Page 2 - Cover Letter and Appendices for Irene Ellsworth

Your Medigap policy

Jerry indicated that he and you both have Medigap Plan F issued by Blue Cross. As you may
know, Medigap policies are nationally standardized, which means that the coverage for Plan F
(and other Medigap plans) is identical regardless of which insurance company you get your
policy from. Some companies may include a non-medical benefit such as a membership in Silver
Sneakers, which gives you access to some health clubs and gyms.

If the premiums shown in Appendices C2 and C3 are reasonably accurate, you can save money
by switching from Blue Cross to a different insurer. California has a law that permits you during
the 30-day period following your birthday each year to switch your Medigap policy from one
company to another without answering health questions or disclosing pre-existing conditions.
This law, which is known as the Birthday Rule, is summarized in Appendix C1. In California,
people sometimes use the Birthday Rule to switch their Medigap policy to a company that has
lower premiums.

Appendix C2 is the California Dept. of Insurance’s list of each company’s premiums for someone
your age who lives in Sacramento County and each company’s phone number. Appendix C3 lists
the premiums from by CSG Actuarial, a consulting firm used by insurance agents. Some of the
CSG Actuarial premiums 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).

In both Appendix C2 and Appendix C3, the premiums are for a 71-year-old. That’s because if
you decide to switch companies, you will be 71 at the time of the switch. Your current Blue
Cross premiums are probably lower than those shown because your most recent premium
increase came when you were 70.

Also, the premiums shown do not include the household discounts that many companies offer
when both spouses get their Medigap policies from the same company. Not all insurers offer a
household discount, when can range between 3% and 10%. The CSG Actuarial premium
comparisons in Appendix C3 indicate the companies that have household discounts as well as
the size of the discounts. According to this information, Blue Cross offers a 5% household
discount when both spouses buy a policy.

If you switch to a different insurance company, Jerry will lose that Blue Cross household
discount. It’s also possible that if you switch your policy to another company that also has a
household discount, Jerry might be able switch to (without using the birthday rule) and you
would once again have a discount.

Yet the household discount may not be important if you can reduce your current premiums by
several hundred dollars a year. As an example, the premium comparisons indicate that Globe
Life will sell you a Medigap Plan F policy for roughly $400 a year less than you may be paying for
your current Blue Cross policy (Globe Life does not offer a household discount). So you’d
probably come out ahead even if Jerry loses his Blue Cross household discount. And he might

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