Page 4 - Cover letter and evaluation for Janet Clayton

The premium comparisons in Appendix C1 are from the California Department of Insurance and
include insurance companies’ toll-free telephone numbers. Several of these premiums appear
to be out of date because they were last revised a year or more ago. If you’ll look at the dates
of the last revisions, you will get a better idea of their accuracy.

Appendices C2 through C5 list each plan’s premiums. These for each plan that’s compared in
your evaluation. These premiums are from CSG Actuarial, a firm that provides quotes for
insurance agents. These quotes are updated daily, but some of the premiums here may be
lower than you can get because the commissions are not included (there’s no way for me to
know which ones they are).

The CSG Actuarial premiums may be helpful in several ways. The premiums are sorted from
lowest to highest, making it easier to identify the lowest-premium companies. The lowest
premiums shown for Plan G, as an example, are from State Farm Insurance, whom your
husband may have purchased his Medigap policy from.

Also, in most cases the CSG Actuarial comparisons list the insurers’ financial ratings, the number
of years they have sold Medigap policies in California, and the amounts of the premium
increases for the last four years. But the CSG comparisons do not list the companies’ phone
numbers, which you can find in Appendix C1.

Discounts

The insurance companies that sell Medigap policies often offer discounts of various kinds. As an
example, some companies have discounts for automatic debit payments of monthly premiums
or for paying for a year’s premiums in advance.

The largest discounts are typically the “household discounts” for spouses who buy their policies
from the same company. Not all companies offer household discounts – State Farm, for
instance, does not have them, according to the CSG Actuarial premiums. But those that do
often have substantially reduced premiums. The discounts can range between 3% and 10% --
the percentages are shown in the CSG Actuarial comparisons, but they are not included in the
premiums shown.

In addition, the UnitedHealthcare/AARP Medigap policies offer an early enrollment discount
that in your case is 36% below AARP’s standard rate. The discount is calculated by multiplying
3% by the number of years that you are younger than 77 -- your discount equals 12 years x 3%,
or 36%, and that discount will be reduced by 3% each year until you turn 77.

Thus if you acquire a UHC/AARP Medigap policy, you may have two increases a year – one a 3%
increase associated with the reduced discount (until you turn 77) and the other an increase for
health care inflation. AARP policies can be good choices if they are attractively priced, but you
should be aware that your premiums may rise more quickly than with many other insurers.

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