Medigap Insurance:

Insurers' Compliance With Federal Minimum Loss Ratio Standards, 1988-91

HEHS-94-47: Published: Feb 7, 1994. Publicly Released: Feb 15, 1994.

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Pursuant to a congressional request and a legislative requirement, GAO reviewed the value of Medicare supplemental insurance (Medigap) through 1994 and Medigap compliance with federal loss ratio standards, focusing on: (1) Medigap insurers' loss ratio performance during 1990 and 1991; and (2) trends in company performance from 1989 through 1991.

GAO found that: (1) Medigap premiums increased more than 50 percent and mature policy premiums increased more than 90 percent from 1988 through 1991; (2) Medigap insurers' loss ratios declined for individual and group policies from 1988 through 1989 and then increased from 1990 through 1991 to 1988 levels; (3) more Medigap insurers met the minimum loss ratio standards in 1991 than in 1988; (4) the insurers that did not meet federal minimum loss ratio standards decreased their premiums from $388 million in 1988 to $206 million in 1991; (5) some companies did not meet the minimum loss ratio standards in every state in which they did business, which decreased their premiums by almost 75 percent; (6) insurers began reporting their loss ratio information by policy form rather than by aggregate experience in 1991; and (7) states are required to maintain loss ratio data on polices sold and make such information available to interested persons.

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