3 Reasons Why Medicare Supplements Rates Increase

Medicare Supplement (Medigap) plans help pay for costs that Original Medicare doesn’t cover. But over time, premiums go up, which can be a concern for seniors on fixed incomes.


When you first enroll at 65 or retire, your Medigap plan may seem affordable. However, as premiums rise, it can get harder to manage costs. While other insurance options exist, they often limit your doctor choices or cover less.


Many people ask, “How can I keep my Medicare Supplement affordable without losing coverage?”


We’ll explore that in a future post, but for now, here are three main reasons why Medigap premiums increase.

Three Main Reasons Why Medigap Premiums Increase in 2025

1. Insurance Costs (Loss Ratio)

Insurance companies must spend a certain amount of your premium on medical claims. If healthcare costs rise or more people use their coverage, they may raise premiums to keep up.

How does it work?

● Medigap insurers must spend at least 65% of premiums on claims for individual policies and 75% for group policies, as required by Medicare.


● If claims are lower than expected, insurers retain more premium revenue. However, when healthcare costs rise or more policyholders use services, premiums may increase to maintain financial stability and comply with Medicare’s rules.


● Each year, insurers review their financials and adjust premiums accordingly to stay solvent while meeting regulatory requirements.


Note: Choosing an insurer that sets sustainable premiums can help avoid steep increases over time.

● The loss ratio is based on the overall health of everyone enrolled in the plan within a state—not just your personal health. Larger insurers with a broader customer base often manage losses more effectively, helping maintain stable premiums.

2. Getting Older (Age-Based Increases)

Age can impact Medigap costs, but it’s not the main reason for price increases.

How does it work?

● Issue-Age Pricing – In some states, your premium is based on your age when you buy the policy. It won’t increase just because you get older, but it can still go up due to rising healthcare costs.

● Attained-Age Pricing – Most states use this system, where premiums start lower but gradually increase as you age. The increases are usually small (around 1-2% per year) and don’t typically start until around age 69.

● Community-Rated Pricing – Everyone in the same age group pays the same premium. Your costs may go up when you move into an older age bracket.


Even if your plan doesn’t raise rates due to age, premiums can still increase due to inflation and Medicare cost changes.

3. Tricky Pricing (The "Shell Game")

Some insurance companies start with low prices to attract new customers but raise rates later. A plan may seem like a great deal at first, but costs can climb over time. That’s why it’s important to check a company’s history of rate increases before choosing a policy.

How does it work?

● Prices Go Up Over Time – As people in a plan get older, they use more healthcare services, leading to higher costs for the insurance company. To cover these costs, they raise premiums.


● New Plans, Lower Prices – Instead of charging new customers more for the old plan, the company creates a new version with lower prices to attract them.

● Healthy People Switch – Younger, healthier people move to the new, cheaper plan, while older or less healthy customers stay in the original plan.


● Old Plan Gets More Expensive – Since the older plan now has more high-risk customers, its rates increase even faster. The cycle repeats, keeping new plans cheaper while old ones become costly.

Why It Matters:

Big companies can afford this strategy, but it leaves long-time customers paying more over time. Checking a company’s rate history can help you avoid unexpected price jumps.

Want more help understanding

WHY MEDICARE SUPPLEMENTS INCREASE

At MAC Insurance, we’re here to help you understand why Medicare Supplement (Medigap) rates increase and how you can prepare for these changes. Knowing what affects your premiums can help you make informed decisions and manage your healthcare costs effectively.


To make things easier, we’ve put together a comprehensive library of resources for you to explore. When you’re ready, give us a call, and one of our licensed agents will:

● Explain the three main reasons Medigap rates increase
● Compare available plans in your area
● Help you find a plan that fits your budget and needs


If you decide to enroll through MAC Insurance, our support doesn’t stop there. We’ll continue assisting you throughout your Medicare journey. Reviewing your plan each year and answering any questions along the way to ensure you always have the best coverage.

ADDITIONAL QUESTIONS TO BE ADVISED ON:

How does my age affect my Medicare Supplement premium?

Your Medicare Supplement premium may increase with age, depending on how your plan is priced:

Attained-Age Pricing – Starts low but goes up as you get older.

Issue-Age Pricing – Based on the age you first enrolled; it won't increase due to age. Community Pricing – Everyone pays the same, no matter their age.

Why do some states have different pricing methods for Medigap plans?

Each state sets its own rules for how Medigap plans are priced, which affects whether premiums increase with age or stay the same. Some states ban age-based increases, while others allow different pricing methods.

What role does inflation play in premium increases?

Inflation increases healthcare costs, which leads insurance companies to raise premiums to cover higher medical expenses. Even if your age stays the same, your Medigap premium may go up due to rising costs in the healthcare industry.

Do all insurance companies raise premiums at the same rate?

No, insurance companies increase premiums at different rates based on factors like claims, pricing methods, and state regulations. Some companies raise rates more often than others.

How does the number of claims filed in my plan impact my rates?

When more people in your Medigap plan file claims, the insurance company pays out more in benefits, leading to higher premiums for everyone in that plan.

Can I switch to a different Medigap plan if my premium increases?

Yes, you can switch to a different Medigap plan if your premium increases, but you may need to go through medical underwriting unless you qualify for a guaranteed issue right (like losing other coverage).

Will my premium increase even if I never use my coverage?

Yes, your Medigap premium can increase even if you never use your coverage because rates are affected by inflation, healthcare costs, and claims from others in your plan.

Are some Medicare Supplement plans more stable in pricing than others?

Yes, some Medicare Supplement plans have more stable pricing based on the insurance company, state rules, and how the plan is priced (attained-age, issue-age, or community-rated).

What can I do to avoid large premium increases in the future?

To avoid large premium increases, consider choosing a company with a history of stable rates, enrolling in a community-rated or issue-age plan, and shopping around for better options if your premium rises.

How can MAC Insurance help me find a lower-cost Medigap plan?

MAC Insurance compares rates from multiple providers to find a Medigap plan with lower premiums and stable pricing. We also check for discounts and plans with fewer rate increases. Call us at (352)-652-4100 to start saving today!

Why was Medicare established?

Medicare was created to offer healthcare benefits to retirees. Before its introduction, retirees who lost employer-sponsored coverage had few health insurance options.

How can I check if I'm enrolled in Original Medicare?

To see if you're enrolled in Original Medicare, check your Social Security check deductions. If you're receiving Social Security benefits, you're automatically enrolled at 65, and Medicare premiums are deducted from your benefits. You can also verify your enrollment online at MyMedicare.gov or by calling the Social Security Administration.

At what age can I get Medicare?

People receiving disability benefits for 24 months qualify for Medicare at any age, as do those with ESRD or ALS. Otherwise, Medicare eligibility begins at 65.

Who does not qualify for Medicare?

To qualify for Medicare, individuals must be U.S. citizens or have lived in the U.S. for at least five years. Those under 65 without disabilities, ESRD, or ALS are not eligible.

What documents are required for a Medicare application?

You must provide proof of U.S. citizenship or legal residency, along with your birth certificate and driver's license.

Do I need a primary care physician for Medicare?

No, you don't need to select a primary care physician with Original Medicare. However, choosing providers who accept Medicare assignment can help minimize your out-of-pocket costs.

Do I have to get a referral to see a specialist if I’m on Medicare?

No, you don’t need a referral to see a specialist. However, your out-of-pocket costs will be lower if you choose a specialist that accepts Medicare assignment.

We are not connected with or endorsed by the United States government or the federal Medicare program. We do not offer every plan available in your area, and any information we provide is limited to those plans we do offer in your area. Please get in touch with Medicare.gov or 1-800-MEDICARE to get information on all your options.

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