For-profit companies sell Medigap policies because these supplemental insurance plans provide a steady revenue stream through premiums paid by policyholders.

 For-profit companies sell Medigap policies because these supplemental insurance plans provide a steady revenue stream through premiums paid by policyholders. Medigap policies cover some out-of-pocket costs not covered by Original Medicare, such as deductibles, copayments, and coinsurance, making them attractive to many Medicare beneficiaries. These policies are sold by private insurers who generate profit primarily through the premiums they collect.

Companies make money on Medigap policies by setting premiums that exceed the expected costs of the claims they will pay, including administrative costs and profit margins. Although premiums can vary by insurer and state, companies use medical underwriting and pricing strategies to manage risk and profitability, except during certain guaranteed issue periods where they must sell policies without denying coverage or charging higher premiums for pre-existing conditions. Additionally, some companies offer policies like Medicare SELECT with network restrictions to lower costs and attract more customers.

Insurance agents also play a role, earning commissions that can influence the types of policies marketed. Medigap policies provide insurers with a long-term customer base, as these policies typically renew annually with premiums, contributing to sustained profit. While the profit margins for Medigap may be lower compared to Medicare Advantage, the policies are a lucrative supplement to insurance companies' offerings.

In summary, for-profit companies sell Medigap policies to gain reliable income from premiums while managing risk through underwriting and plan design, making these policies a profitable part of their Medicare product portfolio.[2][3][4][9][10]

Sources

[1] Illegal Medigap practices - Medicare https://www.medicare.gov/health-drug-plans/medigap/ready-to-buy/how/illegal-practices

[2] Medigap and the One-Way-Street Problem https://crr.bc.edu/medigap-and-the-one-way-street-problem/

[3] Medigap May Be Elusive for Medicare Beneficiaries with Pre ... - KFF https://www.kff.org/medicare/medigap-may-be-elusive-for-medicare-beneficiaries-with-pre-existing-conditions/

[4] [PDF] Choosing a Medigap Policy - NAIC https://content.naic.org/sites/default/files/publication-med-lp-consumer-medigap.pdf

[5] Best Medicare Supplement Insurance Companies in 2025 https://www.nerdwallet.com/insurance/medicare/best-medigap-insurance-companies

[6] The Best Medicare Supplement Companies of 2022 MedicareGuide ... https://medicareguide.com/best-medicare-supplement-companies

[7] Most reliable insurance agencies/brokers selling Medigap? https://www.bogleheads.org/forum/viewtopic.php?t=443314

[8] Find a Medigap policy that works for you - Medicare https://www.medicare.gov/medigap-supplemental-insurance-plans/

[9] Brokers Get Lush Trips and Cash Perks to Sell Costly Medigap Plans https://www.nytimes.com/2023/03/01/health/medicare-plans-elizabeth-warren.html

[10] 10 Things to Know About Medigap Plans - AARP https://www.aarp.org/medicare/guide-to-medigap-plans/