Page 2 - Cover Letter and Evaluation for Patricia Hendrickson

Although Medicare does not provide coverage when you are outside the United States, Plan F
includes some benefits for medical emergencies while traveling in other countries. You can see
a description of this coverage on pages 6-7 of the evaluation – it is a benefit not provided by
your employer’s retiree plan.

In addition, Plan F covers what are known as “excess charges” from providers who do not
accept Medicare’s approved rates as payment in full. As an example, a doctor may accept
Medicare patients but not agree to accept Medicare’s approved rates. In that case, the doctor
can charge up to 15% more than the approved rates. Usually these excess charges are only a
few dollars, but in isolated cases they can be substantial. It’s unclear to me whether your
employer plan covers these excess charges, since they are not covered by Medicare. But at
present this doesn’t seem to be a concern, since according to the Medicare web site all your
physicians accept Medicare’s approved rates (see Appendix A1)

Because Medigap Plan F is so comprehensive, your only cost for Medicare-covered services will
be your premiums. Another way of saying that is that in Plan F you will have no co-payments or
deductibles to satisfy. Although Plan F does not have an out-of-pocket limit, it is rarely an issue
because Medicare’s underlying catastrophic coverage is solid. Beginning in 2020, Plan F (and
Plan C) will no longer be sold, although people who already own this plan at that time may keep
it. In your zip code, a 65-year-old woman can likely purchase a Plan F policy for $2,125 a year or
less. Premiums are shown in Appendices B1 and B2.

During the first six months after you enroll in Part A and B, people can purchase a Medigap
policy without having to answer health-related questions. But after that six-month guaranteed
issue period has past, in New Jersey and most other states they will likely have to answer
questions about their health and any pre-existing conditions they may have before they are
given a quote (if they have a serious pre-existing condition, they may be denied coverage).

The pricing of Medigap policies

The premiums shown in the appendices are from the State of New Jersey’s Dept. of Aging
Services and from CSG Actuarial, a firm that provides quotes for insurance agents. Some of the
premiums in CSG Actuarial’s list may be lower than you can get because commissions are not
included (unfortunately, there’s no way to filter these out or for me to know which ones they
are).

In New Jersey most insurance companies that sell Medigap policies use what is known as an
“attained-age rating” to determine their premiums. Attained-age policies usually raise their
premiums by about 3% a year for each additional year or age. That’s in addition to increases
due to health inflation. So, older retirees pay more than do younger ones for the same
coverage.

The exception is the company that sells the most Medigap policies – UnitedHealthcare or UHC,
whose Medigap policies are endorsed by AARP. UHC uses a modified community rating in

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