Meet the Medigap players

Many of the largest carriers sell Medicare supplemental insurance. UnitedHealthcare, the health insurance unit of UnitedHealth Group, dominates the Medigap market because of its relationship with AARP.

More than 4 million seniors had a UnitedHealthcare Medigap plan in 2015, or about one-third of the entire Medigap population.

Blue Cross and Blue Shield insurers also hold a lot of power in their respective markets. Health Care Service Corp., the Blues carrier in five states, had more than 615,000 Medigap members last year. Publicly traded Anthem declined to disclose the exact number of Medigap enrollees, but industry analysts estimate Anthem covers around 850,000 members.

Aetna and Humana, which are trying to obtain regulatory approval for their pending merger, have a combined 725,000 Medigap enrollees. John Osborn, president of Osborn & Associates, said the Aetna deal has created anxiety in his state, where regulators recently called the merger anti-competitive.

“Everybody is scared to death of that acquisition,” he said. “We basically need to cross our fingers, and hopefully the insurance companies will be able to include us in the enrollments of those plans. The first thing that they take away is the compensation to the agent.”

Medicare supplement plans represent a small slice of most insurers' total revenue, but a Modern Healthcare analysis of health insurance filings shows companies are reaping sizable profit margins. That has helped insurers that have taken a financial beating from the Affordable Care Act exchanges.

Health Care Service Corp. posted a $314 million underwriting profit from its Medigap plans in 2015 after collecting $1.4 billion in Medigap premiums, equaling a 22% margin. Mutual of Omaha had a 25% margin on its Medigap plans last year, leading to a $161.5 million surplus. Highmark, the Pittsburgh-based Blues giant, reaped $62.3 million in profit last year from its Medigap policies.

Blue Cross and Blue Shield of Michigan is a notable outlier for losing money. The insurer had roughly 200,000 Medigap members last year and lost a whopping $170 million. In 2011, Michigan's attorney general enacted a five-year rate freeze on the Michigan Blues' Medigap plans. The rate hike prohibition ends this August.