Producers have complained about compensation trends in the Medicare supplement (Medigap) insurance market in recent years, and insurance carrier marketers have yawned at the thought of single-digit Medigap market growth.
But, in 2014, given the storms that tossed and turned some other health insurance markets, the Medigap market started to look less boring and more pleasingly steady.
Analysts at Mark Farrah Associates talk about the joy of shelter in a new look at 2014 Medigap issuer financial statement data.
The total number of covered lives increased 5.2 percent between 2013 and 2014, to 11.2 million, the analysts report.
See also: 3 top Medigap sales tips
Growth was especially strong at the unit of UnitedHealth Group Inc. (NYSE:UNH) that supplies Medigap coverage for AARP, performance was also strong at other Medigap issuers, the analysts say.
In spite of congressional efforts to promote apples-to-apples by standardizing Medigap plan designs in 1990, the market continues to have a reputation as being a sector in which a large number of smaller carriers wrestle hard for business.
For the past year, the Medigap market was also a market in which agents and brokers could operate without getting the equivalent of doctorates in Patient Protection and Affordable Care Act (PPACA) studies.
For a look at how the Mark Farrah see the Medigap market, read on.
1. New lives are coming in.
Total Medigap enrollment grew, and another key factor also grew: the number of enrollees with relatively young Medigap policies.
The enrollees with policies that were 3 just years old or younger increased 5.8 percent, to 4.7 million.
Solid growth in the number of relatively new enrollees seems to be a sign that Medigap issuers are having good success with competing with issuers of Medicare Advantage plans, and with cash-strapped consumers’ inclination to stick solely with Medicare Part A and Medicare Part B and wish for luck.
2. Revenue rose, and the loss ratio fell.
Total premium revenue rose 5.7 percent, to $25 billion.
The total loss ratio, or claims as a percentage of earned premiums, fell to 76.6 percent, down slightly from 76.9 percent in 2013.
The decline in the medical loss ratio suggests that insurers gained the new enrollees they attracted without trying to “buy business” by underpricing coverage.
3. The new doc fix law might change the market in a few years, but PPACA hasn’t changed it yet.
For now, at least, the Medigap market remains a hotly competitive market, with a few giants but many smaller players fighting over a significant slice of the market pie.
President Obama recently signed H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015 bill. The act, best known for a “doc fix” provision that changes Medicare provider reimbursement rule, will forbid any Medigap plan from paying the Medicare Part B deductible for consumers who buy new Medigap coverage in 2020 or later.
The current Medicare Part B deductible is 147.
Advocates of the change say it will help discourage Medigap enrollees from making unnecessary use of their Medicare coverage.
Some Medigap market watchers question whether the new law will have much effect on the market.
Whatever the new doc-fix law does in 2020, the lack of major legislative or regulatory changes taking effect in 2014 gave the issuers and producers operating in that market a much calmer experience than what sellers of traditional major medical coverage went through.
PPACA itself “has had little impact on Medicare supplement business,” analysts at Mark Farrah say.
More insurers will probably consider diversifying by entering the Medigap market, the analysts predict.