The Best Retirement Savings Plan?

If you are saving for retirement, chances are you have a "tax qualified" account of some kind - an IRA, 401(k) or perhaps a SIMPLE plan. You get a tax deduction for deposits you make to your retirement plan and it grows "under the radar" of the IRS. You don't pay taxes on the growth as the account accumulates interest over the years.

However, you will be taxed out of your gourd when you withdraw from your qualified retirement plan. 100% of the withdrawals are taxed as ordinary income at whatever the tax rates are at the time. People often say they expect to pay less in taxes when they retire. Huh? When did income tax rates go down in the last 45 years? (they haven't)

Another big thing is that your retirement accounts may be taxed as much as 60% if you leave the money to heirs. Is that what you want?

My clients use an IRS sanctioned plan that has been around for generations. There are no limits on how much you can save per year. Deposits are not tax deductible but withdrawals are tax-free. Your money grows as the economy improves. You never see a downturn or loss in your retirement plan if the economy tanks. There is also a self-completing feature: if you become disabled and your work income stops, the plan continues to make annual deposits for you. If you happen to die before or during retirement, the entire account goes to your heirs income tax free.

Contact me for more information and a tailor-made plan for your retirement.

Health Insurance Premium Tax Credits for All?

WASHINGTON — The Obama administration said Friday (february 28th) that it would allow some people to receive federal subsidies for health insurance purchased in the private market outside of health insurance exchanges. The sudden shift was the latest in a series of policy changes, extensions and clarifications by federal officials trying to help beneficiaries and minimize political damage to Democrats in this election year.

Federal officials said they had agreed to provide such assistance retroactively because technical problems had prevented consumers from using online exchanges to obtain insurance and financial aid in some states.

Gov. John Kitzhaber of Oregon, a Democrat, had specifically asked the federal government to allow financial assistance, in the form of tax credits, for people buying insurance outside the state’s troubled exchange. Other states running their own exchanges, including Hawaii, Maryland, Massachusetts and Minnesota, have also experienced technical difficulties, creating political problems for their governors.

The Obama administration’s decision came as a surprise because the Affordable Care Act is clear: Federal subsidies are available only to people who enroll in a “qualified health plan” through an exchange.

But some of the online state exchanges have not been working well enough to determine if people are eligible for coverage, one of the basic functions of an exchange. The exchanges are competitive marketplaces where consumers are supposed to be able to shop for insurance, enroll and get financial assistance to help pay premiums.

“We recognize that some states have experienced difficulties in processing automated eligibility determinations and enrollments,” said Aaron K. Albright, a spokesman for the federal Centers for Medicare and Medicaid Services. “We released guidance providing options to marketplaces to ensure eligible consumers have access to financial assistance.”

The new policy applies to people who — because of “technical issues” — were stymied in trying to buy insurance through an online exchange and signed up for a health plan outside the marketplace. They will now be allowed to sign up for coverage in the exchange and get federal subsidies “on a retroactive basis,” going back to the date on which they first enrolled in a health plan outside the exchange.

Representative Joe Pitts, Republican of Pennsylvania and the chairman of the Energy and Commerce subcommittee on health, expressed disbelief at the latest policy change.

“The administration is blatantly ignoring the law, paying subsidies to plans outside of exchanges,” Mr. Pitts said. “The unilateral delays and changes have been rampant.”

Until now, people who bought insurance outside an exchange were not eligible for subsidies.

Under the new policy, insurers may have to give refunds or credits to reimburse consumers for some of the money they spent on insurance premiums and co-payments before getting subsidies.

The subsidies can greatly reduce the cost of coverage. The Congressional Budget Office estimates that four-fifths of people buying insurance through exchanges will qualify for subsidies, with the government spending an average of $4,700 for each “subsidized enrollee” this year.

Sara Rosenbaum, a professor of health law and policy at George Washington University, said that by offering subsidies for insurance purchased outside an exchange, the Obama administration was avoiding a huge potential legal liability.

“People could have gone to court to obtain benefits denied without due process of law, because of a breakdown in government eligibility systems, and a judge would probably have ordered retroactive relief,” Ms. Rosenbaum said. “The federal government is voluntarily providing equitable relief that a court would have given.”

Mr. Kitzhaber thanked the administration, saying its action would “ensure that Oregonians who enrolled in health plans outside of our insurance exchange would still be able to claim tax credits that are a key benefit of the Affordable Care Act.”

Dr. Joshua M. Sharfstein, Maryland’s health secretary and chairman of its insurance exchange, said he was studying the new federal policy to see if it could be used in Maryland. Many “logistical details” would need to be worked out, he said.

The health law fix this week comes after the administration delayed the requirement for larger employers to offer coverage to employees; extended the deadline for people to sign up for coverage starting on Jan. 1; delayed the opening of online marketplaces for small businesses; and asked insurers to extend individual health care policies that had been canceled for not complying with the new federal law.

Source: New York Times, February 28, 2014

How Medicare covers Alzheimer's disease

Most medical costs to treat beneficiaries with Alzheimer's disease are covered by Medicare. Here is a breakdown of what Medicare (original) does and does not cover when it comes to Alzheimer's disease, along with tips that can help you plan ahead.

Medical care
For the most part, ongoing medical care to diagnose and treat Alzheimer's disease is covered by Medicare Part B (visits to doctors, lab tests, speech and occupational therapy, home health care and outpatient counseling services).

Medicare pays 80% of these costs after your annual Part B deductible is met. You will be responsible for the remaining 20% of costs.

Inpatient hospital care is also covered under Medicare Part A after the annual deductible is met. And, as part of health care reform, Medicare is also covering 100 percent of annual wellness visits which includes testing for cognitive impairment.

Medications
Most Alzheimer's medications are covered under Medicare's Part D prescription drug plans but copayments vary from plan to plan. The Alzheimer's Association offers a chart on coverage for common Alzheimer's drugs. Visit www.alz.org and search for "drug chart."

Insurance
If you don't have a Medigap (Medicare supplemental) insurance policy, you should consider getting one. A Medigap plan will help pay for things that aren't covered by Medicare like copayments, coinsurance and deductibles. For example, a Medigap plan F pays all deductible and all coinsurance plus any excess charges above what Medicare approves.

If you are enrolled in a Medicare Advantage plan (like an HMO or PPO), your plan must give you at least the same coverage as original Medicare, but make sure your doctors are in your insurer's network to avoid excess costs. Also ask if you need a referral or prior authorization before getting care.

Healthcare Payment System Still to be Built

Here is an article by Brian M Kalish that appeared in a newsletter I get. The article is dated January 18, 2014.

The back-end payment system of Healthcare.gov is still being built, a senior Centers for Medicare and Medicaid Services official said Thursday (January 16) in testimony on Capitol Hill.
 
“The automated process for payments is still being built, but we have a process in place that is working,” said Gary Cohen, director of the Center for Consumer Information and Insurance Oversight, in response to questioning by House Energy and Commerce Subcommittee on Oversight and Investigations Chairman Tim Murphy (R-Pa.). Cohen did not elaborate on the process in place.

Asked if there was a predicted finish date for the system, Cohen responded that he does not “have an answer on a predicted date.”

On Nov. 19, 2013, Henry Chao, the top IT official at CMS, said in testimony on Capitol Hill that more than 30% of the "back-end" infrastructure still remains to be built in the federally-run marketplace.

At the time, CMS Spokeswoman Julie Bataille said those tools included things needed in order to process payments to issuers, and they were not required until 2014. CMS added they were on track to complete these applications by mid-January.
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What does this mean to purchasers of individual & family health insurance - those who purchased inside the exchange?  For one, insurance companies may not receive your premiums (paid to the exchange) and the Federal tax credit money in time to guarantee coverage for January until sometime much later than normal.

Second, doctors and other providers unsure of being paid by the insurance company you chose in the exchange, will be skittish about "putting it on your tab" and crossing their fingers that payment will be made.

Third, your broker/agent that helped you enroll and kept you informed about the process won't get compensated until the back-end system is working.

This is all brand new territory for everyone - you the consumer, your doctors and other providers, the insurance companies and your broker.

Know Your Network!

We have become aware of information that you need to know.

Whether you have an individual & family health insurance plan or you are part of an employer sponsored group insurance plan, listen up!

2014 is the brave new world we read about in high school, especially regarding health insurance. My issue today is NETWORKS. Your plan has a network and it may be different than what you had last year. You need to know how to use your network to obtain benefits you are paying for and counting on. You also need to know how to avoid sticker shock when you don't play by the rules.

Gone are the days when you could say "My hip surgery is covered 100%."  Under old rules of insurance, it was true that you could have a hip surgery at a network hospital by a network surgeon and be covered to the full extent of your policy. But that was then. Shrinking networks make 2014 different.

It will not be uncommon for someone to get a hip surgery at a network hospital performed by a network surgeon and be covered for hospital and surgery expenses. However, it may happen that the anesthesiologist is out of network and the patient will be facing a huge bill. Most out of network providers are paid at a much lower percentage AND the out-of-network provider is allowed to balance bill. Here's another scenario -- the anesthesiologist is in network but he uses an anesthetic that is not in your formulary. For example, the anesthesiologist uses Propofol (not in the formulary) instead of Desflurane (in the formulary) and you get stuck with the cost of that drug. (My disclaimer - these drug names are strictly to make a point).

So what do you do?

Before you agree to a procedure - major/expensive test, outpatient surgery, inpatient surgery - or anything that is going to cost more than pocket change, ASK QUESTIONS! Call customer service (the 800# on the back of your ID card) and ask detailed questions about the procedure/surgery recommended such as…

1) Is this surgery for my leaking gizzard a covered expense?

2) Is this hospital or this ambulatory surgical center in network?

3) is this surgeon in network?

4) Is this anesthesiologist in network?

5) What about the anesthesia that will be used, is it covered? (You'll need to get the name of the Rx from the surgeon or the anesthesiologist)

6) Is the post-op therapy covered?

7) If I need durable medical equipment (knee scooter, wheelchair, oxygen tank, etc.) is it a covered expense?

8) If I need to stay in a rehabilitation wing of the hospital or at a remote facility, how is it covered?

9) If any of my treatment is performed at a facility or by providers out of network, what are my responsibilities?

I'm sure you get my drift. And keep a journal with names, dates and times that you made the calls and what you were told. If you later have to appeal a declination of benefits, accurate journal notes may make all the difference in whether you are successful in your claim or if you are denied benefits.

If you don't already have one, get a 3-ring binder for your Health History. Have tabs for Vital Statistics (weight, blood pressure, etc.), Medicines (and supplements you take), Office visits, Labs and Tests, Surgeries (inpatient and outpatient), Hospital Stays and other notes such as when and why you were sick and how you treated yourself even if you didn't see a doctor. Take the binder with you to doctor appointments. (I do this myself)

How do HSAs Work?

What is a health savings account plan?

An HSA is a special tax-sheltered savings account for medical bills. It is similar to an IRA. Instead of buying high-priced insurance with low co-pays, you buy a low cost policy (with a “high” deductible) for the “big” bills and save the difference–in the HSA–to cover “small bills”. Money deposited into the account is 100% tax deductible and can be easily accessed by check or debit card to pay medical bills tax-free (even stuff not covered by insurance like dental and vision). What you don’t use for medical bills is yours to keep–it stays in your account and keeps growing on a tax-favored basis to a) cover future medical bills; or b) supplement retirement, just like an IRA. In sum, the HSA offers 1) lower premiums; 2) lower taxes; 3) freedom of choice; and 4) more cash at retirement.

Establishing an HSA plan is as easy as 1-2-3…

1. Take out a “high deductible” HSA-Qualified health insurance policy. Your monthly premiums will be low because of the nature of the policy. CAUTION: Not just any policy with a so-called “high deductible” will qualify you for the HSA plan—it must be a policy that meets the specific HSA design specified by Congress.

2. After the HSA-Qualified insurance policy is issued and in-force, then establish the actual HSA savings account at a qualified financial institution. Under the HSA law, you have a wide variety of investment options in addition to fixed accounts, including mutual funds, stocks and bonds. You are always free to maintain the account at any financial institution that is a bona fide HSA custodian registered with the IRS. Blue Cross offers a program through Mellon Bank.

3. Begin funding the savings account. There is no minimum contribution required; however, just like an IRA, there is an annual maximum. Be sure not to contribute more than the maximum amount allowable each year. Click here to learn more about the current HSA guidelines (as established by Congress).

Etcetera…

• When you file your taxes each year, all of the money you have deposited into your own HSA will be tax-deductible on line 25, front page, of your 1040 form (assuming you have qualifying income as a self-employed person or you are participating as an employee at a company with under 50 employees). This will cut your tax bill by an average of $1,200 for a family (and about $500 for a single). It is absolutely correct to say that with an HSA, you are paying medical bills with money you would otherwise have paid in taxes! How cool is that? (see examples below—you also save money on the actual bill in most cases)

• When you visit a physician, you pay with tax-free money from your savings account. The account is easily accessible by debit card or check. If your provider is a member of the PPO discount network you have joined (with your HSA insurance policy), your bill will actually be reduced before you have to pay it. (Example: $60 Dr. visit reduced to $42. You pay the $42 with tax-free money from your HSA.)

• When you need to purchase prescriptions, simply visit a participating PPO discount pharmacy (most all major chains participate) and pay your discounted amount on the spot either by debit card or check directly from your HSA account (again, with tax-free money).

• Some medical expenses not covered by the insurance policy may still be considered allowable expenses under the HSA. For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA.

• Keep funding the HSA every year to the maximum amount allowable by year (now up to 100% of the deductible amount with the new HSA). This will reduce your taxes each year plus, more importantly, will give you a larger and larger cushion against unexpected “catastrophic” type claims in the future. After only two or three years of good health and steady funding of the HSA, there should be more than enough in the savings account to cover any foreseeable medical expenses without ever having to dip into your pockets. (Note: dipping into your HSA savings account is not the same as dipping into your pockets—your HSA is the functional equivalent of “insurance” coverage for the small bills—what you don’t have to use is yours to keep—which is dramatically different than paying an insurance company a few thousand dollars a year to do virtually the same thing…insure the “small” bills)

• Remember, what you don’t use for medical bills from the HSA is yours to keep—just like an IRA. The balance continues to grow and grow on a tax-sheltered basis. Once you reach age 65, the account can basically be used just like a traditional IRA (withdrawals subject only to income tax-reporting—no “premature withdrawal penalties”).

We hope you have found this information to be helpful.

Fable of the Gullible Gull

In the Reader's Digest, October 1950 edition, the Fable of the Gullible Gull is shared as a warning against dependency. The story is told of great flocks of sea gulls starving despite the good fishing waters nearby. Why were they starving? They were starving, because although there were plenty of fish to eat, the gulls did not know how to fish.

For generations the gulls depended upon a fleet of shrimping boats which would toss out the scraps to the gulls, but then the fleet moved.

"The shrimpers had created a Welfare State for the sea gulls. The big birds never bothered to learn how to fish for themselves and they never taught their children to fish. Instead they led their little ones to the shrimp nets. Now the Sea gulls, the fine free birds that almost symbolize liberty itself, are starving to death because they gave in to the 'something for nothing' lure! They sacrificed their independence for a handout."

The fable concluded with this, "Let's not be gullible gulls. We must preserve our talents of self-sufficiency, our genius for creating things for ourselves, our sense of thrift and our true love of independence."