Page 5 - Cover Letter and Evaluation for Dr. Jim Fisgus

Unlike most other states, California has a law – the Birthday Rule -- that protects Medigap
policyholders from having to remain with an insurance company that sharply raises 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.

And so if you get a Medigap policy and at some future point find that another insurance
company 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 N 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premiums are a few months out of date, in which case the quotes you receive could be slightly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. Also, many of the insurers schedule their annual premium increases for January, and it
doesn’t appear these recent increases are reflected in many of the quotes.

Appendices B2 and B3 list the premiums Plans G and N. 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 which ones these are).

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, in
most cases the CSG Actuarial comparisons give you the insurers’ financial ratings.

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 24% below AARP’s standard rate (the California premium quotes reflect this
discount, I’m fairly certain). The discount is calculated by multiplying 3% by the number of years
that you are younger than 77 -- your discount equals 8 years x 3%, or 24%, and that discount is
reduced by 3% each year until you turn 75.

If you acquire an AARP policy, that means 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

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