Are Your Employer Benefits Meeting Your Needs?

Contributed by: Robert Ingram, CFP®

Fall is upon us, but just around the corner is the 2021 Open Enrollment Period. The window to select next year’s benefits at your employer runs from Nov. 1st through Dec. 15th. In the past, you may not have given these selections much thought, but this year, the impact of COVID-19 may have you thinking about the many “What if...” situations. Like, “What happens if my family and I get sick?” or “What happens if I'm out of work for a long time?” Understanding your options helps ensure that you're taking full advantage of the insurance plans and other benefits. Here are 5 reasons you should review your benefits and coverages:

1. Do you have the right health insurance coverage?

Most employer health and wellness benefits have at least a couple of health insurance options, such as PPO or HMO plans. Today, available choices usually include a type of High Deductible Health Plan (HDHP) eligible for a Health Savings Account (HSA). With a higher deductible, you will be responsible for a greater amount of medical costs out-of-pocket before the insurance plan begins to pay (compared to a more traditional lower-deductible plan). In addition to the opportunity to contribute to an HSA, the higher deductible plans usually have lower premiums than plans with lower deductibles. However, you should focus on the total potential costs, including premiums, deductibles, co-pays, and annual out-of-pocket maximums. 

When deciding which plan makes the most sense, you would normally consider your health history and the services you might expect to use. Generally, the greater your expected medical costs each year, the more likely you benefit from a lower deductible plan. You also should consider how you want to manage your health care (are you comfortable staying within a specific network of doctors and hospitals, or do you want greater flexibility?). Some health plans, for example, will require higher co-pays for services provided outside of their direct network.

The COVID-19 pandemic has made it even more important to understand your coverage options and make decisions accordingly. Some questions to ask when evaluating insurance plans could include:

• If I get sick and need treatment, what restrictions does the plan have on services? What hospitals or outpatient facilities can I use?

• Are there any deductibles waivers for COVID-related services or office visits?

• How does prescription drug coverage handle any special treatments or therapeutics?

2. Do you need to add young adult children to your health insurance plan?

Under the Affordable Care Act, health plans that offer dependent child coverage must allow children to be covered under the parent’s family plan until they reach age 26. With the widespread disruptions in the economy, many young adults may have lost their employer coverage or face other cost-prohibitive options. 

On plans that cover dependents, you can add your child under age 26 to your plan as a dependent even if he or she:

• is not living with you

• is not financially dependent on you

• is married

• is eligible to enroll in their own insurance plan

3. Strengthen your life insurance and disability insurance protections.

Employer benefit plans offering life insurance typically provide a basic amount of coverage at no additional cost to you, such as an amount equal to your base salary. Many plans will allow you to purchase additional coverage (supplemental life insurance) up to a maximum dollar amount or a multiple of your salary, for example, up to five times your salary.  

Often there is additional spousal coverage you can purchase as well.

While the supplemental and spousal insurance has an extra cost that can increase as the employee/spouse ages, employer group insurance tends to be less costly than individual policies and can provide a good base of coverage. When considering your life insurance needs, here are some tips.

Many employers also provide a group disability insurance benefit. This can include short-term coverage (typically covering up to 90 or 180 days) and/or long-term disability (covering a specified number of years or up through a certain age such as 65). Disability benefits often cover a base percentage of income such as 50% or 60% of salary, many times at no cost with some plans offering supplemental coverage for an additional premium charge.   

As with the life insurance benefits, group disability may not completely replace your lost income, but it can provide a solid foundation of coverage that you should maximize.

4. Your retirement plan (401k, 403b, etc.) might need a tune-up.

Start with contributions to your account. 

• Are you contributing up to the maximum employer match, if offered? Take advantage of free money!

• Are you making the maximum annual contribution (elective deferral)? The basic limit was $19,500 in 2020.

• If you can save more after maximizing your elective deferrals, does your plan offer separate after-tax contributions? This could be a way to leverage additional Roth IRA conversion opportunities.

Review your investment allocation. Do you have the appropriate balance of stocks, bonds, cash, and other asset categories in your portfolio given your timeframe and tolerance for risk? After experiencing the plunging financial markets of March and the sharp rebound in the stock market through the summer, you may have concentrations in certain assets that are above or below your desired target. This could be a good time to rebalance your portfolio back to those targets.

5. Michigan’s auto insurance no-fault law changed in July.

Okay, while your auto insurance is probably not part of your employer group benefits, now would be a good time to review your auto insurance coverage along with your other benefits. 

Earlier this July, legislation went into effect here in Michigan that changed the no-fault insurance law. One of the main changes related to Personal Injury Protection (PIP) is the part covering medical bills and lost wages if you are injured in an accident. Residents can now select different levels of PIP, whereas Michigan law had previously required insurance covering unlimited medical benefits for the lifetime of the injured person. Read more about the Michigan insurance reform.

If your policy has been renewed since July 1st, you may have chosen a specific PIP level or continued a default option for unlimited coverage. Selecting a lower level of PIP can lower your premiums depending on the limit you choose. However, it's important to note that carrying a higher level of protection could still make sense for many people and could be worth the extra cost. 

Having a conversation with your insurance agent and financial advisor about the potential risks versus cost savings can help you decide if changes to your policy are appropriate. 

As always, if we can be a resource for you, please let us know. 

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Are Your Medications Covered? How to Choose the Right Medicare Plan

Contributed by: Josh Bitel, CFP®

Let’s take a look at an important aspect of Medicare coverage: Part D, which covers prescription medications (think “D” for drugs). Each Medicare Prescription Drug Plan has a unique list of covered drugs which is called a formulary.

Here are some important notes regarding Medicare Part D coverage:

• Drugs may be placed into different cost “tiers” within the specific formulary

• More common/generic drugs will often be in a lower tier costing you less

• You can choose your Part D plan based on your current list of medications to help you obtain the most appropriate plan for you

• Commercially available vaccines that are medically necessary to prevent illness must be covered by a Medicare drug plan (if not already covered under Medicare Part B)

• You should receive an “Evidence of Coverage” (EOC) each September from your plan which explains what your Medicare drug plan covers, how much you pay, etc.

  • You should review this notice each year to determine if your current plan will continue to meet your needs or if you need to consider another plan for the next calendar year

  • If you do not receive this important document, contact your plan representative

    • Your plan’s contact information should be available via “Personalized Search” on the Medicare website

    • You can also search by your plan name

Common Coverage Rules:

• Prior Authorization: Your prescriber may be required to show that the drug is medically necessary for the plan to authorize coverage

• Quantity Limits: Different medications may have limits on quantity fillable at one time (ex: 10 days, 14 days, 30 days, 60 days, etc.)

• Step Therapy: You must attempt treatment with one or more similar, lower cost drugs before the plan will cover the prescribed drug

If you or your prescriber believe one these coverage rules should be waived, you can contact your plan for an exception. Your plan’s contact information should be available via “Personalized Search” on the Medicare website.

• You can ask your prescriber or other health care provider if your plan has special coverage rules and if there are alternatives to an uncovered drug

  • It is not uncommon to be required to attempt treatment with other similar drugs (often less expensive, lower tier) on your formulary first

• You can obtain a written explanation from your plan which should include the following:

  • Whether a specific drug is covered

  • Whether you have met any requirements to be covered

  • How much you will be required to pay

  • If an exception to a plan rule may be made if requested

• You can request an exception if:

  • You or your prescriber believes you need a specific drug that is absent from your plan’s formulary

  • You or your prescriber believes a coverage rule should be waived

  • You believe you should pay less for a more expensive, higher tier drug since your prescriber believes you cannot take any of the less expensive, lower tier options for your condition

• If you disagree with your plan’s denial of coverage there are five additional levels in the appeals process

Additional Considerations:

• Your Medicare Part D plan is allowed to make changes to its formulary during the year

  • These changes must be made within existing Medicare guidelines

  • If a change is made to your formulary:

    • You must be provided written notice at least 60 days prior to the effective date of the formulary change

    • OR your plan will be required to provide the current drug for 60 days under the previous plan rules

• Many Medicare Advantage Plans (Part C) cover prescription medication coverage, and you cannot have concurrent coverage of prescriptions through both a Medicare Advantage Plan and a Medicare prescription drug plan. You’ll be unenrolled from your Advantage Plan and returned to Original Medicare if you have an Advantage plan with prescription coverage in addition to a Part D Prescription Drug Plan.

• Even if a desired medication is covered, it is important to note that some plans may require fulfillment via mail order services in lieu of local retail pharmacy pickup

• This may be very inconvenient for some (ex: people that travel often) and may be avoidable when comparing plans

If you have any questions, please contact your financial advisor at The Center. We are more than happy to help you or refer you to one of our professional resources.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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Sources: www.medicare.gov this information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Any opinions are those of the author and not necessarily those of Raymond James. Raymond James is not affiliated with Josh Bitel. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

Open Enrollment Season for Health Insurance and Medicare 2020

Contributed by: Robert Ingram, CFP®

It’s hard to believe we’re already down to the last official days of summer and about to begin another fall season. And along with the foliage, football games, and cider mills comes the health insurance open enrollment season for many employers and for Medicare.

Now, I know reading through benefits manuals may sound about as fun as cleaning out the gutters or raking those autumn leaves. But as our health care costs continue to rise (federal government actuaries estimate U.S. health care spending averaged $11,212 per person in 2018), making smart decisions is critical to keeping more money in your wallet.

Investing a little time to make sure your coverage meets your needs, and limits your financial risks, can really pay off.

Employer-sponsored health insurance plans

Many employers offer an annual open enrollment this time of year, giving employees an opportunity to select, or make changes to, benefits effective in the next calendar year.

Consider these points as you make your health insurance elections for 2020:

• Review and compare your available plan offerings (e.g. PPO vs. HMO). For some key differences among plan types, click here.

• Focus on more than just the premium costs. Compare the potential total out-of-pocket costs, including deductibles, copays, and the annual out-of-pocket maximums.  

• Consider your health history and the services you may use in the next year. Are you likely to hit the deductible or maximum out-of-pocket costs each year? The benefit of lower premiums for a high deductible plan may be outweighed by higher overall out-of-pocket costs. Are you less likely to hit the deductible, or do you have excess cash in savings to cover unexpected health care costs? A lower premium, high deductible plan may be a good choice.

• Consider whether funding an available Flexible Spending Account (FSA) for health care or Health Savings Account (HSA) makes sense. Keep in mind some key differences:

  • HSA requires a high deductible health plan.

  • You generally must spend FSA dollars on eligible expenses by the end of each plan year or forfeit unspent amounts (use-or-lose provision).

  • HSA balances carryover (no use-or-lose provision).

• For working spouses, it is also important to review each of your employer-sponsored health plan options and consider any limitations on spousal coverage. It has become increasingly common for employers to add surcharges to the premium for spousal coverage, or to entirely exclude coverage for spouses who have access to their own employer-sponsored coverage.

Medicare Open Enrollment

The *Open Enrollment for Medicare Advantage and Medicare prescription drug coverage window opens each year for anyone currently enrolled in Medicare to make changes to their plan, add certain coverages, or enroll in a new plan. It also allows first-time enrollment for individuals who have qualified for Medicare but have not previously enrolled at age 65 or during a Special Enrollment Period.

 This window opens from October 15 through December 7. Changes you can make include: 

• Changing from Original Medicare (Part A/Part B) to a Medicare Advantage Plan

• Changing from a Medicare Advantage Plan back to Original Medicare

• Switching to another Medicare Advantage Plan

• Joining a Medicare Prescription Drug Plan (Part D)

• Switching from one Medicare drug plan to another Medicare drug plan

• Dropping your Medicare prescription drug coverage

*There is also a Medicare Advantage Open Enrollment from January 1 through March 31, but only for those currently enrolled in a Medicare Advantage Plan. It allows changing from one Medicare Advantage Plan to another, or changing from a Medicare Advantage Plan back to Original Medicare.

Unlike the fall open enrollment period, this window does NOT allow changes such as switching from Original Medicare to a Medicare Advantage Plan, joining a Medicare Prescription Drug Plan, or switching from one Medicare Prescription Drug Plan to another if enrolled in Original Medicare.

What if I am employed at age 65 or older?

For employees age 65 and older who are reviewing their health coverage options, the decisions can become more complicated due to Medicare eligibility. If such employees have access to great employer group health insurance coverage at very reasonable costs, it could make sense to continue this coverage even while Medicare eligible. This can lead to additional questions such as:

• Should I enroll in Medicare if I have other coverage?

• For which parts of Medicare should I apply?

With more than one potential payer (e.g. employer health insurance provider and Medicare), “coordination of benefits” rules determine which pays first. Understanding how your employer coverage coordinates with Medicare is an important factor in your decision-making process.

For employers with more than 20 employees, the group health plan generally pays first, and Medicare is secondary. This means that if the group plan does not pay all of the bill, Medicare would pay based on its coverage structure, what the group plan paid, and what the provider charged. Because the group health plan is the primary payer, you may have more flexibility to apply for portions of Medicare, such as selecting Part A (which is premium-free for most everyone) and deferring Part B (which has a monthly premium).

If an employer has fewer than 20 employees, Medicare generally pays first, and the group health plan becomes secondary. In this case, as an eligible employee, you should probably enroll in Medicare Parts A and B. (Medicare Advantage Plans also cover services under Parts A and B.) Failing to enroll in both parts of Medicare could leave you responsible out-of-pocket for anything that Medicare would have covered.

While many factors apply to your own unique circumstances, here are some additional tips for employees age 65+ who are making Medicare enrollment decisions:

• Get the details of your employer-provided coverage in writing to help you decide how to handle Medicare choices. Confirm with your employer plan how benefits coordinate with Medicare.

• Coordinate with your spouse when evaluating your coverage options (just as you would if you were under age). If you are both still working at age 65, you can compare employer health plans and how they work with Medicare, as well as understanding any available spousal/family coverage options. Doing a little homework can help you choose the optimal plan.

• Are you contributing to a Health Savings Account (HSA)? By enrolling in any part of Medicare, you lose the ability to continue HSA contributions. Determine which is most important to you, enrolling in Medicare or continuing the HSA contributions.

• If enrolling in Original Medicare Parts A and B, don’t forget to look at Medicare Supplement Insurance (Medigap), which literally helps fill certain coverage gaps in traditional Medicare. 

Health care costs may be one of your largest expenses over your lifetime, and the planning decisions are often complex. Take advantage of these other great resources available to you:

• Have a Medicare question? Check out The Center’s Medicare FAQ.

• Want to learn more about Medicare Open Enrollment? Check out our latest webinar.

• For enrollment details and other information visit medicare.gov.

As always, if we can be a resource for you or someone you know, please get in touch.

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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Source: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Prior to making a decision to purchase an insurance product, please consult with a properly licensed insurance professional.

Health Care Costs: The Retirement Planning Wildcard

Contributed by: Kali Hassinger, CFP®

When planning ahead for retirement income needs, we typically think about how much it will cost us to live day-to-day (food, clothing, shelter), and to do those things we want to do, like travel and helping grandkids pay for college. The costs we don’t often think about, those that could potentially wreak havoc on retirement income planning, are health care costs.

According to a recent article from the Employee Benefits Research Institute, the average 65-year-old couple will need $400,000 to have a 90% chance of covering health care expenses over their remaining lifetimes (excluding long-term care).

Longevity is a critical factor driving health care costs. According to the Social Security Administration’s 2020 study, a couple, both 66 years of age, has a 1-in-2 chance that one will live to age 90 and a 1-in-4 chance that one will live to age 95. And considering that Medicare premiums are means-tested, the more income you generate in retirement, the higher your Medicare premiums.

So, what can you do to plan for this potential large cost?

1. If your goal is to retire early, plan on self-insuring costs from retirement to age 65. Some employers may offer retiree healthcare, or you can purchase insurance on the Health Insurance Exchange through the Affordable Care Act (still out-of-pocket dollars in retirement).

2. Consider taking advantage of Roth 401(k)s, Roth IRAs (if you qualify), or converting IRA dollars to ROTH IRAs in years that make sense from an income tax perspective. You can use these tax-free dollars for potential retirement health care expenses that won’t increase your income for determining Medicare premiums.

3. Work with your financial planner to determine whether a non-qualified deferred annuity or similar vehicle might make sense for a portion of your investment portfolio. Again, these dollars can be tax-advantaged when determining Medicare premiums.

4. Most importantly, work with your financial planner to simulate retirement income needs for health care expenses and include this in your retirement plan. Although you will never know your exact need, flexible planning to accommodate these expenses may help provide confidence for your future.

Contact your financial planner to discuss how you can plan to pay for your retirement health care needs.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

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UPDATED from original post on March 11, 2014 by Sandy Adams.

Any opinions are those of Kali Hassinger and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Employee Benefits Open Enrollment: 2018 Game Plan

Contributed by: Robert Ingram

Now that the Fall season is upon us and the holidays are right around the corner, it is also the annual benefits open enrollment season for many employers.  I know it can be tempting to quickly flip through the booklet checking the boxes on the forms without too much consideration, especially if things haven’t changed too much in your situation.  You’re certainly not alone.  However, setting aside some extra time to review your options is important for not only understanding the benefits you have and what might be changing, but also for identifying potential gaps in your coverages or underutilized opportunities.

Below are some benefits that, if offered by your employer, you should keep top of mind as you are making your elections.

Retirement plan contributions (401(k)/403(b) )

• Are you contributing up to the maximum employer match? (Take advantage of free money!)

• Are you maximizing the account?  ($18,500 or $24,500 for age 50 and over in 2018)

• Traditional 401(k) vs. Roth 401(k) options? 

Click here for a summary of 2018 retirement plan contribution limits and adjustments

Health insurance plans

• Review and compare your available plan offerings (e.g. PPO vs HMO). Want to explore some of the differences between plan types in more detail? Click here.

• Focus on more than just the premium cost. Think about the deductibles, copays, and the annual out-of-pocket maximums

• Consider your health history and the amount of services you use. For example, are you likely to hit the deductible or maximum out-of-pocket costs each year? The benefit of lower premiums for a high deductible plan may be outweighed by higher overall costs out-of-pocket.  Are you less likely to hit the deductible but you have excess cash saving just in case?  A lower premium, high deductible plan could make sense.

Health Care Flexible Spending Accounts vs. Health Savings Accounts

Flexible Spending Accounts and Health Savings Accounts both allow you to contribute pre-tax funds to an account that you can then withdraw tax-free to pay for qualified out-of-pocket medical expenses.  There are, however, some key differences to remember.

Flexible Spending Account for health care (FSA)

• Maximum employee contribution in 2018 is $2,650

• Generally must spend the balance on eligible expenses by the end of each plan year or forfeit unspent amounts (use-or-lose provision).

• Employers MAY offer more time to use the funds through either a grace period option (you have an extra 2 ½ months to spend the funds) or a carryover option (you can carry over up to $500 of the balance into the following year)

For more information on the FSA click here.

Health Savings Account (HSA)

• Can only be used with a high deductible health insurance plan

• Maximum contribution in 2018 for an individual $ 3,450  ($4,450 for age 55 and over)

• Maximum contribution in 2018 for an family plan $6,900  ($7,900 for age 55 and over)

• All HSA balances carryover (no use-or-lose limitations apply)

Click here for more information about the basics of using an HSA

Dependent Care Flexible Spending Account

• Pre-tax contributions to an account that can be withdrawn tax-free for qualified dependent care expenses within the plan year

• Maximum contribution in 2018 is $5,000 ($2,500 if married filing separately)

• Use-or-lose provision applies 

Life and Disability Insurance

• Employers often provide a basic amount of life insurance coverage at no cost to you (typically 1 x salary). 

• You may have the option to purchase additional group coverage up to certain limits at a low cost.

• Many employers also provide a group disability insurance benefit. This can include a short-term benefit (typically covering up to 90 or 180 days) and/or a long-term benefit (covering a specified number of years or up through a certain age such as 65).

• Disability benefits often cover a base percentage of income such as 50% or 60% of salary at no cost with some plans offering supplemental coverage for an additional premium charge.

• Life and disability insurance benefits can vary widely from employer to employer and in many cases only provide a portion of an employee’s needs.It is important to consult with your advisor on the appropriate amount of coverage for your own situation.

Like most things related to financial planning, your benefit selections are specific for your family’s own unique circumstances; and your choices probably would not make sense for your co-worker or neighbor.  We encourage all clients to have conversations with us as they are reviewing their benefit options during open enrollment, so don’t hesitate to pass along any questions you might have. If we can be a resource for you, please let us know.

Robert Ingram is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.®

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This information has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Raymond James Financial Services, Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional. Life insurance Guarantees are based on the claims paying ability of the insurance company.