Retirees Face Steep Hikes in Private Health Insurance Rates : Elderly: Premiums go toward filling in Medicare gaps. Prudential cites soaring number of claims.

Millions of retirees face stiff increases next month in the premiums they pay for private health insurance to fill in Medicare’s gaps.

The American Assn. of Retired Persons said the premiums on the Medigap policies for more than 3 million of its members are shooting up an average of 30%. Prudential Insurance Co., which provides that coverage, is the biggest single seller of Medigap insurance.

Prudential executives blamed the increase on a soaring number of claims filed by its elderly customers.

Most of the elderly buy supplemental coverage to cover things Medicare does not, including the $736 charged for the first day in a hospital and the beneficiary’s 20% share of doctor bills.

Lania Peterson, a Prudential manager in the company’s Fort Washington, Pa., office, said the increases will vary from state to state. They will also depend on which of the 10 Medigap policies a person buys.

“Beginning in late 1994, we’ve seen a really significant increase in those medical costs and claims volume,” Peterson said. Prudential’s Medigap claims jumped 38% in the first half of 1995, she said.

“We’ve tried to hold the line,” she said. “Our premium increases over the last five years average 7.7% annually. In 1992 and 1994, we gave premium refunds.”

The AARP recently said it plans to terminate the agreement with Prudential when it expires at the end of December 1997. The organization said it will consider new options for selling supplemental insurance to members.

Medicare beneficiaries also pay a monthly premium of $46.10 to the government for their basic Part B coverage. That premium is scheduled to drop to $42.50 next month. The Republican Medicare reform proposal before Congress would increase it to $53.50.

Medigap policies typically cost anywhere from several hundred dollars to $2,000 or more a year. The most expensive policies offer some prescription drug coverage.

Diane Archer, executive director of the Medicare Beneficiaries Defense Fund, a New York-based consumer group, said consumers will be left “between a rock and a hard place” by the Medigap premium increases.

If they drop the supplemental coverage, their only real options are “to self-insure, which is risky or impossible on a fixed income, or to join a Medicare HMO, which will limit choice of doctors and may impede access to necessary care,” she said. “Our concern is fee-for-service Medicare is going to become a luxury only for the most affluent seniors as Medicare supplemental premiums go up.”

Gail Shearer, a health policy analyst for Consumers Union, said the AARP Prudential policies are community-rated, meaning the insurer charges the same rates for all customers in a state regardless of their age or health. Some other Medigap policies are not sold that way.

She said Prudential may be feeling the effects of “adverse selection,” in which younger, healthier senior citizens may be attracted to other policies that offer low rates for 65-year-olds but raise them as people age.

Other insurers are also filing for increases.