Does AARP's branding agreement with UHC for Medigap plans preclude UHC from closing books?
So many insurance companies offering Medigap (Medicare Supplement) insurance plans routinely close their plans to new enrollees (known as "closed books" or "closed blocks of business") after about 5 years of business.
The reason for this is as claims come in, they have to start raising rates to cover costs; once their rates are no longer competitive, they "close" the plan and open another under a different name under a shell company. Their initial rates may be really cheap compared to other plans, to sucker newcomers into their plan. But as they raise rates, and then close the plan to new enrollees, the rates really skyrocket since there are no new healthy people signing up. Those who cannot pass underwriting are stuck in that plan along with its jaw-dropping rates.
So my question is, does AARP's branding agreement with UHC for Medigap plans preclude UHC from closing books and playing the plan shell game? It seems if AARP is looking out for their members' interests, they would forbid UHC from doing these switcheroos in their contract.
Yes, their rates would not be the cheapest (and indeed, in my market, they are $16 higher/month than the lowest premium currently). But at least a policyholder would know they were not going to be trapped in a closed pool (and subsequent death spiral of rate hikes) if AARP's contract precluded such a practice. Of course, rates will always increase with all plans, due to medical inflation and advancing age; but closed pool rates far exceed these.
Really, the whole idea of insurance is to indemnify policyholders against loss by spreading risk among as large and as diversified pool as possible for the benefit of all. Baiting enrollees with cheap rates and then trapping them in closed pools runs counter to how insurance is supposed to work.