The supplemental health insurance market continues to steadily grow, primarily due to the increase in the size of the Medicare population. Telos Actuarial’s Future of Medicare Supplement white paper shows that the Medicare Eligible population is expected to grow from 68 million in 2024 to 80.3 million by 2033.
Most seniors choose to either enroll in a Medicare Advantage plan or to stay in traditional Medicare and purchase a Medicare Supplement plan. But even with those products in place, many insurance gaps still remain. For example, many Medicare Advantage plans use cost-sharing features like co-payments and deductibles to reduce monthly premiums. As another example, the pairing of traditional Medicare and Medicare Supplement does not include the dental coverage that Baby Boomers have become accustomed to receiving.
There are a variety of different types of supplemental health insurance plans available to fill those gaps:
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Hospital Indemnity
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Critical Illness
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Short-Term Care
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Dental
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Accident
These products can be sold in the years leading up to age 65, during the sale of a Medicare insurance product, and after the sale of a Medicare product. Doing so results in lower total customer acquisition costs and higher lifetime value for the carrier and distributor.
Data shows that the individual Supplemental Health insurance market boasts 22 million policyholders and earned $9.02 billion in premium at year-end 2023. Note that these amounts are specific to the “individual” market and exclude group and worksite products, and that most, but not all, of these policyholders are seniors.
Loss ratios for these products are typically much lower than Medicare Advantage and Medicare Supplement products. These lower loss ratios lead to more robust profit margins and allow room for carriers to pay higher first year commission rates to agents.