Page 3 - Cover Letter & Evaluation for Michael Novotny

less comprehensive Medigap policies like Plan K have less risk than it might initially
seem. You should be able to get Plan K for $1,100 a year or less.

Another possibility is Plan L, which has a benefit design similar to that of Plan K. But with
Plan L, you’ll pay higher premiums ($1,900 a year) in exchange for a lower out-of-pocket
limit ($2,620) and lower co-insurance payments – 5% for most Part B services compared
to 10% in Plan K.

One other thing to be aware of if you get a less comprehensive plan – the out-of-pocket
limit applies only to those medical services that the plan covers. Neither Plan K nor Plan
L cover the $183 Part B deductible, for instance, and so any money you spend for the
deductible will not count toward the plan’s out-of-pocket limit. Still, Plans K and L cover
the most expensive Medicare services, and so most of your co-payments and cost-
sharing will count toward the out-of-pocket limit (premiums do not count, though).

California’s Birthday Rule for Medigap policies

Unlike most other states, California has a law to protect Medigap policyholders from getting
stuck with an insurance company that has substantially raised its premiums. This law gives
policyholders a guaranteed right to switch to another insurance company during the 30-day
period following their birthdays each year without having to answer health questions.
Consequently, 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.

This law is sometimes referred to as the “birthday rule,” and it is explained in an attachment to
this letter. People cannot, however, use the birthday rule to upgrade to a more comprehensive
plan – they can only switch laterally or to a less comprehensive plan. As an example, if someone
has Plan K with ABC Company, he or she can switch to Plan K with XYZ Company. But he or she
cannot switch to Plan G without first having to answer health-related questions.

Also, the UnitedHealthcare Medigap policies endorsed by AARP may allow you to upgrade
without answering health-related questions. Thus you could in a few years switch from Plan K
or Plan L to Plan G. Before relying on this, however, you should confirm with UHC/AARP that
this is still the company’s policy and that it will apply to you.

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.

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