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.

Reducing Your Medicare Premium Surcharges

Contributed by: Robert Ingram, CFP®

For many clients with incomes above a certain level, Medicare premiums may be higher for Part B and Part D. As a Medicare recipient’s income exceeds specific thresholds, they may pay adjusted amounts in addition to the baseline Part B and/or Part D premiums.

Now, what if you have been paying these Medicare surcharges, but you experience a drop in your income? Can you also get your Medicare surcharge reduced? The answer is, possibly yes.

If you experience a change to your income because of certain life events, you can request that the Social Security Administration (SSA) review your situation and use your more recent income to determine what premium adjustment (if any) should apply. Examples of these life-changing events include:

• Work stoppage or work reduction

• Death of a spouse

• Marriage

• Loss of pension income

• Divorce or Annulment

• Loss of income-producing property

You might be asking yourself, “Why do I have to request this? Aren’t Medicare premiums automatically adjusted according to my income?”. A big reason for making the change request when you experience a qualifying change in income has to do with how and when the SSA measures your income.

Income-Related Monthly Adjustment Amount (IRMAA)

To determine whether your income makes you subject to an Income-Related Monthly Adjustment Amount (IRMAA) to the regular Medicare Part B or Part D premiums for the current year, the SSA looks at the income you reported to the IRS for the previous two years. This means that your Modified Adjusted Gross Income (Adjusted Gross Income with tax-exempt income added back) reported for 2017 determines your Medicare premiums for 2019. 

For individuals paying Part B premiums, for example, the standard premium in 2019 is $135.50 per month. However, the following table illustrates what you would pay in 2019 for Part B depending on your 2017 income.

For a couple who filed a joint return with income above $170,000 and up to $214,000 in 2017, each spouse paying for Medicare Part B may pay an additional $54.10 per month above the standard premium (a total of $189.60 monthly) in 2019. A couple with income that falls between $320,000 and $750,000 (or an individual filing single with income between $160,000 and $500,000) in 2017 could each pay an additional $297.90 above the standard premium, for a total of $433.40 per month in 2019.

If an individual (or couple) experienced a drop in income for 2019, it might normally take until 2021 for the Medicare premiums to reflect any reduction based on the 2019 income. Let’s say the couple who had reported income between $320,000 and $750,000 retires in 2019 and sees their income drop to an expected $165,000. The expected income falling within the $170,000 threshold could mean a difference of $297.90 per month (each!) in Medicare Part B premiums (from $433.40 to $135.50).

If a qualifying life event caused the drop in expected income, then filing a request with the SSA could mean a more immediate change in Medicare premiums, rather than waiting for the savings until 2021.

How do you request the premium surcharge reduction? 

If you think you have experienced a reduction in income due to one or more of the qualifying events, make your request to the Social Security Administration by submitting the Medicare Income-Related Monthly Adjustment Amount –Life-Changing Event form (form SSA-44).

Along with this form, you will also provide supporting documentation for your Modified Adjusted Gross Income and your life-changing event (see form SSA-44 instructions). Examples of supporting documentation may include items such as:

• Federal income tax return

• Signed statements from employers, pay stubs

• Certified documents for transfers of a business

• Marriage certificate

• Certified death certificates

• Letter or statement from pension administrator explaining a reduction/termination

For other disagreements with an IRMAA determination, you have the right to appeal. You can file an appeal online (socialsecurity.gov/disability/appeal) and select “Request Non-Medical Reconsideration”, file a Request for Reconsideration form, or contact your local Social Security office.

If you disagree with an IRMAA determination because your reported Modified Adjusted Gross Income is incorrect, you need to address the correction first with the IRS.

Because these Medicare surcharges are determined each year, you have opportunities to do more proactive income and tax planning leading up to and after Medicare enrollment. Employing different strategies that help control your Adjusted Gross Income could also help control potential Medicare premiums in future years. If you have questions about your particular situation, feel free to reach out to us!

• Want more information about Medicare? Check out The Center’s Medicare FAQ

• Looking for financial strategies and tax tips for year-end? Check out this webinar.

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.

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.