Page 4 - Cover Letter & Evaluation for Michael Novotny

The premium comparisons in Appendix B1 are from the California Department of Insurance and
include insurance companies’ toll-free telephone numbers. Appendices B2 and B3 are from CSG
Actuarial, a firm that provides quotes to insurance agents. Some premiums in the CSG lists may
be lower than you can get because the commissions may not be included (unfortunately,
there’s no way to filter these out or for me to know which ones they are). Most of these
premiums, though, should be close to current quotes.

CSG Actuarial’s premiums can be helpful in a couple of ways. First, they can serve as a starting
point to identify the companies that have lower premiums; second, these quotes also show the
insurance companies’ financial ratings by A.M Best and (for the larger companies) Standard &
Poor. They do not show the companies’ phone numbers, which can be found in Appendix B1

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 18% below AARP’s standard rate. The discount is calculated by multiplying
3% by the number of years that you are younger than 75. In your case, the discount equals 6
years x 3%, or 21%, and that discount will be reduced by 3% each year until you turn 75.

If you acquire an AARP policy and get an early enrollment discount, you may have two increases
a year – one a 3% increase associated with the reduced discount (until you turn 75) and the
other an annual increase for health care inflation. AARP policies can be good choices if they are
attractively priced, but you should be aware that because of the reduced discount each year
until you are 75, your premiums may rise more quickly than with many other insurers. After you
turn 75, the AARP premiums will likely increase more slowly.

In addition to discounts, some insurers provide extra benefits such as membership in Silver
Sneakers, which give you access to more than 12,000 gyms and health clubs nationally.

Medicare Advantage plans

As you are aware, Advantage plans are managed-care plans – primarily HMO’s and PPO’s.
Orange County has several excellent Advantage plans, including the two HMO plans compared
in your evaluation. Dr. Hall is listed in the network directories of both plans, but you should
verify that with his office before enrolling in a plan. Both plans have no premiums for either
medical or prescription drug coverage and no health plan deductibles. Moreover, both have
4.5-star quality ratings from Medicare (out of a possible five stars). These quality ratings are

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