Ask Colleen King

Remember the old phrase ‘be careful what you ask for, you just might get it?’ Well, Anthem Blue Cross put out an email yesterday to agents advising us that due to the new changes resulting from the Patient Protection and Affordable Care Act (PPACA), also known as health care reform, if you are looking for an individual plan with them you have until September 22. After that, they will have to update their plans, their software (and presumably our software, those of us who have their own quoting sites) with the new plans and rates that will be effective September 23.

Now, before you go as nuts as a Jet Blue flight attendant (gotta love that guy!) think about doing something sooner rather than later. Right now, we know what the plans are and we know what the rates are. Anthem currently offers a 12 month rate guarantee, so whatever you enroll in now, you will maintain that rate for 12 months. Since we don’t know what is coming, I’d vote for a bird in the hand.

Carriers are going to be required to include certain benefits and that will probably raise rates. And it’s not only going to be Anthem, all carriers are most likely going to be doing something in order to comply with the new law. This is just the first we are really hearing about it. Why am I fairly sure rates will go up? Two things in particular–people under age 19 will no longer have pre-existing conditions held against them, and there will no longer be annual or life time maximums allowed on plans. The latter frankly won’t have a huge affect overall. Most plans in California have anywhere from a $3-$7 million life time maximum, which the vast majority of us will never come near. But, it will be a reason to increase rates in anticipation. The scarier part will be what happens when they have to take all applicants.

Basically, this is just the beginning of sweeping change. We’re trying to keep up, but since so much of this was not worked out at the time the bills were passed, and still hasn’t been, it’s time to hang tight and hope for the best.
A light humorous look at health care reform

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In my last article I mentioned the first key point with a health savings account (HSA) that in order to use the money to pay for expenses, the expenses MUST occur after the account has been opened. Not necessarily fully funded because you can deposit money and and reimburse yourself after the fact. You just have to have opened the account prior to incurring the expense. And the account has to be opened after you have the appropriate insurance plan, as a reminder.

Other things to consider when opening an HSA:

* Once account or two? Well, only one name can go on the account. For a married couple or domestic partners, once account may be okay. But if both are over age 55, and they are both on an HSA eligible plan, consider opening separate accounts. The reason is after age 55, people can deposit an extra $1000 per year on top of the $3050 maximum for 2010. If you only have one account, only the person on the account can do that, so consider talking to your tax professional for the best route. I don’t consider an HSA the first place to put money, but if you’ve maxed out all your other pre-tax options and you are looking for another place to put some money that can grow tax FREE, this can be an option.
* Fees–You really have to look at this. If you are like most people and you don’t want to dump a large amount in right off the bat, fees of $3-$10 a month will eat into your principle. Many accounts offer low or no monthly fees. You also want to look and make certain there are no ‘per transaction’ fees.
* Investment options–As your account grows, hopefully, because you’ve been able to put money in it and not had sizable expenses, some people want their money to get some growth. Many accounts offer mutual funds after you reach a certain balance. But be sure you aren’t gambling with the rent money, so to speak.

So these are the main things people have questions about, or don’t know to ask. Many banks, credit unions and others are now offering HSAs. You can go to your regular bank but again, look at the fees in particular. If you want to see what’s available, go to HSAFinder.com. This web site is like a central repository that lists many entities that offer HSAs, and I go there regularly to look.

Remember, an HSA is like most other accounts, in that you can transfer it to another HSA if you find better rates. Just don’t have the old agency give you the check to redeposit, as that might trigger fines and penalties you shouldn’t have to pay.

One last thing–Happy Birthday Mr. Obama–talk about a lonely job right now!

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Health Savings Accounts (HSAs) have been a great way to go to ”self fund’ eligible health care expenses. You can even use it for most vision and dental expenses even if you don’t have vision or dental insurance.

But the reason you have an HSA usually is for the fact that the money you put into the HSA is tax deductible. if you had a sizable expense, wouldn’t you like to be able to maximize the tax benefit? Here’s something most people miss. First, what most people do know is that in order to have an HSA, you have to have a qualified high deductible health plan. Once you have that approval or enrollment, then you can open the HSA.

Here’s what catches most people off guard though. There are different ways to fund your HSA, either by putting a full contribution in, maybe electronic fund transfer of a couple hundred a month or my personal favorite, I’ll anticipate an upcoming expense, approximate what it will cost and deposit that amount. But if you have an expense that catches you with a low balance in your HSA, you can pay for it in a regular way, credit card or check and reimburse yourself.

But to legitimately pay for an expense out of your HSA by any of the aforementioned ways, the account MUST be established prior to incurring the expense. Most people don’t know that, they think it just has to happen after you have the health plan. This basically is an honor system, meaning that generally no one is looking over your shoulder on this but if you faced an IRS audit, you do need to keep your receipts for expenses and you’ll potentially need to prove that the medical issue occurred after the HSA was established.

That’s why I tell my clients who are wavering as to whether or not they want to establish the HSA to open one as soon as you are eligible, then just put some nominal amount in it. That way you can add to it later in case something major happens. This came to light when one of my clients called and asked me where again to open their HSA. The husband had an emergency, they were going to open the HSA, drop the maximum amount into it and pay the hospital bill. Unfortunately, that wasn’t going to work.

So set up your account. Lots of banks, credit unions and others offer them. For a nice clearing house web site that lists who is offering them, go to www.hsafinder.com. But be sure to verify the details on the account, because sometimes this site misses a couple of things.

NEXT–tips on what to look for when you set up your HSA

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The news came out last week that Leslie Margolin was leaving Anthem Blue Cross and I had to wonder why. Of course, there’s the obvious, the blow out earlier this year when the rate increase craziness hit. But that was months ago, and things had toned down considerably. Click here for a short story on this.

I heard her speak at a forum earlier this year in Woodland Hills, and she seemed like a very nice, nose to the grindstone kind of person. In asking my account rep at Anthem about here, he commented that people would be surprised at how geared toward a desire to provide a more universal type of health care she was.

Let’s face it, NO ONE was going to win in the position she was in. She did diversify the product portfolio considerably in her time there, which makes me wish some of the other carriers would do a bit of that too. While overall I like what they’ve done, I like to have more than one carrier to chose from and when their pricing beats everyone out overall, there’s not a lot to suggest outside of Anthem. People these days have to watch their budgets. I regularly have account execs tell me I should be selling on the benefits of a plan, not just the price. I do that to an extent, but if you have two similar plans, one $100/month less than the other, that’s usually the only benefit most folks want to look at. And I can’t blame them.

I hope Ms. Margolin does well at her new job, and would love to pick her brain one of these days on this whole mess!

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I came across an article last month that was published by USA Today on April 30th that to me, outlines just a part of the big wake up call we have coming in 2014 when the bulk of the health care reform measures go into effect. If you can find it, check out the article by Sandra Block, “IRS lack clout to enforce mandatory health insurance.” Sorry, I waited to long to post this and lost the link. But my article will give you the basis for my concern.

This article lists estimates of needing 16,000+ IRS agents to enforce this eventually. The Congressional Budget Office is estimating the cost at $5-10 billion to administer this. And that’s just the start.

My concern along with other agents in California is the price tag on all the changes. Even though people aren’t happy with rates in LA and Ventura counties, you are definitely paying less than places like Massachussettes, New York and New Jersey. And now that you are looking at eventually subsidizing people, not excluding for pre-existing conditions, rates will soar. But the IRS can’t apparently enforce these new provisions in the law.

For example–30 year old male in New York City, hospital only plan would run $176/month. No deductible, but no coverage for office visits, most outpatient care or prescriptions. Which is more of what a 30 year old would need. You could get something comparable in the SFV area for $78-99/month, but there would be a deductible.

The same 30 year old, wanting a more comprehensive plan, opts for a $2000 deductible, $30 office visits, 80/20 coverage, sounds great right? Are you willing to pay $529.06/month for that? That’s a real figure for the 10009 zip code. I can find $2500 deductible, 70/30 plans with three office visits per year with generic and brand coverage for $111/month.

So you might want to look for coverage now, while it’s affordable in California. No one really knows what will happen once all this starts to kick in. Pretty scary!

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We agents really aren’t all bad, money grubbing fiends but unfortunately the insurance industry has had their share over the years. You want your agent to watch out for you best interest, not theirs–i.e. commissions. I kid my clients at times when suggesting a less expensive health insurance policy than one they are looking at. I’ll tell them ‘you can buy that, and my mortgage company and I would appreciate it, but do you really need to spend that much?’ So what two things do you need to watch out for?

Twisting– This is a term you hear more in life insurance but it can apply to health insurance as well. This is where an agent gets you to drop a policy, or replace a policy, that doesn’t really need to be changed but it will generate a sale for them. The times to change a policy would be:

* rates have gone up
* your needs have changed–maybe you need less coverage, maybe you need more
* a health condition you once had has changed or gone away and you had previously received an above standard rate. Sometimes you don’t need to change carriers, but sometimes it ends up being easier.

The other thing you want to avoid at all costs is the Rescission of a policy. Insurance companies are within their rights to rescind coverage if you have lied or misrepresented facts on an application. What will happen usually is they will refund any premium paid minus any expenses they paid out. So if you bought health insurance, ‘fibbed,’ had an expensive bout of care thinking you’d just drop the coverage later, think again. Not only will you be on the hook for the costs but you also risk criminal prosecution for insurance fraud.

These days insurance carriers are running a bit scared due to all the health care reform changes coming up. And I had a rescission happen to me. Dealt with the party entirely over the phone (which is not unusual with health insurance) and thought all was well and good. A few months later the carrier called me about this person, asked me some questions, saying there was something ‘pre-existing’ with this person that wasn’t on the application.The policy ended up being rescinded, and I have no idea about the associated costs, but turns out my client had gone through inpatient rehab, which certainly isn’t cheap!

The irony was I was told I couldn’t have any information on what the situation was that flagged this due to privacy protection. But I was copied on the rescission letter, and it cited the reason for rescission was this person’s ‘recent care’ at a drug rehab facility that was named in this letter–so much for confidentiality!

So in short, if you don’t think you need any changes, don’t be pressured into it. And if you do fill out an application, play it straight; it’s not worth the angst of losing coverage you need. And a second opinion from another agent should be considered if you are concerned about what you are being told.

Have a great weekend!

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A few days ago I wrote about how convoluted the small business tax credit for group health plans was going to be. Here’s a reminder.

Now here’s a commentary on why the bill was bad for small business, and a very eloquent one at that. The National Federation of Independent Business’s (NFIB) president, Dan Danner, points out some very strong points as to why small business is going to get very little help through this, but the government will gain a fair amount in taxes.

Here is one of the worst points:

“This law is death by a thousand cuts for small business owners. According to the Congressional Budget Office (CBO), the overhaul will cost about $115 billion more than first projected, bringing the total to more than $1 trillion. Small businesses will also now have to deal with an onslaught of new taxes and burdensome paperwork.”

So basically, in California, we’re already taxed into oblivion seemingly, so this isn’t going to help. Rather than repeat his points, PLEASE click on this link and read. Almost better than the article itself, click on the tabs for ‘Comments.’

Not many people want to see folks go without health care, certainly including me, but I’d like to see them have jobs too. Having a job means an income, which means food and other basic necessities. This will only hasten the demise of local and small businesses that are the lifeblood of the economy rebounding. This may not seem like an ‘insurance’ related article, but kill off small business, you kill off the economy. Kill off the economy, and there’s no tax money to fuel your benevolent attempt at reform. So no improvement in the ‘health care’ situation. No, I don’t have the answer, but I know this isn’t it. Because with all of this, people aren’t going to be buying health insurance, that’s for sure!

You can’t pay for health care or insurance if there’s no money in California. Remember the phrase after NAFTA passed, ‘that sucking sound you hear is jobs moving south of the border?’ Now that sucking sound is jobs moving to Oregon, Arizona and Nevada. Along with their tax revenue!

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With all the discussion around health care coverage, the cost, who’s good and who’s not, I like to see my clients get the most they can from their health insurance.

The big tip–the excitement–drum roll please…..You want to use contracted providers whenever possible. With HMO (health maintenance organization) plans you don’t really have a choice. You have to see doctors contracted with the carrier or your care isn’t covered except in case of an emergency.

PPOs, preferred provider organizations, you have the option of using providers that are or aren’t contracted. If you use a doctor, hospital, outpatient surgery center, whatever, that IS contracted with your insurance carrier you get the benefit of a contracted rate. So even if you are paying for the care, like when you haven’t met your deductible yet, you get the benefit of the contracted rate, also known as a discounted rate or negotiated rate. This can really help–I had blood work that I was billed over $400 for last year, and once the negotiated rate was applied, it cost about $100. I still had to pay the bill, but would the lab have knocked it down 75%? I think not.

So either go to the web site of your insurance company (they all have them) or call them. You can also ask the office or hospital you are going to be going to if they are contracted but be sure to specify if you have an HMO or PPO plan. Just asking ‘do you take Aetna’ won’t help if you have an HMO and they only accept PPOs.

It may seem like a little thing, but believe me, it will make a difference.

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As with most things that came out in the health care reform bill, the devil is in the details. The small business tax credit most assuredly included. I am not a tax expert by any means, but my wonderful tax guy, David Marton in Westlake Village, passed this on to me from the Kiplinger Tax Letter. And here is an article with various pieces of information you may find helpful.

So, you will get a 35% tax credit if you have 10 or fewer employees and the average yearly wages are less than $25,000. If you are a tax exempt organization, the credit is capped at 25%. And the higher the average wages, the more full time employees you have, the credit decreases. For example, the Kiplinger letter give the example that if you have 15 employees, averaging $35,000 per year, the credit goes down to 9%. And it’s gone completely if you have more than 25 full time employees or wages average more than $50,000.

And god forbid our government should stop there as far as complexity. Guess who is NOT eligible to be included in this? Partners, sole proprietors, 2% owners of S corporations and 5% owners of C corporations. On top of that, Family Members–including kids, their spouses, spouses and their parents, grand kids, parents, siblings and their spouses, nieces, nephews, aunts and uncles. I didn’t see anything about partridges in pear trees, but I bet they’re excluded too. Then there’s rules around seasonal workers, part timers, it just goes on and on.

Oh Yeah–employers must be contributing a minimum of 50% of the employee premium. Most do, but several of my clients have a fixed amount they contribute per employee, and sometimes that doesn’t calculate out to be 50%.

Then the amount of the credit you take decreases the amount of the deduction you can take for paying premiums. That makes sense, otherwise you’d be ‘collecting’ twice.

And there’s more, so I urge you to contact your tax professional to see how this works for you–or doesn’t–before you make any decisions about your benefit offerings and how they will work with the new credits. And of course, they phase out over the next few years. Probably out the time we figure it out.

Like I said, there’s a lot to this, so stay tuned.

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In my last article I talked about the impending herd of new graduates, high school and college, and that people are now needing to address what to do about their health insurance.

Again, If your high school grad is going to college, then of course they can stay on your group health plan if you want them to. The health care reform bill has passed, one of the FEW things that comes into effect this year is allowing overage dependents up to age 26 to stay on their parents’ plan. That is supposed to to go into effect September 23 this year, but most major carriers have said they will implement this early. But should you do it?

Check the cost of doing this–if you only have one child it might be more expensive to go that way. if you have more than one child on the group plan, usually it is the same cost regardless of the number of kids. So ask.

Other options to consider–There are short term health plans available that I refer to as ‘accident and illness’ plans. Generally they don’t cover maternity, routine care or anything pre-existing. But if someone gets sick or injured, which tends to happen in your 20s, then you are covered subject to the deductible. Because they don’t cover pre-existing conditions, the underwriting review period is very quick and these can be set up in a couple of days usually. They can either be purchased on a month to month basis for a maximum of 6 months, or if you know specifically how long you will need it you can purchase a certain number of days. It’s affordable–one carrier I use for these, in Los Angeles County a 22 year old can get a policy with a $1000 deductible for $87/month. Or if you knew you only needed one month, or 30 days, that same coverage would cost $51.30.

Or, if you’re not sure what the future holds for your new grad, no job prospects on the horizon, you would probably want to consider a regular individual health plan. Rates on these really run the gamut, so I won’t go into a lot of detail here, but for a 22 year old male, in a Northridge zip code, standard rates range from $44 – $440/month.

So there are ways to get your new grad covered; consider talking to an independent agent to sort through the best options for you.

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