Page 3 - Cover Letter and Evaluation for Marilyn Shelton

As an example, if you go to the doctor and the Medicare-approved cost of the visit is
$100, then Part B will in most cases pay $80 of that amount. Plan K would pay for one-
half of the remaining $20 balance, e.g., $10, or 10% of the total cost. Plan L above would
pay for 75% of the remaining balance, and you would owe is only $5.

Plan K’s high out-of-pocket limit, then, means you’d have to use more than $100,000 in
Medicare-covered medical services before you reached the plan’s $5,880 out-of-pocket
limit. Consequently, there’s less risk in Plans K and L than most people think there is.

Not many insurers sell Plans K and L, in part because they generate lower commissions for the
agents who sell them.

The pricing of Medigap policies

It’s good to give some thought as to the company that you will buy your policy from and to
make a few calls to get current quotes. While it’s important to choose a company that has
relatively low premiums, you may also want to factor in a company’s financial strength and size.
As a rule, larger companies have slightly lower annual premium increases, according to a
government study a few years ago.

Unlike most other states, California has a law – the Birthday Rule -- that protects Medigap
policyholders from having to remain with an insurance company that has sharply raised its
premiums. This law, explained in an attachment to this letter, gives people a guaranteed right
to switch to another insurance company without answering health questions during the 30-day
period following their birthdays each year.

If in the future you find another insurance company that has lower premiums, you can switch to
that company during the 30-day period following your birthday each year. But you cannot use
the Birthday Rule to upgrade to a more comprehensive Medigap plan, e.g., from Plan L to Plan
G. You might be able to upgrade on your own, but you would first have to answer questions
about your health and wouldn’t be protected by the Birthday Rule.

The premium comparisons in Appendix B1 are from the California Department of Insurance and
include insurance companies’ toll-free telephone numbers. It’s possible that some of these
premiums are a few months out of date, in which case the quotes you receive could be slightly
higher.

Appendices B2 through B5 list the premiums for each plan in your evaluation. These premiums
are from CSG Actuarial, a firm that provides quotes for insurance agents. 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 whether the commissions are included).

The CSG Actuarial premiums may be helpful in a couple of ways. The premiums are sorted from
lowest to highest, which makes it easier to identify the lowest-premium companies. Also, the

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