Page 4 - Cover Letter and Medicare Evaluation for Barbara Pender

to go with a company that has relatively low premiums, you may also want to factor in a
company’s financial strength and size. One guideline is that larger companies tend to have
slightly lower annual premium increases, according to a government study a few years ago.

CSG Actuarial’s premium comparisons in Appendix A2 and Appendix A3 may be helpful in a few
ways. First, they can serve as a starting point to identify the companies that have lower
premiums; second, they show the companies’ financial ratings by A.M Best and (in a few cases)
Standard & Poor. And for many insurers, they show recent years’ premium increases. CSG
Actuarial is a quoting service for insurance agents, and in some cases the premiums shown in
the appendices may not include commissions (I don’t know which ones they are). But for most
companies, the premiums shown should accurately reflect what you will pay today. Still, it’s
important to call the insurers to get current quotes.

Some companies offer discounts of various kinds. A few companies, for instance, will offer a
discount for automatic monthly debit payments or for paying a year’s premiums in advance.
And some companies offer a discount when both spouses buy a Medigap policy. The companies
that offer these “household discounts” are indicated in Appendices B2 and B3, as well as the
discount percentages (the premiums that are shown do not include these discounts). If you and
your husband both decide to get Medigap policies, you might see if you can save money by
choosing an insurance company that offers household discounts.

Another type of discount is the early enrollment discount offered by the UnitedHealthcare
Medigap policies endorsed by AARP. The discount is 3% a year for each year that you are
younger than age 77, and so in your case the discount is 36 % (3% a year times 12 years). These
policies can be good deals if they are attractively priced, but if you get a UHC/AARP Medigap
policy you will probably have two increases a year – the first a 3% increase because you are a
year older, and the second an increase for health care inflation.

Birthday Rule

California has a Medigap consumer protection law that’s known as the “Birthday Rule.” This
law, described in Appendix B4, allows Medigap policyholders to switch insurance companies
each year during the 60-day period following their birthdays without having to answer
questions about their health or disclosing pre-existing conditions.

Medigap policyholders can use this rule to avoid being stuck with an insurance company that
has sharply raised its premiums, switching their policy to a different insurer that has lower
premiums. But they cannot use the Birthday Rule to upgrade from a less comprehensive to a
more comprehensive Medigap plan, e.g., from Plan N to Plan G.

Medicare Advantage plans

Your evaluation compares two highly rated Advantage HMO plans that have no premiums and
no deductibles for either health or prescription drug coverage. Next year there will 70

4