Got Medicare? Get Ready to Open Your Wallet

Recent federal legislation, the Medicare and CHIP Reauthorization Act (April 16, 2015), incorporates additional costs to be paid by Medicare Beneficiaries.

Original Medicare contained two parts, generally Hospital In-patient benefits, (Part A), and benefits for those not hospital confined, (Part B). Later Part C was added, called “Medicare Advantage”, wherein the Medicare Beneficiary contracts with a health insurance company to provide his/her Medicare Parts A & B benefits. Newest Medicare addition is Part D, to help pay some of the costs associated with out-patient prescription medicine.

Most Medicare Beneficiaries pay no monthly premiums for their Medicare Part A coverage, as the Medicare Taxes they paid during their working years are used to partially off-set Part A benefit costs. Medicare Beneficiaries must pay monthly premiums to Medicare for their Part B benefits. Most pay $104.90 per month in 2015, and that amount increases for those with modified adjusted gross incomes above $85,000, if filing income tax returns as “single”, or $170,000 if filing as married filing jointly. Part B monthly premiums for higher income earners can be as much as $335.70 in 2015. Charging higher income earners more simply because they earned more than Joe or Jane Lunch-Bucket is referred to as “Means Testing” by Washington’s bureaucrats.

Such means testing, referred to above, also applies to monthly premiums paid by higher income beneficiaries for Medicare Part D out-patient prescription drug insurance, and can add as much as $70.80 to the base monthly premiums for such insurance this year.

Provisions in the above Medicare and CHIP Reauthorization Act increase sur-charges to Medicare Part B and Part D beneficiaries, and will bump up the basic $104.90 Part B monthly premiums paid by Joe and Jane Lunch-Bucket to an estimated $181.00 by 2025.

Are you a Medicare Beneficiary covered by a Medigap (Medicare Supplement) Plan? Starting in 2020 expect to find a deductible attached to your medigap policy…as much as $217 by 2023. You will be expected to pay that deductible amount before your supplement plan can begin paying out its benefits.

These additional out of pocket costs have been brought to you by your president and your elected representatives in Washington. Please feel free to contact them directly to offer your thanks.

Carpe Diem

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Affordable Care Act Mine Field…Small Business Owners Watch Your Step

The Patient Protection and Affordable Care Acts of 2010…”Obamacare” to most, contains thousands of pages and its still emerging regulations add more thousands of pages, making it impossible for the avarage small business owner to cope with its effects on his/her business. If you are one of them, make sure you have access to a savvy CPA, HR Consultant, and attorney specializing in small business. No, you do not need to add them to your payroll, but you should seek them out and be ready to compensate them for their advice before installing, canceling or amending your group health insurance plan.

Notice I did not include a health insurance broker in the mix. You need a good one, preferrably one who has at least ten or twenty years insurance experience. But a good one will not attempt to charge you a fee, because his/her insurance company provides them service fees for bringing your business to them. Charging a fee on top of that would be unethical.

Daniel N. Kuperstein of Employee Benefits News published an on-line article on 4/20/15, titled The top 5 Affordable Care Act myths debunked. (http://ebn.benefits.com)
To summarize Mr. Kuperstein:

Myth No. 1: I have between 50-99 employees and don’t need to worry about anything under ACA for 2015.

Not true. Employers with between 50-99 full time employees including full time equivalents might be exempt from ACA’s pay-or-play penalties in 2015, but it is not automatic. To gain exemption in 2015 an employer must have averaged at least 50 but less than 100 full time employees (including full time equivalents, FTE’s) in 2014…cannot have reduced workforce size or overall workforce hours of service to satisfy ACA restrictions, unless for legitimate business reasons, and cannot have eliminated or materially downgraded the health insurance coverage they offer. Other ACA rules still apply, i.e., new employee health insurance benefits waiting periods must not exceed 90 days

Myth No. 2: Information reporting does not apply to me because I have between 50 to 99 full-time employees.

Employers with 50-99 full-time employees, including FTE’s, must complete information reporting for calendar year 2015, even if not subject to pay-or-play rules.

Myth No. 3: I can break my business into several different smaller entities, then avoid paying any ACA fines/penalties.

That is Not True. Doing so creates a “controlled group” as defined in the Income Tax Code and provides no refief from ACA rules. Different entities under common ownership or control are considered to be One Business under the Tax Code, and such business could be subject to ACA’s Pay or Play rules.

Myth No. 4: My group health insurance plan year starts in July, so no need to worry about what happened during January through June 2015.

Wrong Again. You must meet ACA rules/regulations during all months in 2015. Safe harbors are possible, but the rules/tests are complicated, and that is a good reason to review your situation with one or more of the experts mentioned in this article’s first paragraph above.

Myth No. 5: I can designate all my employees as “Part Time”, and even if they work more than 30 hours per week on average, avoid ACA’s penalties.

Not an option…designating them “Part Time” does not change anything. What counts is how many hours each works on-avarage each week during the year. Putting in 30 hour weeks/ 130 hour months makes your “Part Time” worker a Full Time employee, and the heavy hand of ACA will land on you.

Another myth not mentioned by Mr. Kuperstein is the idea that a small business employer can just drop the company’s group health insurance plan, then give each employee a raise to off-set the employee’s cost for buying his/her own personal/family health insurance policy. You can do it, but make certain your employee’s salary increase is not tied to a requirement that the increase be used to buy health insurance…otherwise you have created an employer sponsored health insurance plan and will be right back in the ACA hot seat. If your employee chooses to buy a new car instead of health insurance with the salary increase you will just have to live with it. Your schadenfreude moment will occur when that employee is forced to pay ACA’s tax penalty for not being covered by qualified health insurance during the calendar year.

Carpe Diem

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CYA In 2015

Are you one of millions who failed to buy personal health insurance in 2014, then, when filing your 2014 Income Tax forms, learned that you had to pay a penalty tax (the so-called “Shared Responsibility Payment”) for not owning such insurance? Are you still uninsured? If so, you have until April 30, 2015 to apply for 2015 Obamacare health insurance.

To do so, and as part of the application process, you must sign statements saying you paid the penalty tax when you filed your 2014 Income Tax return…including the date when you submitted your return…and that you first became aware of the “Shared Responsibility” tax, or you misunderstood its implications, until after the end of the 2015 Open Enrollment Period (February 15, 2015), and while preparing your 2014 Income Tax return.

The Shared Responsibility Tax goes up in 2015 to the greater of $325.00 or 2% of your Adjusted Gross Income (AGI)…not just your W-2 or 1099 income. The tax hit depends upon whether you are single or part of a family. If you are part of a two-earner family filing a joint income tax return, 2% of your family AGI could be a pretty large number.

While paying Obamacare’s high premiums takes more from your pocketbook over the year than a one-time Shared Responsibility Tax payment, not owning health insurance exposes you and your family to potential bankruptcy if you are hit with a major surgery followed by a week long hospital stay and rehab.

Carpe Diem

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What is your Most Valuable Asset?

Do you own a house? If so it is probably your most valuable asset. If you don’t own a house, your automobile might be your most valuable asset…or maybe you have a pile of cash stashed somewhere. Maybe that is you most valuable asset. Possibly you own or control a business or professional practice, and you consider it as your most valuable asset. Guess what? None of those are your most valuable asset.

By far, your most valuable asset is your ability to generate an income for yourself and your family…to make it to your office or job site every day.

Think about it. What happens to that income stream if a sudden injury or illness disables you for a few weeks…a couple months…a year or more? You can always apply for Social Security disability benefits, but that takes months and sometimes years before the checks start arriving…provided your application is approved…and what happens while you wait for Social Security Administration to open its wallet?

Open your check book and add up all the monthly bills: rent/mortgage payments, credit card charges, food, utility charges, car payments, insurance, phone bills, local, state and federal taxes and a dozen other bills which must be paid on time. Not being able to work first reduces and eventually strangles your earning ability.

Savvy people know unexpected disability is a possibility and they take that issue off the table by owning Disability Income Insurance….insurance that guarantees continuing cash flow should an injury or illness steal your earning ability for a time or forever.

I know a top real estate agent who woke up one morning not being able to speak above a whisper…and she stayed that way for almost a full year! It took months before her doc’s could figure out what was causing her problem. Imagine, a real estate agent not being able to speak over the phone, converse with buyers or sellers…or even the cat, for a year. I can only guess how much that cost her in lost income.

Another case is a very successful dentist who suffered nerve issues in his neck area making it impossible for him to look down while working on patient’s teeth…might as well have been wearing boxing gloves. Yep. He owned disability income insurance which cushioned the loss of income when he was forced to close his practice.

Think about it then contact your life/health insurance broker to discuss Disability Income Insurance this week. Owning some could be a life saver for you and your family…and it doesn’t cost you a dime to talk to your insurance broker.

Carpe Diem

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Traveling Outside the US? Are You Covered?

Does your health insurance cover you if you leave the good old USA? As many current health insurance plans now assign you to their Health Maintenance Organization (HMO) networks of doctors, hospitals and healthcare service providers, and no longer provide “out of network” benefits, leaving the US and its territories could leave you out on a limb should you suffer an accidental injury or fall ill.

If this is the year you take that long planned trip to Europe, to Peru’s Machu Piccu, or cruise through the Southern Caribbean, chances are your HMO will not cover you there. No problem, though…just obtain Travel Insurance before leaving home. Considering what it provides to you it’s relatively inexpensive.

Purchase your travel insurance through your travel agent or save some cash by obtaining it through a qualified insurance broker. It covers medical expenses incurred while outside the US, but covers much more than that. You buy it based on the number of days you intend to be away on your trip and sometimes, based on the cost of your trip including its air fare, if any.

Why based on the cost of your trip?…Because some travel insurance plans agree to refund the dollars you’ve already spent on non-refundable tickets if illness, an accident or family emergency makes it impossible for you to begin/complete your trip. Most contain a really important “repatriation” benefit. If a serious illness or injury strikes you while thousands of miles away in some foreign country, repatriation pays to fly you home in an air ambulance. If the worst happens and you do not survive the illness or injury, the insurance pays to fly your body home. It also picks up the tab for your spouse or other trusted person to accompany you home.

I know of a couple who traveled to east Asia to climb mountains and take pictures. While shooting a picture one of them suffered a slip and fall resulting in a compound fracture of a leg. After being rescued from the mountainside, stablized in the village at the foot of the mountain, then transported to the nearest hospital where the broken bone was set, an air ambulance was chartered to fly the couple to their home in San Francisco. The bills for all of that totaled more than $123,000.00. The couple paid less than $400.00 for their travel insurance. Stealing a line from American Express…”Don’t Leave Home Without It.”

Carpe Diem

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Affordable Care Act Gotcha’s in 2015

Did you sign up for health insurance or continue last year’s health insurance into 2015? If so, good for you. If not, you have until February 15,2015 to enroll in an Affordable Care Act health insurance plan. Missing the 2/15/15 enrollment cut-off could cost you some serious cash when you file your 2015 income tax return. Maximum Tax Penalty…yes, it is a tax…just ask Chief Justice John Roberts…can be as high as $945.00 for not registering for health insurance in 2015.

Of course if you are locked-up in jail, a member of an indian tribe, an undocumented immigrant, or if your health insurance premiums exceed 8% of your annual household income, the tax penalty will not be imposed upon you…that’s in the law. However, all others must be covered by personal health insurance or by employer-sponsored group health insurance during the year 2015, otherwise the IRS (Insurance Reprobate Sackers) will come to your door, grab you by the ankles and hold you upside-down until they shake the fine from your jeans.

You get the government you elect…and the laws that government imposes on you…If you did not vote in 2012 or 2014, you cannot complain about the “Unaffordable Care Act”. Like a year old infant in a poop filled diaper you can now just sit in it and cry.

Carpe Diem

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Get Ready for Obamacare Open Enrollment for 2015

Open Enrollment period for 2015 Individual and Family health insurance plans starts November 15, 2014 and ends February 15, 2015. If you bought health insurance for yourself or for yourself and family this year and wish to change to a different plan or to a different health insurance company, you may do so starting 11/15/14.

If you bought a health insurance policy between March 10, 2010 and December 2013, a so-called non-grandfathered policy, your health insurance company may be willing to continue it into 2015, temporarily, as implementation of some features of the Affordable Care Act (Obamacare) have been postponed. However, some insurance companies have opted to switch non-grandfathered policies to new ones meeting the requirements of Obamacare now, with new insurance taking effect on January 1, 2015. By now you should have received a letter from your insurance company explaining their action. In any event you are free to shop for new health insurance starting November 15th.

The law of unintended consequences is always in play, and the Affordable Care Act (ACA) is loaded with them. Pre-ACA, the vast majority of health insurance policies renewed each year on their anniversary date, so roughly one-twelfth of an insurer’s book of business was up for renewal each month.

ACA policies all run through the calendar year (January through December), and may or may not be available on January 1st following the year they were purchased. ACA creates an administrative log jam at your health insurance company each December as its total book of business must be addressed. Some policies may renew as-is in January, or may be replaced, or canceled, or who-knows-what. Expect chaos.

If you are caught in the ACA whirlpool take solice in the fact that your federal government is taking good care of you. After all, your President promised your Obamacare premiums would go down $2,500, that you could keep your old insurance and you could keep your doctor. A famous scholar once said you don’t lose your freedoms all at once, but little by little while you are not paying attention.

Carpe Deim

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September is Life Insurance Month

Life Insurance…It really is “The Gift that keeps on giving”.

Think about it. Life insurance equals cash to pay for:
Food on the table
A roof over your family’s heads
Money to pay the monthly bills
A little red wagon under the Christmas tree
Clothes for the kids
A whole lot of other things, and most importantly…Peace of mind

Buying life insurance is a nobel unselfish act. Assuming you love your spouse and kids does that love end if an accident or illness takes your life too soon? Because, unless you have a jaw dropping balance in your investment account, your income stops when your heart does. When you own life insurance the event that creates the need creates the cash…income tax free.

Be loving, nobel and unselfish…Do the right thing. Call your life insurance broker today.

Carpe Diem

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Another Affordable Care Act Gotcha

If you bought a personal/family health insurance policy this year, do you understand it will expire on December 31st? No? Well, it does.

Some history…prior to January 1, 2014, personal/family health insurance policies, unlike employer-sponsored group health insurance plans, were by contract “guaranteed renewable” on their policy anniversary dates from year to year.* Each year the issuing insurance company would recalculate a policy’s premium taking into account the beneficiaries’ increased ages, overall current and expected claims from that block of policies and other data, then provide the policy owner the opportunity to renew his/her insurance, without change, in exchange for paying the resulting renewal premium. Typically, that would occur on each policy anniversary date until the policy owner entered Medicare. That was the case regardless of any changes to beneficiaries’health. Individuals could not be singled out for premium increases because of claims paid on their behalf. Policy owners were free to accept the insurance company’s renewal premium offer, or reject it and seek coverage elsewhere.

Prior to passage of the Affordable Care Act (ACA), qualifying to purchase personal/family health insurance was an issue for those with significant health conditions or for those working in very hazardous occupations. Most states supported safety-net programs to provide healthcare assistance or to provide the needed insurance to those who qualified for help.

Fast forward to 2014. Personal/family health insurance is now “Guaranteed Issue”…no more concern about health histories or hazardous occupations. But no longer is such insurance “Guaranteed Renewable”. Instead, your insurance company can change the benefits structure of your insurance each January 1st, as long as those changes fulfill the strictures of ACA…and expect continued premium increases. If you bought an ACA qualified health insurance policy in 2014, look for a letter from your insurance company before year-end offering to keep you insured, but with changes to your present policy and changes to your premiums effective January 1, 2015…just the tip of the ACA iceburg.

Open Enrollment Period for 2015 ACA insurance plans begins November 15, 2014, ending on February 15, 2015. Work with a qualified agenty or broker, or take your chances with healthcare.gov. If you anticipate collecting a premium tax credit you must go through healthcare.gov, but working with a qualified agent or broker at your side will be to your benefit. Your premiums will be same whether or not you work with and agent or broker.

*In the distant past so-call Industrial Insurance Companies offered accident and health insurance policies which could be cancelled by the insurance company on short notice for any reason, but as the health insurance industry developed in the last century competition from more attractive health insurance products pushed industrial insurance out of the marketplace.

Carpe Diem

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Affordable Care Act…Are You Grandfathered?

If you own a personal health insurance policy, not employer-sponsored group health insurance, AND if your personal health insurance policy went into effect prior to March 10, 2010, AND if you made no changes to your policy after 3/10/2010, such as changing its annual deductible amount or co-insurance percentages, your policy may be “Grandfathered”. Owners of grandfathered personal health insurance policies will not be forced to replace them with “Obamacare” policies in the future.

“If you like your insurance, you can keep your insurance.”…well not so much. Rules imposed by the Affordable Care Act (ACA) demand that personal health insurance policies which became effective after March 10, 2010, non-grandfathered plans, be replaced by health insurance plans meeting requirements imposed by ACA starting in January 2014. However, the effective date of the replacement rule has been postponed twice since ACA became law. Currently that replacement date has been pushed out to 2017. Most health insurance companies have opted to renew such policies through the end of 2015. Call the member service number on your insurance ID card to see what your health insurer intends to do regarding renewal of non-grandfathered policies.

ACA health insurance policies must provide benefits which may or may not be included in pre-2014 health insurance policies…items such as maternity benefits, juvenile vision/dental benefits. Your health history or occupation will not preclude your obtaining ACA health insurance plans. Premium rates are the same for men and women in ACA plans. Only age, number of family members to be covered, your zip code, and tobacco use are considered when determining the amount of premiums to be charged for ACA plans. Insureds’ Annual Out of Pocket claims costs for healthcare services received from in-network providers are capped at $6,350 for singles/$12,700 for a family in 2014. Insurers must pay out at least 80% of each year’s personal plan premium collections to cover claims, retaining only 20% to operate the company. If the claims pay-out is less than 80%, insurers must refund the difference to its policyowners.

Leaving insurers only 20% of premium income to operate the business while mandating they offer health insurance to anyone who applies forces them to seek ways to increase efficiencies and reduce operating costs. Thus ACA health insurance plans offer much less flexibility to their owners. No longer can one buy a health insurance policy containing a selection of annual deductibles and reduce his/her monthly premium by opting for a higher annual deductible. ACA plans contain one annual deductible…take it or leave it. ACA health insurance plans are open-ended…no annual benefit payout maximums. In the past most health insurance policies
expired after paying out a pre-determined dollar amount in benefits, most recently three to five million dollars.

“If you like your doctor, you can keep your doctor, period.”…well, not so much. Most ACA personal health insurance plans contain networks of doctors, hospitals and other healthcare service providers. Obtaining healthcare services from providers outside those networks greatly increases out-of-pocket costs. ACA plan healthcare service provider networks offer fewer choices of providers…and your family doc for the past twenty years may not be in your new ACA plan’s network.

So, if you own a grandfathered health insurance policy think long and hard before replacing it with an ACA compliant policy. Keeping much broader provider networks, avoiding forced-on premium costs for maternity, juvenile dental/vision services, and other add ons, makes owning grandfathered insurance quite attractive for the next several years.

Carpe diam.

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