Page 2 - Cover Letter and Evaluation for Judy Thomas

PERA plans, where (even though they are PPO plans) there are no network restrictions or
higher costs when you go outside the network.

As you probably know, Medigap policies do not include Rx drug coverage, and if you decide to
acquire a Medigap policy, you will need to enroll in a Part D stand-alone plan, discussed below.
Both Plans G and N include some benefits for medical emergencies while traveling outside the
United States, as do the PERA plans. The benefit designs for all 10 Medigap plans are shown on
pages 6-7. Here are summaries of the two Medigap plans in your evaluation.

1) Medigap Plan G. This is a comprehensive Medigap plan -- it will become the most
comprehensive plan in 2020 when Plans F and C will no longer be sold. Plan G also
covers ‘Part B excess charges” by providers who have not agreed to accept Medicare’s
approved rates. These providers can charge up to 15% more than Medicare’s approved
rates, and Plan G covers these additional costs, which are typically small.

According to the Medicare web site, four of your doctors accept Medicare-approved
rates, as shown in Appendix A1. I was unable to find either Dr. Healy or New York
Cardiology Associates on the Medicare web site, but it’s likely that she is listed under a
different group name or affiliation. But even if she does not accept Medicare-approved
rates, any excess charges would be covered by Plan G. Estimated annual premiums are
$1,700, but you may be able to get a policy for less.

2) Medigap Plan N. This is slightly less comprehensive than Plan G but still has solid
coverage. It does not cover Part B excess charges. You can see this plan’s benefit design
on pages 6-7 of the evaluation. Estimated annual premiums are $1,450.

The pricing of Medigap policies

If you decide to get a Medigap policy, 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 go with 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.

As you aware, you have a guaranteed right to buy a Medigap policy without having to disclose
pre-existing conditions or answer questions about your health. Your premiums will, however,
be adjusted for age and gender. If you decide to remain with the PERA coverage, it’s uncertain
whether you would have that guaranteed right again, although you would if PERA were to drop
retiree health coverage altogether.

Still, many people who are in relatively good health wait until their late 70s and early 80s to buy
their first Medigap policy, and for them waiting until later retirement to get a policy can save
money. Yet there is a risk because people with serious pre-existing conditions will be charged
higher premiums and in some cases may be denied coverage – a risk that increases with age.

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