Page 4 - Cover Letter and Evaluation for Patricia Hendrickson

most medical costs until you reach the plan’s out-of-pocket (or OOP) limit, after which you will
not pay anything for covered services. This plan covers 80% of most Medicare-approved costs
until you reach the plan’s OOP limit – but Medicare, the primary insurance, also pays the 80%
for most Part B services, leaving the employer plan with nothing to pay. Then you pay the 20%
balance. Attached to this letter is an example of how an indemnity plan works.

There are some Part B services – recommended preventive services -- that Medicare covers at
100%, and so you will pay nothing for those. As for Part A services, you will be responsible for
the $1,340 Part A deductible, although this obligation ends when you reach the OOP limit. The
most you could pay, then, if you were hospitalized is $750 (or less if you have already paid for
other services that count toward the OOP limit).

This plan’s premiums are exceptionally low for the benefits that it offers -- $1,039 a year for
combined medical and prescription drug coverage. In this plan the maximum you could spend
for Medicare-covered services this year is $3,789 -- $1,039 in plan premiums + the $750 medical
OOP limit + the $2,000 Rx drug OOP limit.

One approach to estimating the value of this plan is to look at its total premiums for medical
and Rx drug coverage. If retirees are paying approximately 20% of the employer plan premiums,
as your e-mail indicated, then the total annual premium for this coverage exceeds $5,000. That
$4,000 subsidy by the employer compares favorably to the Medigap policy/Part D stand-alone
plan combination, which is not subsidized.

This plan’s benefits summary indicates that it has a $250,000 lifetime cap on the amounts it will
pay for medical services, not including premiums. Medicare supplemental plans cannot place a
lifetime limit on benefits, as explained in an attachment to this letter. The only exceptions are
supplemental plans that were in place before 1992, and so it’s likely that this is an older plan
(there are not many indemnity plans left).

Rx Drug Plan Coverage

Levothyroxine sodium, the generic equivalent for Synthroid, was used to estimate your
Medicare prescription drug costs.

If you were to get a Medigap policy, you would also need to enroll in a Part D stand-alone plan.
The Humana-Walmart Rx Plan has the lowest mail-order costs for levothyroxine sodium at $240
a year, which includes premiums and co-payments. In the Horizon Blue Medicare Advantage
plan, your annual costs this year are only $56, again including premiums and co-payments. And
in the CIGNA Medicare Supplemental plan, your co-payments are $120 a year. That does not
include plan premiums, which are an unspecified portion of the plan’s premium.

The CIGNA plan’s strongest suit is its $2,000 out-of-pocket limit for Rx drugs. In contrast,
Medicare Part D plans do not have an out-of-pocket limit. Instead, they have a catastrophic

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