Why Medicare Supplement Rates Can Vary So Much.

It has always been very interesting to our clients that Company A can be 50% less money per month than Company B for the exact same standardized Medicare Supplement Plans. How could this be, well there is no short answer for this. It is a complicated answer with many factors.

State Regulations can be a major factor when it comes to rates, if a state has tougher regulatory standards the prices will show it. For example New York state has the potential “Medical Loss Ratio” of 95% meaning that 95% of the revenue that comes into that company must be paid back out in claims. The state of Colorado has a “Medical Loss Ratio” of 65% meaning they will be able to retain 35% of the revenue that comes into that company from that state.

Why this is so important to note is this, first remember that not all Medicare Supplement Companies sell in every state. With that being said you are still able to use a Supplement in any state at any provider that accepts Medicare in that state. What this means is that some companies have chosen to not sell in states that have high regulatory standards even though there Supplements can still be used in those states.

When a company does decide to sell in a state like New York what we have found is that the cost for plans in that state are very high. Insurance companies need about .30 of revenue for $1.00 they take in just to take care of administrative expenses. So what a company that operates in a state like New York will do is just raise there prices to compensate for higher regulatory standards.

If it was just the people in those states that has higher regulatory costs that suffered from this we would feel bad for them and move on with life. The problem is that any company that sells in a highly regulated state like New York or California will not just raise the rates for there customers in those states, they will also raise the rates for customers across the country to compensate.

What this means for you is simple. If you are in a state where there are high regulatory standards you might want to think about relocating. If you are not in that type of state than it might make sense to choose a Medicare Supplement Plan provider based on where they sell at. It could save you a lot of money.