Page 5 - Cover Letter and Evaluation for Patricia Hendrickson

coverage threshold ($5,000 in 2018), after which enrollees pay much lesser amounts that
cannot exceed 5% of a drug’s cost.

Analysis

Your employer plan’s coverage is superior in almost every way. Its benefit design provides more
coverage than most young retirees need or would want to pay for. But since it is generously
subsidized by the employer, that’s not a concern.

Because employer plans are group plans, everyone in the plan pays the same annual premiums
regardless of age. That’s a great benefit for older retirees, particularly compared to Medigap
policies. In New Jersey and most other states, Medigap policies can be pricy for older retirees,
e.g., an 85-year-old will likely pay 50% more in annual premiums than a 65-year-old (or 30%
more in the UnitedHealthcare policies endorsed by AARP).

When comparing a Medigap policy to your employer retiree plan, perhaps the most important
difference is not between the two medical coverages. It is that if you get a Medigap policy, you
will also have to enroll in a Part D stand-alone plan that is greatly inferior to your present
coverage and its $2,000 OOP limit. Approximately one out of four retirees spends more than
$3,000 a year on their prescription drugs, including premiums, and so your employer plan may
at some future point provide needed protection.

On page 4 of your evaluation, you can compare the minimum costs of the employer plan and a
Medigap Plan F policy. As you can see, your minimum or fixed costs in the employer plan are
roughly $1,100 less than with the Medigap policy and Part D plan. The Medigap policy,
however, has no additional costs for health care – it is considered first-dollar coverage with the
entire cost in the premium, i.e., there are no co-payments. And as mentioned earlier, while it
does not have an OOP limit, Plan F’s coverage is so good that it rarely matters.

In the employer plan, on the other hand, you will have some cost-sharing until you reach the
plan’s $750 OOP limit. Yet even if you spend enough to reach the OOP limit, your total out-of-
pocket costs will be about $350 lower in the employer plan than in the Medigap policy.

Patricia, after you’ve had a chance to review the evaluation, please let me know if you would
like additional information.

Sincerely,

David Armes, CFP®

Attachments
WDA:12115

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