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Health Insurance–what’s the difference between an HMO and a PPO?

07-18-2008by Colleen King

Health insurance is never a simple thing, but the things that really make in complicated (in my mind) most people never encounter. The difference between an HMO and a PPO is pretty simple, but NOT if you don’t deal with it regularly.


  


Health Maintenance Organizations (HMOs) are where you select a primary care physician (PCP) and they coordinate your care, whether it’s hospitalization, referrals to specialists, you name it. They hospitalize you in the medical group’s hospital, refer you to specialists within in their medical group, and only go outside the ‘network’ if there isn’t a specialist that can handle something very complex.


Preferred Provider Organizations (PPOs) also have a network of doctors and hospitals, but you aren’t tied to a selected or assigned PCP. You choose who you see, and when. You can see non-network doctors and go to non-contracted hospitals but you pay a larger share of the cost.


Which kind of plan is better? Depends on your perspective. Many think HMOs don’t cover ‘anything,’ when in reality, from a financial perspective they cover more than a PPO. You just have a smaller network to choose from because that’s part of the cost containment mechanism.


People burn through the $$ often time with PPOs, but they have more latitude in who they see. In individual health insurance, at least in California, HMOs are more expensive than PPOs. But in group health insurance HMOs are less expensive.


So again, which is better? Ask 10 people, you’ll probably get 7 different answers. There’s a lot to consider specific to your situation. A good agent can help you evaluate your needs and make recommendations. If you’re in California and you don’t have an agent, feel free to drop me a note.


Be well!

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Annuities–what are they, and why should I consider having one?

07-13-2008by Colleen King

Annuities can be a good things for a lot of people depending on their retirement status, financial situation and age. There are essentially two categories–fixed and variable. In the fixed category, you have the regular old fixed annuity and fixed indexed annuities.


Variable annuities I’ll touch on briefly–only briefly because I don’t sell them, but want to share with you what they are. Variable annuities are directly invested in the stock market. The advantage of these that are touted is that when the market goes up there is big money to be made. But if things go down, your principle isn’t guaranteed. There are riders that can be purchased to help safeguard against this but obviously, if you are purchasing them, it eats into your profit potentially. Not going to spend a lot more time on this, again because I don’t sell them. If you’re interested though I’d be glad to refer you to reputable agents that will give you good advice. They may be good for your situation, most certainly.


On the fixed side, the plain ole vanilla fixed annuity is what your parents and grandparent would be well versed in. Your principle is guaranteed! You accumulated a large amount of money, $100,000+, bought an annuity from an insurance company, and you were guaranteed an income for life. You would get monthly payments for life, and the amount per month would be based on the amount you deposited and your life expectancy. Annuities are sold as a source of income you can’t outlive. What makes this different from one other particular product, there’s a bad old insurance saying that explains it–life insurance is in case you die too soon, and annuities are in case you live too long.


You can now find fixed annuities for lower opening amounts, most of them have no associated expenses. Deposit it, let it grow, and as you approach ‘the golden years,’ your nest egg will help provide for you. The ways payouts can be calculated has changed a lot too, defeating a lot of the complaints and concerns from days gone by–especially from beneficiaries when their benefactor died not long after opening an annuity.


Fixed indexed annuities are a little more adventurous. But like all fixed annuities, your principle is guaranteed. In this case, you have multiple ways to allocate your money. Your gains and losses are tied to different stock market indices, but not directly invested in the stock market. Sounds like a contradiction in terms, but trust me, it works. If the market goes up, depending on the crediting strategy you select, you value goes up. But if the market plummets, you don’t lose, your balance stays the same. Another bad old insurance-ism, ‘Zero is the Hero.’ Good market things go up, bad market, you stay the same, your balance doesn’t drop.


Recently, due to a popular NBC television show, Fixed Indexed Annuities and the agents selling them were branded as being deceptive and a bad thing to put money into. While Chris Hanson was able to point all the bad, he apparently passed on the option to present any of the positives. Love you Chris, but I was disappointed in how lopsided your show was. They are a safe product to put your money into, but there will always be the loser agent that will be more interested in their commissions rather than finding a suitable vehicle for their clients. The way you lose money in a fixed indexed annuity is by pulling too much money out of the policy too soon, thus incurring the wrath of the surrender charges. But more on that in a future post.


So, if you are looking for a safe vehicle to plan for retirement, or you have left a job and want to figure out what to do with your old 401k or 403b, consider an annuity. If you’re in your late 40s or up, this can be a safe place to plop that nest egg. You can also consider a stock account, mutual funds or things like that, but be sure to ask what kind of guarantees on your principle they will make. I’ve got two indexed annuities, and I’ve sold some to family members. Believe me, as most will know when you do business with family, you better have the strength of your convictions behind what you offer them!

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Category: Annuities


Life Insurance–talk about a morbid discussion!

07-12-2008by Colleen King

Life Insurance is always an odd discussion to embark on, and I try to get that out right off when I speak with clients for the first time. Basically, when couples are shopping for life insurance for the first time, what you are trying to figure out how much money one would need if their spouse/partner were to die in order to maintain the current standard of living.


There’s a happy discussion! But realistically, when you have a family, what would happen if one of you were to die? These days, most couples are both working because if you live in California, you’ve had to either take out a mortgage the size of a small nation’s GDP. Or if you are renting, you know, rents here are pretty ridiculous too.


Optimally, when figuring out how much coverage you need, we look at your expenses on a monthly or annual basis to see what it would take if the income from one of the partners were to go away. This can be done in multiples of annual salary, or look at what it would take to pay off the mortgage, cover utilities, food, schooling for the kids and eventually college. As well as any other incurred debts. Either method usually gets you pretty close to the same number.


Then the type of insurance you need–term or permanent, either whole or universal. That will be covered in another post. Let’s say we’re looking at term rates, because that’s usually the less expensive. Doesn’t always mean cheap though–again, your health history, smoker status and a few other things get in to play. Please try to be of a normal weight, nonsmoker, not have a hazardous occupation and be pretty healthy. That way we can get the best rates. But if you’re not in ‘super hero’ status, don’t let that keep you from checking into rates.


If you need a $1,000,000, 20 year term policy let’s say, and the monthly premium is NOT going to fit into your budget, don’t do it. We start ratcheting back the amount until the cost isn’t a strain. Even if the final amount won’t cover everything that you want it to, you need to have some coverage rather than none. That will buy your surviving spouse time to grieve and deal with life without facing losing the home. It gives them time to figure out what they are going to do, and not having to make huge financial decisions at a time when they can’t think straight.


So, even though you aren’t going to die, talk to a good agent about your needs and look into the cost of something that will provide financial peace of mind. Life insurance–a morbid, but crucial discussion. Don’t make a bad situation worse. Be well!

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Category: Life Insurance


Long Term Care Insurance–no thanks, don’t need it

07-12-2008by Colleen King

Long Term Care insurance is being talked about a lot as baby boomers are starting to approach retirement. They/we are starting to need to go to the doctor a bit more, need a few more medications and find they don’t necessarily put it all together to figure out the obvious–we ain’t getting any younger!


What does Long Term Care insurance pay for anyway? If you think Medicare is going to pay for anything other than medical needs, those days are long gone. MediCal, California’s version of Medicaid will eventually, but you will have to spend the vast majority of your liquid assets before it will kick in. And then after you pass away, the State will usually try to reclaim they money they spent on your care from your estate. Wow, bet none of THIS was in your estate plan, was it?


If you have needs for skilled care, like recovering from a surgery calling for intravenous medications, dressing changes or other therapies, Medicare will cover a certain number of days, but then you end up sharing the cost.


But if you are becoming debilitated, need help dressing, bathing, eating, walking or getting to the bathroom, these aren’t considered ‘skilled’ needs, but rather, custodial care. Depending on the type of policy, care can be provided in the home, an assisted living center or a nursing home. Most people have the vision of growing old gracefully in their paid off home. But that’s not always possible without help. And don’t automatically assume your kids will be able to care for you.


First, they need to want and be able to. This usually falls to daughters in most families. On top of that, they either have their own families or depending on their age, they may be having health issues of their own. I can remember when I was an emergency nurse, we’d see people in their late 80s or 90s seriously ill and dependent, and the ‘kids’ that were supposed to take care of them were in their late 60s or 70s. So it’s just not always possible.


So at least look at a Long Term Care insurance quote with a good agent. There are lots of options, many ways to do this, so don’t assume it’s too expensive before you look at it. If you think $1,500 -$3,000 or more per year is expensive, how is $60,000- $80,000 going to fit in your budget? Revisit my blog in the future, because this and more will be discussed here. Be well!

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Group Health Insurance in California

07-12-2008by Colleen King

Group health insurance is a HUGE discussion in California. It has been over the past 2-3 years as concerns rise over the uninsured. As well as the cost of health care–wow, it’s all exploding.


The beauty of small group health insurance (2-50 employees) in California is that when a company is set up within certain parameters, group health insurance is guaranteed issue regardless of the health status of the enrolling members. One of the things that has been fun about setting up group health plans for me is that I’ve been able to help people get insurance they need, legitimately, and frequently they didn’t know this was an option. Love doing that! Does that mean it will cost a fortune? Well, it isn’t cheap but the plans tend to have richer benefits than individual health insurance plans so that make it cost more. BUT, even with disastrous health problems, a two person group will never pay more than 10% about standard rates.


So when you think every group health case sold in California is profitable, it’s not. The carriers know they won’t make money on every plan sold, but that’s the way the game is set up in California. At the risk of sounding too ‘salesy,’ if you are having trouble recruiting and retaining employees, having a group health plan can help you get and keep the people you want.


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