Page 3 - Cover letter and evaluation for Geoffrey Newman

Medigap premiums from the Kansas Department of Insurance (or DOI) and from CSG Actuarial
are shown in Appendices B1 through B4. In these appendices, the Kansas DOI premium
comparisons are listed first, followed by the premiums from CSG Actuarial.

The Kansas DOI premium comparisons have separate categories for companies that use an
issue-age rating approach and those that use an attained-age approach. In theory, a company
that uses the issue-age rating approach sets its premiums higher initially to account for future
age-related increases. But the approach most insurers use is the attained-age rating – here,
companies raise premiums each year to account for the fact that people are a year older and
also make a second adjustment for health care inflation. With the attained-age approach, initial
premiums should be lower but then are likely to increase more quickly.

That’s the theory. But it often doesn’t hold up very well because so many factors besides age
can affect premium increases – companies’ overhead, loss ratios, etc. So, even though issue-age
premiums should be higher to start with, as you can see in the appendices, they are sometimes
lower than attained-age premiums.

Besides the premiums from the Kansas DOI, premiums are listed from CSG Actuarial, a service
used primarily by insurance agents. Some premiums in the CSG lists may be lower than you can
get because the commissions may not be included (unfortunately, there’s no way to filter these
out or for me to know which ones they are). Most of these premiums, though, should be close
to current quotes.

CSG Actuarial’s premiums can be helpful in a couple of ways. First, they can serve as a starting
point to identify the companies that have lower premiums; second, these quotes also show the
insurance companies’ financial ratings by A.M Best and (for the larger companies) Standard &
Poor. Neither the Kansas DOI’s nor CSG Actuarial’s premiums show the companies’ phone
numbers, which can be found in Appendix B5.

Discounts

Insurance companies that sell Medigap policies 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 available when
both spouses buy their policies from the same company. While not all companies offer these
“household discounts,” the ones that do often have substantially reduced premiums.

In addition, the UnitedHealthcare/AARP Medigap policies have an early enrollment discount
that in your case is 30% below AARP’s standard rate. The discount is calculated by multiplying
3% by the number of years that you are younger than 75. Your discount equals 10 years x 3%,
or 30%, and that discount will be reduced by 3% each year until you turn 75. If you acquire an
AARP policy, then, you may have two increases a year – one a 3% increase associated with the
reduced discount (until you turn 75) and the other an increase for health care inflation. AARP

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