Underwriting and the Medicare Supplement Market

Author: Chris Hagerstrom


Underwriting is a very vital part of the stability of the Medicare Supplement market.  Without underwriting, most Medigap plans would be too expensive for our clients to afford.  So why do we spend so much time and effort avoiding the process completely?  With all of these Baby Boomers turning 65 and enjoying the freedom of their 6 month open enrollment window, and Medicare Advantage clients needing to answer only one “health” qualification, it’s easy to lose sight of the benefits of the underwriting process.  I mean, who wants to ask all those health questions anyways?  Well, you should, and here’s why.

Benefits of Underwriting
It must be difficult to be an actuary.  When launching a new Medigap plan or simply maintaining a large block of business, there are many things to consider:

  • How many people does the carrier plan on insuring?
  • What percentage of people will join during Open Enrollment/Guaranteed Issue versus going through underwriting?
  • Will the 65 year old rates be the lowest in the area and therefore get a majority of the turning-65 business?
  • How healthy are those that join during Open Enrollment/Guaranteed Issue?
  • Can they get enough healthy people to offset the costs of their higher-risk clients?

Luckily, we as agents don’t have to deal with these questions, we only need to do what’s in the client’s best interests.  But that does bring up some things to consider, like “how often do my clients go through underwriting?” and “is my favorite carrier the least expensive option at age 65?”.  We’ve seen a carrier come into a market with the lowest rates, gobble up all of the Open Enrollment and Guaranteed Issue business, then take a 15%+ rate increase 18 months after launch.  If your clients aren’t able to move due to underwriting, they’re stuck with that higher rate.  A stable Medigap carrier will have a good mix of open enrollment/guaranteed issue and underwritten business.  Bottom line, the carriers want your clients to be underwritten 100% of the time so they know they are getting healthy people into their block of business, but what about Open Enrollment and Guaranteed Issue?

Open Enrollment vs. Guaranteed Issue (GI)
Open Enrollment is the time frame for individuals turning 65 or qualifying for Medicare Part B for the first time to choose a Medicare Supplement plan without going through the underwriting process.  It starts the month they turn 65 or get Part B (if later) and continues for 6 months, and they can even switch from one plan to another as long as they’re still in Open Enrollment.  Guaranteed Issue, on the other hand, is a situation where the client had some interruption in coverage that would allow them the ability to sign up for a Medigap plan without underwriting.  This usually happens when a client is retiring and involuntarily losing group coverage or was on a Medicare Advantage plan that is leaving the client’s service area, and lasts for 63 days.

With Open Enrollment, the client can choose any Medigap plan from any carrier in the state (A, B, C, D, F, G, K, L, M, N) and the plans have to accept them (please note that this may not apply for those qualifying for Medicare before age 65, depending on the state).  For Guaranteed Issue, the carriers are only required to offer plans A, C or F for the client to choose from.  Considering the savings available through plans G and N, people in GI situations would not be able to choose those plans if they were to utilize their guaranteed right.  So, even if your client has a guaranteed issue situation, consider the benefits of going through the underwriting process to get them into a more cost effective plan.  If they cannot qualify due to health, they still have their GI options available to them.

Another way that underwriting can help you, the agent, is commissions.  Open Enrollment applications will pay you 100% of whatever the carrier’s commission amount is for the sale, whereas GI apps usually pay a reduced commission or a flat, one-time fee for the sale.  If the most competitive carrier in your area pays a reduced commission for GI, and you’re dealing with a large layoff from a local business that employed numerous Medicare beneficiaries, you can see where this could be an issue.

Incorporate Underwriting into Every Sale
Outside of your Open Enrollment clients, start each of your Medigap sales with the underwriting section.  This will help you become familiar with each of the carrier’s quirks and niches, and also get you comfortable with asking your clients the questions.  For your GI clients, many carriers allow you to submit those applications through underwriting depending on how you answer the guarantee issue questions on the app (check with your specific carriers to see how they handle this situation) and earn your full commission.  Bottom line, Medicare Supplement carriers want to underwrite your clients 100% of the time to make sure they are maintaining a healthy book of business so they can keep rates stable.  It’s a win-win.


Chris Hagerstrom is the Marketing Vice President at Jack Schroeder and Associates, LLC. Through years of experience he has become an expert with Medicare, Life Insurance, Annuities and Supplemental Health and how to successfully navigate the senior market.

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