Page 3 - Cover Letter and Evaluation for Dr. Herman Kensky

The pricing of Medigap policies

Most people who buy Medigap policies will keep those policies with the same insurance
companies. One reason is that, at least in a few cases it may be difficult for them later to
change companies because they will have to answer questions about their health before they
can get a policy.

It’s worthwhile, then, to give some thought as to the company that you will buy your policy
from and to make a few calls to get current quotes. While it’s important to go with a company
that has relatively low premiums, you may also want to factor in a company’s financial strength
and size. As a rule, larger companies have slightly lower annual premium increases, according to
a government study a few years ago.

Premiums for the four Medigap plans in your evaluation are shown in Appendices A2 through
A5. These are from CSG Actuarial, a firm that provides quotes to insurance agents. Some
premiums may be lower than you can get because the commissions may not be included
(unfortunately, there’s no way to filter these out or for me to know which ones they are). Most
of these premiums, though, should be fairly close to current quotes. Also, current online quotes
from two insurers are shown in Appendix A6.

CSG Actuarial’s premiums can be helpful in a couple of ways. First, they can serve as a starting
point to identify the companies that have lower premiums; second, these quotes also show the
insurance companies’ financial ratings by A.M Best and (for the larger companies) Standard &
Poor.

Your premiums will likely be between 15% and 20% higher than your wife’s. One reason is that
you are older, with most companies increasing premiums by about 3% for each additional year
of age. And since Georgia allows insurers to rate by gender, most of them have higher
premiums for men than they do for women of the same age, although it can vary widely by
company. The UnitedHealthcare policies that are endorsed by AARP do not rate by gender, so
the only premium difference is the amount of the early enrollment discount, which is discussed
below. In an AARP policy your premiums should be about 9% higher than your wife’s.

Discounts

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

The UnitedHealthcare/AARP Medigap policies have an early enrollment discount that in your
case is 21% below AARP’s standard rate. This discount is calculated by multiplying 3% by the

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