Thinking about a Medicare Supplement plan? Don’t just look at the premium. It's crucial to understand the insurance carrier's loss ratio and rate history.

 

When people shop for a Medicare Supplement (Medigap) plan, the first thing they always ask me is:

 

“Which plan is the cheapest?”

 

Totally fair question — but it’s only part of the story. Two things I always encourage clients to understand before choosing a carrier:

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1. The loss ratio

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This simply means: how much of the premium dollars a company pays out in claims versus keeps for administration and profit.

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If a carrier collects $1 million in premiums and pays $850,000 in claims, their loss ratio is 85%.

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So what’s high? Generally, anything consistently over 90% is considered a high loss ratio.

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Why that’s a red flag:

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A very high loss ratio means the company is paying out almost everything it collects. That’s not sustainable long-term. When this happens, carriers usually respond with larger or more frequent rate increases to stay profitable.

On the other hand, companies with very low loss ratios may look attractive today, but that can also signal future rate hikes once claims catch up. Ideally, you want a carrier in the “healthy middle.”

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Most actuaries consider a long-term loss ratio in the 75%–85% range to be a sweet spot — high enough that the company is paying claims responsibly, but not so high that major rate increases become likely.

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2. The carrier’s rate increase history

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Some companies have a pattern of coming in low and then raising rates aggressively. Others start a little higher but stay much more stable over time. That difference can easily mean thousands of dollars over the life of your policy.

 

With Medicare Supplement plans, the benefits are standardized. A Plan G is a Plan G, no matter the company.

What’s not standardized is:

 

• How a company prices risk

• How often they raise rates

• How they manage long-term claims

 

This is why the “cheapest plan today” is often not the cheapest plan over 5–10 years.

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My job as a broker isn’t just to find a good price — it’s to educate to help clients make sound decisions to try to avoid unpleasant surprises down the road. And this is exactly why carrier selection matters just as much as plan selection.