Steady as she goes was the theme for the U.S. Medicare Supplement market through 2022, according to our latest benchmark report on the sector. Forty-five questionnaires were completed, representing 91 companies with Med Supp business. They include those with open and/or closed blocks of business, with more than half of the companies managing both.
Participating companies reported $13.0 billion of Med Supp in‑force premium for 2022, an increase of about 2% over 2021. In‑force premium rose by nearly 4% for open blocks, while declining 1% for closed blocks.
Participants also reported nearly 5.3 million covered lives, which was level with the 2021 results. Open blocks account for 64% of the total premium in‑force and 72% of covered lives.
Market Results
Fifty-four percent of companies with open blocks and 86% with closed blocks reported a profit in 2022. Profit margins averaged ‑0.3% for companies with open blocks and 7.9% for closed blocks.
Loss ratios averaged 81% for companies with open blocks and 76% for closed blocks.
Companies reported over $1.1 billion of Med Supp sales premium for 2022, declining by 11% compared to 2021. The number of new lives covered declined by about 97,000, or ‑12%.
Fifty-two percent of companies with open blocks reported lapse rates ranging from 6% to 10% for 2022. Companies with open blocks reported an average lapse rate of 11%, while those with closed blocks reported an average lapse rate of 16%.
Most companies sold Plan F, Plan G and Plan N in 2022. Plan G accounts for 69% of the total new sales premium and lives for 2022. Although most companies also sold Plans F and N, those plans account for only 13% and 8% of new sales premium respectively, and only 9% of new lives covered.
Distribution Channels
Of the 27 respondents, 25 companies (93%) sell Med Supp through independent agents – and more than half (59%) sell direct-to-consumer. Eight companies utilize captive agents to sell Med Supp, while 11% mentioned other distribution methods, such as in‑house salaried call center agents and senior private exchanges.
Underwriting Evolution
On average, 39% of all Med Supp applications received in 2022 went through an underwriting process. About 76% of underwritten applications were approved and placed, while 16% were declined. Of the 27 companies:
- 12 currently use an automated underwriting platform, defined as a system used to make decisions on underwritten, web-based applications without human involvement.
- 4 companies plan to implement an automated underwriting system within the next 24 months.
Of those companies that use an automated underwriting platform, on average 85% of underwritten applications were directed to that platform.
The Future
Just looking at the generational demographics, the opportunity in the Med Supp space will continue. However, more attention needs to be focused not just on sales but the persistency and future loss ratios of the block of business. The keys to long-term success will be sustainable growth and robust in force block management.