Medicare Supplement premiums are climbing at unprecedented rates in 2025, with average increases nearing 10%—the highest in over a decade. In some states, policyholders are facing hikes of up to 40%. Understanding the reasons behind these surges can help beneficiaries make informed decisions.
Key Drivers of Rising Medigap Rates
- Age-Based Pricing Models: Most Medigap plans use attained-age pricing, where premiums escalate as you age. This structure means that even without changes in health status, costs increase annually.
- Escalating Healthcare Costs: Medical inflation continues to drive up the cost of services, hospital stays, and prescriptions. Insurers adjust premiums to cover these higher expenses.
- Diminishing Risk Pools: As healthier individuals opt for alternative plans, the remaining pool becomes riskier, leading to more claims and necessitating higher premiums to maintain financial stability.
- Regulatory and Plan Changes: The discontinuation of Plan F for new enrollees has resulted in a closed risk pool, increasing costs for existing members due to a lack of new, healthier entrants.
- Underwriting Practices: Some insurers have relaxed underwriting standards to attract more enrollees. While this increases accessibility, it can also lead to higher claims, prompting premium hikes.
Navigating the Increases
Beneficiaries should annually review their Medigap plans and consider the following strategies:
Compare Plans: Premiums for identical coverage can vary between insurers. Shopping around may yield more affordable options .
- Switch Plans: Transitioning to a plan with slightly less comprehensive coverage, like moving from Plan F to Plan G, can result in savings while maintaining substantial benefits.
- Explore Medicare Advantage: For some, Medicare Advantage plans may offer lower premiums, though they come with different networks and coverage rules.
Staying informed and proactive is crucial in managing healthcare costs during retirement. Regularly assessing your coverage ensures it aligns with both your health needs and financial situation.
Joe DeAngelis
Medicare Supplement Broker