Rate actions are the most important tool that carriers can use to manage the performance of their Medicare Supplement business. Rate increases (and sometimes rate decreases!) are used to adjust competitive positioning and to move loss ratios toward the pricing targets.
Below is a summary of recent Rate Action news in the Medicare Supplement market. Note that data pertains to open blocks of business and excludes instances where companies are implementing large rate decreases as they re-enter the market using old paper. Here we are focusing on Plan G since it accounts for roughly 70% of the market.
Recent Rate Actions
Medicare claim trends have been up in 2023, so it is no surprise to see some carriers getting a jump on managing their loss ratios by taking larger increases this year. The following chart shows the average Plan G rate increases for the largest carriers in the market plus a grouping of all the other carriers (labeled as “Other”).
Carriers with larger increases in 2023 than prior years: Aetna (CVS), the BCBS entities, Humana, and United Healthcare.
Carriers with smaller average rate increases in 2023 than prior years: Cigna, Mutual of Omaha, and “Other”.
We expect more carriers to file higher rate actions in 2024 as 2023 loss ratio results continue to come in higher than previous years.
Important Trends
Over the past two years there have been six new states that have expanded Guaranteed Issue/Open Enrollment rights to allow existing Med Supp policyholders the opportunity to replace their coverage with a similar plan offered by another carrier. Typically, policyholders have 30-60 days to replace coverage beginning on their birthday, hence they have become known as ‘Birthday Rule States’. The expected impact of these rules is that the average claim level will increase, and carriers will have to increase their premiums to maintain targeted loss ratios.
The chart below shows the average Plan G rate increase for ‘Birthday Rule States’ and ‘Normal States’. In Q4 of 2022 and 2023, the average rate increase in the Birthday Rule States was about 1.5% larger than in the Normal State.
