LewB
Expert
- 83
Inquiring minds want to know? Why do Medicare Supplement companies close a book of business and then come out with a new plan? Can someone explain the logic in it to me?
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Can someone explain the logic in it to me?
Because the current book of business has people who have become older and therefore have more lllnesses meaning more claims. They close that book and raise the rates to cover the increasing losses. Then, they open a new book with younger, healthier folks and charge a lower premium do to lower claims ratios. After a couple of years, rinse and repeat.
That would eliminate about all of them.I tried to avoid the companies that did that.
The problem is that it penalizes theirvlong term policyholders whose health prevents them from going elsewhere. Once they close the book and are no longer sdding new healrhy people, the rates begin to go up. Those that healthy and can pass underwriting go elswhere which accelerates the adverse claim ratio as there are none left but the sick people. Then, the rates really begin to skyrocket. I wish every state would pass the birthday rule where folks can buy any plan without underwriting within 30-60 days of their birthday. Would put a crimp in the game companies play.Wow, I have never thought about that but it makes sense, thanks for the lesson Rousemark