Medigap Costs Surge: Why Premiums Are Skyrocketing and Your Limited Options for Relief

Medigap Premiums Soar, Leaving Consumers with Limited Options

For nearly five decades, Illinois-based broker John Jaggi has been selling insurance, but he has never witnessed a premium increase like the one his customers experienced last August. More than 80 of his clients who were enrolled in the same Medicare supplemental plan from Chubb were hit with a 45{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d} increase, a jump that Jaggi described as unprecedented in his 49 years of doing business as a broker. The policies, which pick up deductibles and other costs not covered in traditional Medicare, are essential for many consumers, as they provide a financial safety net and protect against excessive medical expenses.

The sudden and significant increase in premiums has left many of Jaggi’s clients scrambling to find more affordable options. The challenge is not unique to Jaggi’s customers, as double-digit premium increases for Medicare supplemental, or Medigap, policies are becoming the norm. According to data from the Nebraska-based consulting firm Telos Actuarial, rate increases for Plan G policies, the most commonly purchased supplement type, ranged from just over 12{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d} to more than 26{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d} in the first quarter of 2026. This trend is likely to continue, as insurers face upward pressure on their claims experience, driven by factors such as an increase in the use of medical services by beneficiaries, the aging of the population, and rising labor and medical costs.

Understanding the Medigap Market

More than 12 million people, approximately 43{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d} of those in traditional Medicare, purchase a Medigap policy to supplement their coverage. Others rely on retiree employer coverage or a different backup, while about 13{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d} of people in traditional Medicare do not have supplemental coverage, leaving them vulnerable to large medical expenses if they experience a serious illness. The Medigap market is complex, with various factors influencing premium rates, including the type of coverage chosen, the beneficiary’s age, and their location. For example, the average monthly premium for Plan G coverage was $164 in 2023, according to the Kaiser Family Foundation (KFF), but this amount has likely risen since then.

Brokers and policy experts blame a range of factors for the rising premiums, including the increasing use of medical services by beneficiaries, the aging of the population, and rising labor and medical costs. Rules in some states governing Medigap plans, as well as people’s enrollment in or exit from private Medicare Advantage plans, also contribute to the trend. As Chalen Jackson, vice president for government affairs at Integrity, a Dallas-based company that sells life and health insurance, noted, “Five years ago, it was exceedingly uncommon to have a carrier with a rate increase of more than 10{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d}. Now it’s very uncommon to see a rate increase below 10{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d}, and it’s not uncommon to see it over 20{a8ae776824e21a302cf57c8bb0f17fb3786a19df5265fb9ca267054a783a849d}.”

Impact on Consumers

The rising premiums have significant implications for consumers, who are facing limited options and tough choices. For those who are struggling to afford their Medigap premiums, one possible solution is to leave traditional Medicare and enroll in a private-sector Medicare Advantage plan, which has out-of-pocket caps. However, joining a Medicare Advantage plan means beneficiaries must generally rely on a set of in-network doctors and hospitals, and if they change their mind and want to return to traditional Medicare, they have only a 12-month window in which to purchase a Medigap plan without passing health questions. After that, it can be more difficult to obtain a Medigap policy, especially for those with preexisting conditions.

Some states have implemented rules to help consumers, such as the “birthday rule,” which requires insurers to allow people enrolled in a Medigap plan to change to different supplemental coverage without being medically underwritten around their birthdays. Additionally, four states – Connecticut, Massachusetts, Maine, and New York – require insurers to offer at least one Medigap policy to all applicants either year-round or during an annual enrollment period, depending on the state. These rules can help consumers, including those with health conditions, to switch to a more affordable plan.

Possible Solutions

Policymakers have outlined possible solutions to address the rising Medigap premiums, including capping out-of-pocket costs for Medicare beneficiaries or subsidizing the purchase of Medigap coverage. As Senator Ron Wyden (D-Ore.) noted, “Traditional Medicare is the only federal health insurance program without an out-of-pocket cap,” and the program “needs to be updated and strengthened to protect the Medicare guarantee for American seniors.” However, implementing these changes would require congressional approval, which is unlikely in the current legislative environment, especially since adding an out-of-pocket cap would add costs to the federal budget.

Another option for consumers is to consider one of the two types of Medigap plans that come with a deductible, which is currently just under $3,000 for a year. These plans charge far lower monthly premiums than Medigap plans that pick up a much larger portion of annual amounts people must pay toward their Medicare services. However, as Patricia Mack, an insurance agent in Alaska, noted, “a lot of people are not comfortable with a $3,000 deductible,” highlighting the trade-offs that consumers must make when choosing a Medigap plan.

Future Prospects

The rising Medigap premiums are a symptom of a broader issue – the need for a more sustainable and equitable healthcare system. As the population ages and medical costs continue to rise, it is essential to find solutions that balance the needs of consumers with the financial constraints of the healthcare system. Policymakers, insurers, and brokers must work together to develop innovative solutions that protect consumers from excessive medical expenses while ensuring the long-term viability of the Medicare program. By addressing the root causes of the rising premiums and implementing policies that promote transparency, competition, and affordability, we can create a more stable and secure healthcare system for all Americans.

As the Medigap market continues to evolve, it is crucial for consumers to stay informed and engaged. By understanding the factors that influence premium rates, exploring available options, and advocating for policy changes, consumers can take control of their healthcare costs and ensure that they have access to affordable and comprehensive coverage. The future of the Medigap market is uncertain, but one thing is clear – the need for affordable and sustainable healthcare options will only continue to grow, and it is up to all stakeholders to work together to address this critical challenge.