Outside Economics

Medicare Basics

Posted by Wendell Brock, MBA, ChFC on Wed, Apr 23, 2014

Medicare is health insurance for Americans 65 and older, those younger than 65 with certain disabilities, and people of any age with End Stage Renal Disease (ESRD). The federal government administers Medicare, and you apply for it through the Social Security20071227 medicare 18 Administration (SSA). There are several types of Medicare coverage.

  • Original Medicare, or Parts A and B, cover inpatient care (Part A) and outpatient services (Part B).
  • A Medicare Advantage plan, called Part C, is sponsored by a private company. Medicare Advantage plans sometimes offer additional services not covered under Original Medicare. Some Medicare Advantage plans also provide prescription drug coverage. You must have enrolled in Parts A and B to enroll in Part C.
  • Medicare prescription drug coverage is called Part D. Like Part C, Part D is provided by private companies.
  • Medigap plans are forms of supplemental insurance that pay for costs not covered by Original Medicare. If you have a Medicare Advantage plan, you cannot also have a Medigap plan.

The advantage plans or Part C, and Part D are likely to become more important than ever. With the baby boomers retiring in massive amounts the Medicare System will be stretched very thin. This will cause two things, 1) an increase in taxes and premiums to pay for the coverage, and 2) a continued reduction of benefits paid for by Medicare.

There are different time periods during which you can enroll in Medicare. For many people, the Initial Enrollment Period - a seven-month period around your 65th birthday - is common. There are also Special Enrollment Periods for people who are retiring and losing employer health coverage, or whose spouse who carried coverage is retiring.

You will want to learn about the different times you can enroll, and which time applies best to your situation. If you don’t enroll on time, you could be without coverage for up to four months and you may have to pay a penalty that lasts as long as you have Medicare!

Timing is also important if you decide to purchase supplemental insurance. You should sign up for supplemental insurance within six months of when you sign up for Part B. If you wait too long, the insurance company can deny you coverage, or charge you higher premiums for pre-existing conditions and impose a waiting period before your coverage starts.

Many people continue to work past age 65, and have health coverage through their employers. Others may be retired, and have insurance through the military (VA or TRICARE benefits) or employee unions. There are different rules depending on whether you are “actively employed” or retired.

Be sure to contact the benefits administrator of your current plan to ask about how it works with Medicare, and if and when you need to sign up for Medicare. You may also want to call the Social Security Administration to make sure that your employer’s advice is consistent with SSA policies.

It is recommended that you seek advice well in advance of signing up for Medicare. Find a trusted insurance source that is well trained in the ins and outs of Medicare. Do your own research as well. Knowing when to sign up and what to sign up for can save you headaches and hassles down the road!

One headache is finding the right doctor, prior to signing up you will want to find out if your current doctor accepts Medicare. If not you will have to go Medicare doctor hunting, which is about the same thing as hunting elephants in Alaska! Fewer and fewer doctors are accepting Medicare – I was visiting with one Doctor who had to stop because his office overhead (staff, rent, utilities, supplies, etc.) was higher than what he was being reimbursed by the government. What has been your experience with Medicare? Good? Bad? Or indifferent? 

Topics: Medicare, Baby Boomers, Social Security Administration

Yuck - Life Insurance!

Posted by Wendell Brock, MBA, ChFC on Thu, Apr 17, 2014

about life insuranceThere are two things in life that are inevitable: death and taxes, as the old saying goes. This article will discuss ways in which you can protect your family upon your death with life insurance – there it’s been said; no one likes to talk about life insurance! While this may not be a very uplifting topic for most people, it is better to plan and be prepared for the event now, than to put it off and perhaps leave your family coping with both your loss and a personal financial crisis.

If you have young children at home, this is an especially important topic. It doesn't matter if you are a breadwinner or a stay-at-home parent. Having adequate life insurance coverage for both spouses will ensure that your family will be provided for once you are gone.

A good rule of thumb is to have ten to as much as twenty times your income in life insurance coverage.  If you are in debt, this amount should cover any remaining debt, burial costs and leave money enough to invest, whereby earning a rate of return that replaces your lost earnings.

If you have a small policy through your employer, that may not be enough. A small policy may be able to cover burial expenses and living expenses for about a year, but what will your family do after that? You may need to review it and consider purchasing a separate policy. Making sure you have plenty of coverage will allow your family to live comfortably until they figure out the next step in their lives.

Waiting too long to buy life insurance is risky for a few reasons. First, it is always possible that something may happen to you before you are able to buy a policy and your family is then left unprotected. You may have a change in health that could substantially increase your rates or even eliminate your ability to have life insurance. Also, life insurance is cheaper to purchase when you are younger and the rates are locked for the set time of the policy.

In considering the term length of the policy, don't try and save money by purchasing a shorter term. A lot of health changes can happen in a small amount of time and you could be hampering your future ability to have inexpensive coverage. As a general rule, if you are planning on having children in the future, having a 30-year or longer plan might make sense for you. If you have young children but are not planning on having any more, than a 20-year policy might be appropriate.

You may have needs that truly last a lifetime and would require a mix of term insurance and permanent insurance. That is a challenge is to properly asses a family’s needs and plan accordingly. Even though some needs may change over time, some financial needs are constant or some needs are replaced by other needs.

Insurance premiums are based on three general areas: the insurance company administrative expenses, company investment returns, and mortality expenses (death claims paid). Term rates are generally lower due to the fact that so many of the policies expire before the company pays a death claim. Fewer claims, lower premiums. Permanent insurance or cash value policies are typically in-force for a longer period of time and thus experience more death claims and thus have higher initial premiums. Even with term insurance, a 30 year term policy will be much more expensive than a 20 or 10 year term policy – the risk of death and thus the risk of paying a death claim is greater for the insurance company – so the premium expense is much higher.

It is good to review your policy from time to time to make sure your coverage is adequate to your needs. Circumstances and needs change as life progresses and you may find that the policy you purchased 10-15 years ago will no longer do for your family. Perhaps you are making more money now and your family is used to a higher lifestyle. Or maybe your health habits have improved and you can qualify for better premiums. Periodically assessing your circumstances can either help you save money or require additional coverage.

Be sure to shop around before you purchase your insurance. At times the cheaper policies have the most stringent underwriting standards, thus making the slightest health problem(s) a standard rate instead of the advertised preferred rate. Independent agents can pull quotes from many different sources, thus ensuring a competitive quote. Educate yourself before purchasing any policy.

Life insurance is a major part of a wise financial plan. Love your family enough to protect them from a financial crisis in the midst of their grief. Remember the insurance is not for you – its for the people you love most! Is your family properly protected?

Topics: life insurance, death, taxes, permanent insurance, term insurance, cash value, personal financial crisis, debt

Long-term Care Insurance

Posted by Wendell Brock, MBA, ChFC on Thu, Apr 03, 2014

Nearly everyone knows someone over age 50, the prime age to purchase Long-term care insurance (LTC), which is an insurance product that helps provide peace of mind and dignity for the elderly who need assistance caring for themselves beyond a predetermined period. There are many aspects to this insurance, how premiums are priced, when does a person go on claim, how many people need the care, etc. Below these items and many more will be discussed.long term care insurance

Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid. Individuals who require long-term care are generally not sick in the traditional sense, but instead, are unable to perform some or all of the basic activities of daily living such as dressing, bathing, eating, toileting, continence, getting in and out of a bed or chair, and walking.

Age is not a determining factor in needing long-term care. According to the U.S. Dept of Health and Human Services, about 60 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. About 40% of those receiving long-term care today are between 18 and 64. Once a change of health occurs long-term care insurance may not be available. Early onset (before age 65) Alzheimer's and Parkinson's Disease are rare but do occur.

LTC insurance generally covers home care, assisted living, adult daycare, respite care, hospice care, nursing home and Alzheimer's facilities. If home care coverage is purchased, long-term care insurance can pay for care within your own home, often from the first day it is needed. It will pay for a visiting or live-in caregiver, companion, housekeeper, therapist or private duty nurse up to seven days a week, 24 hours a day (up to the policy benefit maximum).

Other benefits of long-term care insurance:

  • Many individuals may feel uncomfortable relying on their children or family members for support, and find that long-term care insurance could help cover out-of-pocket expenses. Without long-term care insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family.
  • Premiums paid on long-term care insurance may be eligible for an income tax deduction. The amount of the deduction depends on the age of the covered person. Benefits paid from a long-term care contract are generally excluded from income.
  • Business deductions of premiums are determined by the type of business. Generally corporations paying premiums for an employee are 100% deductible if not included in employee's taxable income.
  • Medicaid provides some of the benefits of long-term care insurance. As a welfare program, Medicaid does provide medically necessary services for people with limited resources who need nursing home care but can stay at home with special community care services. However, Medicaid generally does not cover long-term care provided in a home setting or for assisted living.

Once a person purchases a policy, the language cannot be changed by the insurance company, and the policy usually is guaranteed renewable for life. It can never be canceled by the insurance company for health reasons, but can be canceled for non-payment.

LTC insurance rates are determined by six main factors: the person's age, the daily (or monthly) benefit, how long the benefits pay, the elimination period, inflation protection, and the health rating (preferred, standard, sub-standard).

Most companies will offer couples and multi-life discounts on individual policies. Some companies define “couples” not only to spouses, but also to two people who meet criteria for living together in a committed relationship and sharing basic living expenses.

Most companies offer multiple premium payment modes: annual, semi-annual, quarterly, and monthly. Companies may add a percentage for more frequent payment than annual. Options such as spousal survivorship, non-forfeiture, restoration of benefits and return of premium are available with most plans.

You should not purchase any long term care insurance if you currently receive or may soon receive Medicaid benefits, if you have limited assets and can’t afford the premiums over the lifetime of your policy, or if your only source of income is a social security benefit or supplemental security income. Insurance companies and the National Association of Insurance Commissioners advise that you should not spend more than 7% of your income on this insurance.

The LTC industry suggests that you’ll pay less if you buy your policy at age 50 instead of waiting until age 60 as others recommend. Many people worry that if they wait until age 60 to buy LTC, they will develop a medical condition that will either prevent them from qualifying for coverage or significantly raise their premiums. The average age of purchasers has dropped from 68 years in 1990 to 61 years in 2005, and the number of purchasers who are under age 65 has increased significantly.

ltc solutions

Some may argue waiting until age 60 because you are much less likely to file a claim before that age. Statistically, 90% of LTC claims are filed for people over age 70. But if you have a family history of illness at a young age, or you are losing sleep because you’re worried about getting sick and not being able to afford care, then buy LTC when you can afford it. The peace of mind is worth more than any cash you’ll save on premiums.

Many people think that they will use a retirement account to help fund Long-term Care, should you need it. Remember withdrawals from retirement accounts are subject to income tax. However if this is done right the withdrawals for Long-term Care maybe income tax free, saving retirees thousands of tax dollars.

While there are hundreds of thousands of these policies that have been issued, still 93% of retired Americans, who are the very people who need this coverage don’t have it. It has been said that your retirement plan is not complete without long-term care insurance in place.  Have you looked into LTC insurance for yourself or your parent(s)?

Topics: retirement, LTC, LTC insurance, Long-term Insurance, elderly, Insurance, retirees, tax free

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Wendell W. Brock, MBA, ChFC

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