” said Weiss. “As a result, consumers should expect to see increased health insurance premiums, more mergers, changes in employer offerings, and changes in product design.”
In other findings from Weiss, it appears that the growth of insurers’ junk bond holdings has slowed.
The double-digit annual growth of life insurers’ junk bond holdings slowed to 9 percent during 1999, compared to an average annual rate of 18.4 percent since 1996. At December 31, 1999, junk bond holdings totaled $102.6 billion versus $94.3 billion at December 31, 1998.
“With the Federal Reserve raising interest rates to their highest levels since 1991 in an attempt to slow down the economy, large holdings of junk bonds and high-risk derivatives could signal problems for some companies,” said Weiss.
