Page 3 - Cover Letter & Evaluation for Carola Bundy

deductible will not apply to the out-of-pocket limit. Annual premiums for Plan L are
about $1,350 or perhaps less.

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.

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premiums are a few months out of date, in which case the quotes you receive could be slightly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
CSG Actuarial comparisons give you the insurers’ financial ratings in most cases.

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

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