The Weiss Ratings analysis of 2001 Medigap premiums found numerous examples of extreme variations in premiums.

• A 65-year-old male living in Ft. Myers, Fla. would pay 3,667.18 with Physicians Mutual Insurance Company for Plan J but only $2,712.00 with United Healthcare Insurance Company through AARP-nearly $1,000 less for an identical policy.
• The same gentleman living in Las Vegas, Nev. would pay $1,543 for Plan G with United American Insurance Company but less than half that ($778) with USAA Life Insurance Company for the same policy.
• A 75-year-old husband and wife living in Tucson, Ariz. would pay a combined rate of $5,953.20(1) for Plan F with Reserve National Insurance Company but only $3,479.60 with American Family Mutual Insurance Company. If they had had the necessary pricing information to compare these identical policies, they would have saved almost $2,500 a year.

Martin D. Weiss, Ph.D., chairman of Weiss Ratings, commented: `Imagine being charged one price for a share of stock with one broker and double that price by another broker. This is essentially what`s happening with Medigap insurance. The policies are identical, plain-vanilla products that should vary only slightly in price. But it is very difficult for consumers to get the pricing information they need to shop for Medigap policies, making it possible for some insurers to charge consumers much more than the average.`

Attained-Age Pricing Not Less Expensive in the First Year

The industry has sometimes excused the wide price differences in Medigap premiums by pointing to the different ways it raises rates for existing policyholders in future years. For example, premiums based on `attained-age` pricing, which automatically rise as a policyholder grows older, are supposed to be lower in the first year but higher in future years. 

By contrast, premiums based on `issue-age` pricing, which are promised never to rise for an individual unless they are raised for everyone in a particular group, are supposed to be higher up front, but less expensive in the long run.

However, in reality some attained-age policies are actually more expensive than issue-age policies for the same individual and the same plan. For example:

• A 65-year-old male living in Dayton, Ohio, would pay $1,254.38 with Continental General Insurance Company for Plan A utilizing attained-age pricing but only $771.40 from Nationwide Life Insurance Company using issue-age pricing. One would expect the attained-age policy to be less expensive up front because of the greater likelihood of future premium hikes, but it`s actually more expensive.
• Similarly, in McAllen, Texas, World Insurance Company charges 1,911.07 for an attained-age Plan F policy, but Christian Fidelity Life Insurance Company charges only $1,220.00 for the same exact Plan F using issue-age pricing.
• A 70-year-old male living in Morrisville, Penn., would be charged $2,075.80 by Guarantee Trust Life Insurance Company for an attained-age Plan C policy but only $1,454.76 by Philadelphia American Life Insurance Company for an issue-age Plan C.

`These examples support our view that the Medigap marketplace is still very inefficient. In 1992, Congress took the first step by mandating standard benefit plans. Now, to follow up, Congress must take steps to ensure that complete pricing information is readily available to consumers so they can comparison shop,` said Dr. Weiss.

Senior citizens shopping for the least expensive and safest Medigap policies can obtain a Health Insurance Report for Seniors ($49) available from Weiss Ratings at 800/289-9222. 

The report, based on each consumer`s individual circumstances, provides customized comparisons of the actual premium rates offered in his or her county of residence for each of the ten Medigap plans, along with the Weiss Safety Rating for each carrier. 

The report also includes ratings and complaint data on Medicare HMOs, compiled by the Health Care Financing Administration, and a list of long-term care insurers with their ratings.

Weiss issues safety ratings on over 15,000 financial institutions, including securities brokers, banks and thrifts, insurers, and HMOs. Weiss also rates the risk-adjusted performance of more than 11,000 stock, bond, and money market mutual funds. It is the only major rating agency that receives no compensation from the companies it rates. 

Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings web site at www.WeissRatings.com. Ratings are also available by phone (800/289-9222) starting at $15.

The first two releases in the series - `Prescription Drug Costs Boost Medigap Premiums Dramatically` (March 27) and `Medigap Consumers Face Erratic Price Increases` (April 17) - were based on a comprehensive database compiled by Weiss Ratings of all Medigap insurance premium rates on the market in 1998, 1999, and 2000 offered in all fifty states and the District of Columbia. 

Source/Resource: Weiss Ratings, June 11, 2001.