Page 4 - Cover Letter and Evaluation for Nobuko Christy

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 – the Birthday Rule -- that protects Medigap
policyholders from having to remain with an insurance company that has sharply raised its
premiums. This law, explained in an attachment to this letter, gives people a guaranteed right
to switch to another insurance company without answering health questions during the 30-day
period following their birthdays each year. If you get a Medigap policy and in the future you
find that another insurance company has lower premiums, you can switch to that company
during the 30-day period following your birthday each year. But you cannot use the Birthday
Rule to upgrade to a more comprehensive Medigap plan, e.g., from Plan N to Plan G.

The premium comparisons in Appendix B1 are from the California Department of Insurance and
include insurance companies’ toll-free telephone numbers. It’s possible that some of these
premiums are a few months out of date, in which case the quotes you receive could be slightly
higher. Also, many of the insurers schedule their annual premium increases for January, and
because you won’t be enrolled until March, your premiums may be higher then.

Appendices B2 through B4 separately list the premiums for each plan in your evaluation. These
premiums are from CSG Actuarial, a firm that provides quotes for insurance agents. Some of the
premiums here 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).

The CSG Actuarial premiums may be helpful in a couple of ways. The premiums are sorted from
lowest to highest, which makes it easier to identify the lowest-premium companies. Also, the
CSG Actuarial comparisons give you the insurers’ financial ratings in most cases.

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 21% below AARP’s standard rate. The discount is calculated by multiplying
3% by the number of years that you are younger than 75 -- your discount equals 7 years x 3%,
or 30%, and that discount will be reduced by 3% each year until you turn 75.

If you acquire an AARP policy, that means you may have two increases a year – one a 3%
increase associated with the reduced discount (until you turn 75) and the other an increase for
health care inflation. AARP policies can be good choices if they are attractively priced, but you

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