Page 1 - Medigap premium comparisons for Mr. Michael Johnson

September 13, 2021

Mr. Michael Johnson
655 S. Rimpau Blvd.
Los Angeles, CA 90005

Dear Michael,

Based on the Medigap premiums shown in the appendices, you will not be able to save a
significant amount if you switch your Plan F policy to another company.

You indicated that in November State Farm will increase your premiums to $2,384 a year
($198.66 a month). According to CSG Actuarial’s premium comparisons for Plan F in Appendix B,
USAA Life has the lowest premiums, but it is only $62 a year less than your new State Farm rate
(as you may know, to get a USAA policy you need to be a military veteran). And because your
State Farm premiums will increase in November, it’s unlikely they will increase again for at least
another year (until November of 2022) – during which time USAA Life and other insurers may
raise their premiums.

One way you can save money is to switch from your current Plan F to Plan G. The only
difference between these two plans is that Plan F covers the Part B deductible while Plan G
does not. This year the Part B deductible is $203, and so if you could save more than $203 in
annual premiums by switching from Plan F to Plan G, you would come out ahead this year. The
Part B deductible goes up by a few dollars each year.

If the premiums in the appendices are reasonably accurate, you’ll save several hundred dollars
next year even after paying the Part B deductible. According to the California Dept. of Insurance
premium comparisons in Appendix A and the CSG Actuarial Plan G comparisons in Appendix C,
you’ll save more than $700 in premiums if you keep your policy with State Farm but switch to
Plan G.

There’s no guarantee, of course, that the premium savings will remain as large as they are now,
but my guess is that you will see savings for the next several years because Plan F’s premiums
are currently so much higher than Plan G’s.

Why are State Farm’s Plan G premiums so low compared to those of Plan F? My guess is that
it’s because Plan F can no longer be sold to people who turned/will turn 65 in 2020 or later. For
these people, Plan G is their most comprehensive choice (as I recall, this is the case for Janet –
she was not eligible to get Plan F). The market for Plan G, then, is expanding, and insurers are
competing to sell this plan to incoming Medicare beneficiaries. That puts pressure on the
insurers to keep premiums low. The market for Plan F, on the other hand, is shrinking, and