The supplemental health insurance market has been steadily growing in recent years, primarily due to the increase in the size of the Medicare population. Our Future of Medicare Supplement white paper shows that the Medicare Eligible population is expected to grow from 66 million in 2023 to 78.7 million by 2032.
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, Medicare Advantage plans use cost-sharing features like co-payments and deductibles to reduce monthly premiums. Another example is that 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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Dental
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Critical Illness
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Hospital Indemnity
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Accident
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Short-Term Care
These products are sold in the years leading up to age 65 as well as during and after the sale of a Medicare insurance product, resulting in lower customer acquisition costs and higher lifetime value for the carrier and distributor.
Data shows that the individual Supplemental Health Insurance Market boasts 21.4 million policyholders and earned $8.53 billion in premium during 2022. 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 the ability for carriers to pay higher first year commission rates to their agents.
Carriers and distributors are expanding their portfolios to offer these Supplemental Health products, and we are projecting that this market will continue to grow.