Page 3 - Cover letter and evaluation for Jack Hosier

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.

Unlike most other states, California has a law that protects Medigap policyholders from getting
stuck with an insurance company that substantially raises its premiums. This law gives people a
guaranteed right to switch to another insurance company during the 30-day period following
their birthdays each year without going through medical underwriting (although premiums can
take age, gender, and smoking status into account). That means that if in the future you find
another insurance company that has lower premiums than you are currently paying, you can
switch to that company during the 30-day period.

This law is sometimes referred to as the “birthday rule,” and it is explained in an attachment to
this letter. People cannot, however, use the birthday rule to upgrade to a more comprehensive
plan – they can only switch laterally or to a less comprehensive plan. As an example, if someone
has Plan F with ABC Company, he or she can switch to Plan F with XYZ Company. But he or she
cannot switch from Plan L to Plan F without first having to answer health-related questions.

Premiums for the four Medigap plans in your evaluation are shown in Appendices B1 through
B6. The premium comparisons in Appendix B1 are from the California Department of Insurance
and they include insurance companies’ toll-free telephone numbers. Appendices B2 through B5
are from CSG Actuarial, a firm that provides quotes to insurance agents.

Some premiums in the CSG lists 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 close to current quotes. Also, customized
online quotes from AARP are shown in Appendix A6 – these quotes do not include AARP’s 5%
household discount (explained below).

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. They do not show the companies’ phone numbers, which can be found in Appendix B1

Your premiums will likely be 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
California allows insurers to rate by gender, most of them have 10%-15% 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
(the household discounts are the same for you and for Linda).

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