Page 3 - Cover Letter and evaluation for Katherine Kensky

Most people who buy Medigap policies will keep those policies with the same insurance
companies throughout retirement. In a few cases it may be difficult for them to change
companies later since they will have to answer questions about their health and any pre-
existing conditions before they can get a quote.

It’s good, then, to give some thought as to the company that you will buy your policy from.
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 B2 through
B5. These are from CSG Actuarial, a firm that provides quotes to insurance agents. Some
premiums listed here may be lower than you can get since 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 the premiums, though, should be accurate.

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. Then you can call two or three of
those companies for current quotes; second, in most cases CSG Actuarial also shows the
insurance companies’ financial ratings by A.M Best and Standard & Poor. Also, current online
quotes from AARP and Blue Cross Blue Shield of Georgia are in Appendix B6.

There appear to be greater-than-usual premium variations for Medigap policies in Chatham
County. Also, some of the premiums do not seem to be rationally priced, so they may not be
correct. An example is in the online quotes in Appendix B6 -- Blue Cross Blue Shield of Georgia
sells Plan G for approximately $670 less per year than Plan F. But the only difference between
these two plans is that Plan G does not cover the $183 Part B deductible.

Discounts

Many insurance companies that sell Medigap policies offer discounts of various kinds. The most
common are household discounts when both spouses buy their policies from the same
company. Companies sometimes offer other discounts as well, e.g., for automatic debit
payments of monthly premiums.

The UnitedHealthcare/AARP Medigap policies have an early enrollment discount that in your
case is 30% below the standard rate. This discount is calculated by multiplying 3% by the
number of years that someone is younger than 75. For someone who’s 65, the discount equals
10 years x 3%, or 30%. When you turn 66, the discount is reduced to 27%, when you turn 67 it is
reduced to 24%, and so on.

The reason for pointing this out is that if you choose a UHC/AARP policy, you may have two
increases a year – one that’s 3% a year until you turn 75, and the other that’s an increase for

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