Page 4 - Cover Letter and Medicare evaluation for Mr. Rod Fallow

each year during the 60-day period following their birthdays without having to answer
questions about their health or disclosing pre-existing conditions.

The Birthday Rule says that if you are a California resident who has a Medigap policy, during the
60-day period following your birthday each year, you can switch your policy to an insurer which
has lower premiums. But people 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 or Plan F.

Premium Discounts

Insurance companies that sell Medigap policies sometimes offer discounts of various kinds.
Some companies, for instance, have discounts for automatic debit payments of monthly
premiums or for paying for a year’s premiums in advance. The largest discounts are typically
when both spouses buy their policies from the same company. While not all companies offer
“household discounts,” the ones that do often have substantially reduced premiums.

In addition, the UnitedHealthcare/AARP Medigap policies sold in California have an early
enrollment discount that in your case is 30% below AARP’s standard rate. The discount is
calculated by multiplying 3% by the number of years that you are younger than 77. In your case,
the discount equals 10 years x 3%, or 3%, and that discount will be reduced by 3% each year
until you turn 77.

If you acquire an AARP policy, then, you may have two premium increases a year – one a 3%
increase associated with the reduced discount (until you turn 77) and the other an increase for
health care inflation. AARP policies can be good choices if they are attractively priced, but you
should be aware that because of the gradually vanishing discount each year until you turn 77,
your premiums may rise more quickly than with many other insurers. After you turn 77, the
AARP premiums may increase more slowly.

Medicare Advantage plans

Your evaluation includes two Advantage HMO plans, neither of which appears to be an optimal
choice since one of your providers is in Southern California. I selected two HMO plans that have
a quality rating of four stars. Medicare’s quality ratings are an important criterion to consider
when choosing an Advantage plan. Among other things, they measure not only a plan’s clinical
quality, but its attention to preventive tests and screenings, and customer satisfaction. Plans
have a financial incentive to score well because every year that they are rated four stars or
higher, they are awarded substantial bonuses.

Below are summaries of the two Advantage HMO plans compared in your evaluation:
memberships.

1) Ava Advantage HMO Plan. This four-star plan is sponsored by Alignment Health, which
has for several years earned superior quality ratings for its medical care. It has no

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