Page 3 - Evaluation and cover letter for Jack Barnhill

of an expensive treatment, they could be substantial. Medigap Plan F covers these excess
charges while Plan L does not.

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.

Unlike most other states, California has a law that protects Medigap policyholders from getting
stuck with an insurance company that substantially raises its premiums. This law gives people a
guaranteed right to switch to another insurance company during the 30-day period following
their birthdays each year without going through medical underwriting. 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 L with ABC Company, he or she can switch to Plan L with XYZ Company. But he or she
cannot switch from to Plan F without first having to answer health-related questions.

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.

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