Medigap Insurance:

Insurers' Compliance with Federal Minimum Loss Ratio Standards, 1988-93

HEHS-95-151: Published: Aug 23, 1995. Publicly Released: Aug 30, 1995.

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Pursuant to a congressional request, GAO reviewed benefit payments by Medigap policies between 1988 and 1994, focusing on trends in Medigap insurers' aggregate loss ratio performance.

GAO found that: (1) the Medigap market grew from $7.3 billion to $12.1 billion between 1988 and 1993; (2) Medigap insurers' aggregate loss ratios were stable from 1988 to 1991, but these ratios decreased about 10 percent by 1993 to an aggregate 75 percent for individual policies and 85 percent for group policies; (3) the percentage of Medigap policies that failed to meet loss ratio standards increased from 19 percent in 1991 to 38 percent in 1993; (4) the premium dollars spent on such policies increased from $320 million in 1991 to $1.2 billion in 1993; and (5) in the future, insurers will be required to give refunds or credits on substandard policies.

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