Blue Cross of Massachusetts announced in July that its Medicare supplement policy (Medigap) prices would be going down a few percent in 2013. That's good news for seniors but a strange twist for market analysts. Why aren't the market leaders (see illustration) taking advantage of their popularity to edge prices up?
The flagship Blue Cross Medigap product in Massachusetts -- called Medex Bronze -- is priced currently at $186.47 per person per month and will come down to $183.73 per person per month in 2013. Medex Bronze outsells the second most popular currently available Blue Cross Medigap supplement -- Medex Core -- more than 15:1.
[In addition, between its Medigap products and its pieces of Medicare Part C (Medicare Advantage) and employer retiree plans, Blue Cross dominates the overall Medicare market just as it dominates the entire Massachusetts healthcare insurance market.]
The market dominance among its own brands alone by Blue Cross may explain the Blue Cross price decrease for 2013 because the benefit difference between Medex Bronze and Medex Core does not warrant such choices by consumers. Many Massachusetts Medicare consumers appear to be paying much more than needed because the major difference between the two Blue Cross plans (and between all Massachusetts Medigap core and supplement-1 plans) is coverage of the $1156 initial deductible for a Medicare Part A admitted hospital stay. Medicare consumers in relatively good health would be better off putting the approximately $1200 annual premium difference between Core and Bronze in the bank and betting they will not be admitted (not just observed, which comes under Medicare Part B) into a hospital.
However some anomaly of Massachusetts' RomneyCare healthcare reform may also explain the reduced prices for Blue Cross Medigap plans. Perhaps Blue Cross can use Medicare Medigap prices in some kind of loss-leader way to show that it is reducing prices as mandated by existing or new state price-control laws.
-- Dennis Byron
Note: This is a work in process piecing together various population count information from various sources because there is no collectively exhaustive, mututally exclusive view of the Medicare market in Massachusetts (or in the United States for that matter) and there is very poor transparency by the Massachusetts state government on the healthcare insurance market as a whole (despite its almost total regulatory control of the market). For example, the Medicare Part C information comes from University of Minnesota information released recently but is based on a different time period. I am purposely at this point not including percentages because there is certainly overlap in the above pie chart:
- some employers offer Medicare Part C (Medicare Advantage) and Blue Cross Medex plans as a retiree option
- many dual-eligible Medicare/Medicaid beneficiaries use their Medicare "savings" (i.e.. Medicaid pays their Medicare Part B premium) to buy supplemental insurance such as Medex Bronze