June 1, 2020
Another Medicare supplement company has announced it is exiting the Medicare Market. Equitable National announced this week that as of June 30, 2020 they will no longer offer Equitable Medicare supplement plans. That’s it. All done. What does that mean for you if you own one of the Equitable Medicare supplement plans?
If you own an Equitable Medicare supplement plan you will very likely be facing out sized price increases in the relatively near future because you are now in a “Closed Pool”. No one young and healthy can be added to your pool of insured policyholders, leaving only those with higher medical expenses in your plan. Higher medical expenses lead to higher premiums. If you want to know what to do, read on.
If you do not own an Equitable Medicare supplement plan and are hoping to learn how to not end up making the mistake of selecting an insurance company that will do to you as they have to their customers, this too is the right article for you. We will provide some specifics on the why and what do to.
We are often asked by people researching Medicare “Why should I do business with you?” “What does your company offer that I can’t get when working with someone else or directly with an insurance company?”
Our answer, of course, defines our value. The example below referencing the situation with Equitable Medicare Supplement plans is a perfect example of the value we add, even behind the scenes.
An obvious added value is our After-the-Sale customer service. MedigapSeminars.org unique in our industry in that we have an in-house professional, experienced Medicare biller whose primary role is to act as your Medicare Advocate in helping you resolve claims or billing issues and appeals. If you have not seen our Medicare Advocate video, you should.
Our clients have quite an advantage knowing that whatever problems arise with their Medicare, they have an experienced professional they can lean on for help, at no charge. They don’t have to fight any Medicare battle alone. Ever. It’s a great and often used service we enjoy providing.
But our value both before and after the sale of an insurance policy goes well beyond our Medicare Advocate services.
It starts with education. Anyone who has seen our educational videos on Medicare knows of the focus we put on educating the consumer to make an informed decision. There are literally dozens of videos on Medicare that are designed to help anyone learn what they need or wish to know about Medicare. If you have not seen this videos just use the hashtag #Medigapseminars to search on the internet or YouTube or go to our website to start your journey. For our prospective clients, they are there to help you make an informed decision. But these videos are also used by medical professional to train office staff and by other insurance agents hoping to learn enough about Medicare to advise others.
Once a person understands Medicare and the choices you must make, the next step is helping identify a plan that fits your needs and your budget. This is immediately followed by identifying the right insurance company. The right insurance company offers peace of mind knowing you have reduced risk of price volatility. That is where our discussion of Equitable National Insurance ties in. If Equitable Medicare Supplement Plans were discussed at all during this process, our client would learn early on why we avoided them.
Now, none of us has a crystal ball. We cannot promise absolute price stability. But with three decades of experience in this industry and a background in finance, I can help you select an insurance company that is less likely to surprise a person with unusual price increases. Or, as is the as with Equitable Medicare supplement plans and many others, exiting Medicare and leaving you in a closed pool. Your price experience over your lifetime starts with selecting the right insurance company. It is where we add value from the start.
Are we unique? Here is a challenge that will help you answer that question. Before you read some of my insights below, go to your favorite web search engine and type in “Equitable Medicare Supplement Plans”. Then scroll through page after page of insurance brokerages soliciting Equitable Medicare supplement Plans. They have set up special sections or pages of their websites just to entice you to buying Equitable Medicare supplement plans from them.
Now, continue reading below and see what they missed (or never bothered to research). You will understand why I never recommended their product and what information you can use to avoid falling into the same trap.
Keep in mind Equitable National is not unique. I have witnessed several insurance companies leave the Medicare supplement market in just the last three years. More than three if you count insurance companies exiting Medicare Advantage and Part D plans. It happens every year and will continue in the years ahead.
My video Medicare Supplement Plans Benefits & Hidden Risks and its accompanying article is the first public discussion of some of the Hidden Risks involved in selecting a Medicare supplement insurance company and how to avoid those risk.
Where that video is a very detailed presentation, I will highlight the only portion relevant to the situation with Equitable here.
Equitable National had several tell-tale signs of high risk as an insurer. Signs that would be evident to anyone who had watched my video on Hidden Risks as noted above.
First, Equitable has never been a highly rated company. They are currently rated B+ by A.M Best, which is a very recent upgrade from B announced in October 2019.
One of my rules I use personally and teach to my agents regarding Medicare is to never even consider an insurance company with a rating low than “A-”. Equitable’s B rating that it carried through most of the 2010 through 2019 time period is three grades lower than an A-. They are currently a B+ rated company. The higher rating is B++ and then followed by A-. Just applying my first rule would have helped anyone researching Medicare supplement plans avoid this disaster.
Most people assume that I avoid a lower rated insurance company because it might go out of business. But that is far from the issue that concerns me most. In Medicare, going out of business is not the worst that can happen. If a Medicare company goes out of business Medicare will provide the insured a Guarantee Issue pathway to a new company and new policy. No questions asked. It is inconvenient, but far from devastating.
The bigger issue or concern is that the lower rated companies are typically smaller and will mold their business to that which is most profitable. This is exactly what Equitable has been doing and what has led them to exit the Medicare supplement market today.
The signs were all there. In 2018 they announced they would discontinue selling Medicare supplement plans in five states, Georgia, Idaho, Illinois, Montana and North Dakota. For whatever reason, those states were not profitable. Because they needed to protect their AM Best rating, the solution was to cut them. Simple.
In 2019 Equitable cut their ancillary products that often accompany Medicare. This included their Cancer Protection Plan, Short Term Nursing Care and Hospital Indemnity plans. Again, they can’t afford to support marginal portions of their business. When you don’t have an “A” rating, you don’t have the cash to provide a cushion or leeway. The company must remain focused on it’s most profitable endeavors. This is, of course, what lead to the most recent announcement of exiting all Medicare supplement plan sales as of June 30,2020.
So, what are they going to do? The same thing other small insurance companies have done in the past three years, focus on fixed annuity sales. Fixed Annuity sales are a simpler product to manage and sell with annual management fees paid to the insurer. Many other small insurers have taken a similar path. It usually leads to their being bought out by a larger insurance company within just a couple years. The annuity sales bring a high premium to the company share price. Add to that the cash flow offered by keeping (but not selling) existing Medicare supplement plans makes for a handsome profit for shareholders.
As an aside, it did not go unnoticed (by me) that Equitable was purchased in 2017 by SILAC Inc. a private company that offers investment advisory services. SILAC is founded by Stephen C Hilbert. This is the same person that founded CONSECO, a company with a very interesting history. A simple review of SILAC’s management shows this to be a company with a history of buying smaller companies, improving profitability then selling them four or five years down the road. Nothing about this company indicates it would be a good long-term choice for a person entering Medicare.
I have other rules that would have helped anyone avoid Equitable. You will find those rules and more in the latter half of my Hidden Risks video.
If you would like our advice and guidance in choosing a Medicare plan, please call us at 800-847-9680. Or reach out to us using our Medicare Supplement Quote Request.