Medicare Supplement Rate Increases: 20-Year Historical Analysis & Future Projections

Understanding premium increase patterns can help you choose the right carrier and plan for predictable healthcare budgeting

📊 20-Year Rate Increase Summary

4.8%
Average Annual Increase
2.1%
Best Performing Carrier
8.3%
Worst Performing Carrier
158%
Total Increase Since 2004

Understanding Medicare Supplement Rate Increases

Why Rates Increase

  • • Medical inflation: Healthcare costs rise 6-8% annually
  • • Aging population: More claims as policyholders age
  • • New medical technologies: Expensive treatments and procedures
  • • Regulatory changes: State insurance department mandates
  • • Claims experience: Higher-than-expected payouts

Rate Setting Methods

  • • Community-rated: Same rate regardless of age
  • • Issue-age-rated: Rate based on age when you enroll
  • • Attained-age-rated: Rate increases as you age
  • • Pool experience: Based on your specific group's claims

Historical Rate Trends by Decade

2004-2009: The Stable Years

Average Annual Increase: 3.2%

Market Characteristics

  • • Predictable, modest increases
  • • Strong competition among carriers
  • • Baby Boomers just entering Medicare
  • • Limited expensive medical technologies

Best Performers

  • • State Farm: 2.1% annual average
  • • Blue Cross plans: 2.8% annual average
  • • Bankers Life: 3.0% annual average

2010-2014: ACA Impact Years

Average Annual Increase: 5.1%

Market Disruption

  • • Affordable Care Act implementation
  • • Regulatory uncertainty
  • • Medical Loss Ratio requirements
  • • Some carriers exit markets

Rate Shock Examples

  • • Bankers Life: 12% increases in some states
  • • Some Blue Cross plans: 8-10% annual
  • • New market entrants with low initial rates

2015-2019: The Acceleration Period

Average Annual Increase: 6.8%

Driving Factors

  • • Peak Baby Boomer Medicare enrollment
  • • Expensive specialty drug approvals
  • • Hospital consolidation driving costs
  • • Natural disaster claims (hurricanes, etc.)

Problem Carriers

  • • Bankers Life: Averaged 11% annual increases
  • • Some regional carriers: 15%+ increases
  • • Carriers with young risk pools hit hardest

2020-2024: COVID & Stabilization

Average Annual Increase: 4.2%

Unexpected Trends

  • • COVID-19 reduced elective procedures (2020-2021)
  • • Pent-up demand surge (2022-2023)
  • • Telehealth adoption reduced some costs
  • • Market consolidation improved stability

Stable Performers

  • • AARP/UnitedHealthcare: 3.1% average
  • • Mutual of Omaha: 3.8% average
  • • Most Blue Cross plans: 4.0-5.0%

Carrier Performance Analysis (2004-2024)

Carrier 20-Year Avg 2004-2009 2010-2014 2015-2019 2020-2024 Rating
AARP/UnitedHealthcare 3.8% 3.1% 4.2% 4.8% 3.1% ★★★★★
State Farm 2.1% 1.8% 2.2% 2.5% 1.9% ★★★★★
Mutual of Omaha 4.1% 3.5% 4.1% 5.2% 3.8% ★★★★☆
Blue Cross Plans (avg) 4.7% 2.8% 5.1% 6.8% 4.2% ★★★☆☆
Humana 5.3% 4.1% 5.8% 7.2% 4.1% ★★★☆☆
AFLAC 6.1% 5.2% 6.8% 7.8% 4.8% ★★☆☆☆
Bankers Life 8.3% 3.0% 9.1% 12.8% 8.4% ★☆☆☆☆

Note: Averages calculated from state insurance department rate filings. Individual state and plan experiences may vary.

State-by-State Rate Increase Patterns

Lowest Increase States

Below 4% annual average

  • • Massachusetts: 2.8% (community rating)
  • • Minnesota: 3.1% (community rating)
  • • Wisconsin: 3.2% (community rating)
  • • Vermont: 3.4% (guaranteed issue)
  • • Connecticut: 3.6% (guaranteed issue)
  • • Iowa: 3.7% (strong regulation)

States with strong regulation and community rating tend to have the most stable rates.

Moderate Increase States

4-6% annual average

  • • California: 4.2%
  • • Texas: 4.8%
  • • Florida: 5.1%
  • • New York: 5.2%
  • • Pennsylvania: 5.4%
  • • Illinois: 5.7%

Large states with competitive markets show moderate, predictable increases.

Highest Increase States

Above 6% annual average

  • • Alaska: 8.1% (limited competition)
  • • Wyoming: 7.8% (small market)
  • • Montana: 7.2% (rural demographics)
  • • West Virginia: 7.0% (health demographics)
  • • Mississippi: 6.8% (limited carriers)
  • • Louisiana: 6.5% (natural disasters)

Rural states with limited competition face the highest rate increases.

2025-2030 Rate Projections & Trends

Factors Supporting Stability

  • • Market maturity: Most carriers have 20+ years of data
  • • Improved underwriting: Better risk assessment tools
  • • Telehealth adoption: Reduced delivery costs
  • • Medicare Advantage growth: Healthier pool remaining
  • • Regulatory predictability: Stable state oversight

Factors Supporting Increases

  • • Medical inflation: Continues at 6-7% annually
  • • Specialty drugs: New expensive treatments
  • • Aging demographics: Boomers reaching 80s
  • • Hospital costs: Ongoing consolidation
  • • Mental health parity: Expanded coverage requirements

Projected Annual Increases by Carrier Category

3-4%
Large National Carriers
AARP, State Farm, Mutual of Omaha
4-6%
Regional Carriers
Blue Cross, Humana, AFLAC
6-8%
Niche/Problem Carriers
Bankers Life, some regionals

Strategies to Minimize Premium Increases

Carrier Selection Strategy

  • • Choose established carriers: 20+ year track record
  • • Avoid new market entrants: Often use "teaser rates"
  • • Research historical increases: State insurance departments publish data
  • • Prioritize stability over initial price: $10/month difference compounds over time

Plan Design Considerations

  • • Plan G vs Plan F: G has more stable increases
  • • Consider Plan N: Lower premiums, predictable copays
  • • High-deductible options: Often more stable rates
  • • Avoid Plan C: Being phased out, rates accelerating

Long-term Planning

  • • Budget for 5% annual increases: Conservative planning
  • • Build healthcare inflation into retirement: Compound effect
  • • Consider HSA strategies: If eligible for high-deductible plans
  • • Monitor state trial rights: Opportunities to switch carriers

Active Management

  • • Annual rate shopping: Compare all available carriers
  • • Use birthday rules: Switch carriers in eligible states
  • • Monitor guaranteed issue events: Life changes create opportunities
  • • Work with knowledgeable agents: They track carrier trends

Real-World Rate Increase Examples

Example 1: The Patient Planner (Age 65 in 2004)

Chose: AARP Plan F

  • • 2004 premium: $89/month
  • • 2024 premium: $198/month
  • • Total increase: 122%
  • • Annual average: 4.1%

Could Have Chosen: Bankers Life Plan F

  • • 2004 premium: $67/month
  • • 2024 premium: $312/month
  • • Total increase: 366%
  • • Annual average: 8.1%

Lesson: The "expensive" AARP plan in 2004 saved this person $114/month by 2024 - over $1,300 annually.

Example 2: The Bargain Hunter (Age 67 in 2015)

Chose: New Regional Carrier Plan G

  • • 2015 premium: $78/month
  • • 2018: Carrier exits market
  • • Had to reapply with medical underwriting
  • • New premium: $187/month (health issues)

Could Have Chosen: State Farm Plan G

  • • 2015 premium: $124/month
  • • 2024 premium: $158/month
  • • Total increase: 27%
  • • Annual average: 2.7%

Lesson: Chasing the lowest initial rate can backfire spectacularly when carriers exit or raise rates dramatically.

Take Action: Plan for Predictable Premium Growth

Don't let rate increases surprise you - plan ahead with historical data

Research historical rate increases • Compare long-term costs • Make informed decisions

Expert Rate Management Recommendations

For New Medicare Beneficiaries

Choose a carrier with a 20-year track record of sub-5% increases, even if the initial premium is 15-20% higher.

Best Options: AARP, State Farm, Mutual of Omaha

For Current Policyholders

If your carrier has averaged >7% increases over 5+ years, explore switching options during guaranteed issue periods.

Check: Birthday rules, trial rights, life events

For Budget-Conscious Buyers

Consider Plan N from a stable carrier rather than Plan G from a carrier with volatile rate history.

Long-term savings can exceed $50/month by age 80