Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - The Birthday Rule: An Update on Medicare Supplement OE / GI Rules 🎂

3. Sponsor Snapshot 🚀 - brought to you by Telos Actuarial

4. Compliance Chatter 📢 - Several new regulations to review!

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

The Birthday Rule: An Update on Medicare Supplement OE / GI Rules 🎂

In Q3 2023, we discussed the rising trend of “The Birthday Rule” in state specific Medicare Supplement regulations.

As it turns out, this was not just a fad.

Since that time, a few states added Birthday rules, and there are currently 8 states with proposed legislation for creating a new Birthday rule.

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Background

It is well known that consumers have two main Medicare options:

1. Original Medicare + Medicare Supplement

2. Medicare Advantage

Medicare Advantage now makes up over 50% of the Medicare market, so let’s start there.

Medicare Advantage has annual plans. Each year, policyholders can shop for a plan that is best for them. Essentially, Medicare Advantage presents policyholders with the annual right to change plans and avoid medical underwriting.

Unlike Medicare Advantage, which is regulated federally, Medicare Supplement policies are regulated at the state level. This means there is no nationwide equivalent to the annual plan change opportunity in MA

However, several states decided to take this matter into their own hands. While there have been various approaches taken, the most popular way seems to be the Birthday rule.

Note: the Birthday rule allows consumers to change Medicare Supplement plans without underwriting around the time of their birthday each year.

To help keep track of the unique Open Enrollment and Guaranteed Issue rules in each state, check out this FREE guide, now equipped with a cheat sheet (brought to you by Telos Actuarial) →

To stay up to date on the latest states hopping on the Birthday Rule bandwagon, KEEP READING.

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Proposed New Birthday Rules

The 8 states and their recently proposed birthday rules are summarized in the table below.

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OE / GI Rules by State

In addition to the 8 pending states listed above, there are several states that already have some version of Open Enrollment / Guaranteed Issue rules.

The following map illustrates the various types by state.

As you can see, the Birthday Rule’s popularity is only growing:

Another interesting view is to look at these rules over time. Several states have had OE/GI rules since as early as 2009.

This year’s activity in the area has really picked up:

It will be interesting to track the progress of the currently proposed legislative bills and see how many additional states adopt such rules.

[Note: for weekly regulatory updates sign up for the Insurance Regulatory Insights newsletter]

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Likely Impacts

Traditionally, Medicare supplement plans realize profits towards the end of their lifetime.

This is largely due to the highly competitive commissions and agent bonuses that are paid out in early policy years. For reference, a typical policy year 7 commission might be 1/5^th the rate of policy year 1. Therefore, profits are highly dependent on strong persistency.

When you add in a birthday rule, this makes things riskier for insurance carriers for a few reasons.

In general, a given carrier’s risk pool will have less underwritten lives simply because the rule drastically lowers the amount of underwriting taking place.

Additionally, with no potential for having to pass underwriting, policyholders will be best off selecting the newest product in the market with the cheapest rate each year. Similarly, agents will be best off collecting more top-level commissions in policy year 1. For new entrants, this results in a lot of anti-selection in year 1, followed by higher lapses in year’s 2+.

There are 2 main ways that carriers have combatted these risks in the past:

1. Increase Premium rates

2. Leave the Market

We can see this in action by investigating states that have more recently adopted Birthday rules.

Higher Rate Increases

Average rate increases from open blocks in ID, LA, MD and NV (recent Birthday Rule adopters) are:

• 9.9% in 2024

• and 13.0% so far in 2025

This is higher than the average in all states by 1-1.5%:

• 9.0% in 2024

• and 11.6% so far in 2025

Less Competition

For one example:

In 2023, Nevada’s Birthday Rule was fresh, and 34 carriers were actively selling in the market.

Today, the Nevada market has already been reduced to 25 actively selling carriers.

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Conclusion

Birthday rules are not exactly black and white.

One on hand, they benefits policyholders by giving them more rights and the ability to shop policies each year.

On the other hand, they raise overall market premium rates and decrease competition.

Eventually these regulations may result in less differentiation, fewer new entrants, and higher premiums for all.

As these changes continue, insurers and agents must navigate shifting risk dynamics. We’ll be tracking these developments closely!

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

• Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)

• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)