By Tammy Worth, Special to the Los Angeles Times -- Two years ago, Ruth Collins found herself in a quandary. The primary-care doctor she'd been seeing for 17 years was not covered by her Medicare Advantage plan, a private Medicare plan. Instead, her health insurer tried to send her to other physicians and the insurers wouldn't accept some charges by the provider. Luckily, there were other options for Collins. She switched to a different Medicare Advantage plan and can now see her doctor in San Bernardino, where she lives. She's happy with the change and has decided to stick with the same plan next year.
Happy or not, Medicare Advantage enrollees should make a habit of evaluating their options each year. Though experts say that beneficiaries won't be seeing a lot of changes this time — and what changes there are will mostly be for the better — it is a good idea for people to go through this annual drill before enrollment ends Dec. 31, just to make sure their plan choice remains a good one.
Private health plans have been available in Medicare since the 1970s. Their popularity has grown in recent years, more than doubling nationwide (from 5.3 million to 11.1 million) between 2005 and 2010, according to the Kaiser Family Foundation, a nonprofit health policy organization. In California, approximately 35% of Medicare enrollees are in these plans.
These so-called Medicare Advantage plans provide benefits through insurance companies. They offer preferred provider organizations, health maintenance organizations and private, fee-for-service options. The plans are funded by Medicare and enrollees pay small premiums, averaging about $50 per month. They're preferred by many because they often are more robust than original Medicare, offering features such as coverage for dental and eye care.
Medicare Advantage has garnered a lot of media attention this year, much of it negative, because of rising premiums as well as insurance companies that allegedly misled consumers about providers that enrollees can access in their networks and medications that are covered in the plans.
And in October, Kaiser estimated that, nationwide, 13% of all Medicare Advantage plans would be leaving the market, leaving fewer options for enrollees. There are two reasons for this, says Cheryl Matheis, director of state affairs for AARP. The first is just business: Insurers drop from the market all the time. The second are rules that the Center for Medicare & Medicaid Services has created to make sure that all plans have an adequate number of physicians for enrollees. Those that didn't were discontinued.
Consider your needs
Despite bad press and shrinking options, consumers should consider their own situation when deciding whether to stay in, or enroll in, a new Medicare Advantage plan, said Peter Ashkenaz, a spokesperson for the Centers for Medicare & Medicaid Services: For some people, they can be a good deal. "Each beneficiary needs to look at their own options," Ashkenaz says. "What they are going to find … is that there is still going to be a wide range of plans."
Will that remain the case? Beginning in 2012, Medicare will begin lowering payment to Medicare Advantage providers to even the playing field between original Medicare and Advantage plans. But plans generally aren't leaving because of healthcare reform, experts say. The Centers for Medicare & Medicaid Services is offering bonuses to plans that perform well, which should soften the cuts and keep good providers in the marketplace.
Some facts and deadlines you should be aware of:
Anyone enrolled in plans that are terminating should have received notice by mail by Oct. 1. If these beneficiaries don't enroll in another plan, they will be automatically switched to original Medicare.
Beneficiaries who want to drop a Medicare Advantage plan and move to original Medicare have an extended time to do so — from Jan. 1 through Feb. 14. But there's a potential problem: Original Medicare doesn't offer drug coverage. There is no guarantee someone would be able to pick up Part D (drug coverage for Medicare) if they drop their Medicare Advantage plans, Matheis cautions.
All plans must begin covering preventive services at 100% in 2011. Many Medicare Advantage plans already do this, but there should be no deductible (meaning the portion of charges not covered by the insurance company) for enrollees getting services such as mammograms or physicals.
Changes to plans
Out-of-pocket maximums will be added next year, another protection for enrollees. Beneficiaries will not have to pay more than $6,700 on health expenses over the course of the year, says Elaine Wong Eakin, executive director of California Health Advocates, a nonprofit Medicare Advocacy organization.
Need help finding the right Medicare Advantage plan? In Collins' case, she found a plan that fit her needs by working with her physician's office, which has specialists who assist people in choosing and enrolling in Medicare Advantage programs. Though most doctors' offices don't provide this kind of service, there are a number of other ways to get help.
The first place to go is to the Centers for Medicare & Medicaid Services' website: Use a plan-finder tool you'll find there to help narrow options (www.medicare.gov/find-a-plan/questions/home.aspx). Ashkenaz says people shouldn't base their decision strictly on the premiums they will have to pay, but on their overall healthcare needs.
Hovannes Daniels, director of senior business for Blue Shield of California, says there are five things people should consider when looking for a plan.
First, make sure your doctor is in the provider network. Second, make sure the hospitals that are covered are ones that are convenient. Third, make sure your prescriptions are covered under the plan, especially if you take sustaining drugs for a chronic disease. Fourth, consider what your out-of-pocket costs will be. And fifth, go with a trusted insurance provider — one that has been in the market for a long time or that comes well recommended.
In addition to the Centers for Medicare & Medicaid Services site, insurers such as Blue Shield offer seminars on selecting a plan. Find out more by contacting the insurance company.
Those who don't have Internet access or a family member who can assist them can call organizations such as California Health Advocates (800) 434-0222, which provide Medicare counselors. Another resource is Health Assistance Partnership, a Washington, D.C.-based organization that works with state health programs on Medicare education. It can be reached at (202) 737-6340.
Finally, to underscore: Even if you intend to make no changes in your Medicare Advantage plan, Wong Eakin said it's good practice to reexamine your options each year — because plans can be tweaked annually, including changes to premiums, drug benefits or providers included in the network.
health@latimes.com
Copyright © 2010, Los Angeles Times
Tuesday, November 30, 2010
Practical Matters: Time to evaluate Medicare Advantage plans
Changes in Medicare for 2011
by Irene Card, NorthJersey.com -- Our first concern is always the premium. We do not pay a premium for Part A but we do pay for Part B. Part B covers our medical expenses, laboratory, durable medical equipment, etc. If you sign up for Part B in 2011, your premium will be $ 115.40 monthly and it will be deducted from your Social Security check.
The premium is based on income and this premium is for people whose income is equal to or less than $85,000 if single and $170,000 if married.
If you are single and your modified adjusted gross income is greater than $85,000 and less than or equal to $107,000, your premium will be $161.50 and if married, it will be $161.50 per month, per person, if your income is greater than $170,000 and less than or equal to $214,000.
The premiums continue to increase based on your income and if your income is higher than what I quoted, you are welcome to call me for the exact number. Remember, this only applies to people signing up for Part B in 2011.
The "hold harmless" provision of federal law does not allow our Part B premium to increase more than that year's cost of living increase to your social security benefit. Inasmuch as there has been no increase in Social Security retirement income checks and there will be no increase in 2011, our premium remains the same as what you are paying in 2010.
For folks who were new to Medicare Part B in 2010, their premium will remain at $110.50 per month. The 2011 increase amounts to $4.90 per month.
Part A Medicare pays the hospital bill – all but the $1,100 deductible in 2010. In 2011, the in-hospital deductible will be $1,132. If you are out of the hospital for two months or more, you have to meet the deductible again, the next time you are admitted.
The deductible for Part B (medical expenses) is going up from $155 to $162 per calendar year. Depending on which Medicare supplement policy you have chosen, these deductibles will be covered in full. Some of you still have a group insurance policy from your former employer as secondary to Medicare and, depending on the coverage, they may pay a percentage of the $162 or all of it.
Part D (Medicare Prescription Drug Plan) premiums vary widely with so many companies selling Part D in New Jersey. You will find a list of the companies in the back of Medicare and You, 2011.
If you are on Medicare, you automatically receive a copy of this booklet every year from the Center for Medicare and Medicaid Services.
You can also go online to Medicare.gov for help with determining which Part D plan will be best for you. You can only change your plan once a year, during open enrollment, which is right now.
Open enrollment goes from Nov. 15 to Dec. 31 and the change becomes effective the first of January. Then you are locked in to whichever plan you chose for the entire year.
Irene Card and Betsy Chandler are both licensed insurance professionals working at MIC Insurance Services, a health insurance services company. If you have questions relative to this column or other related topics, we invite you to call 973-492-2828.
Saturday, November 27, 2010
Administration Unveils MLR Rules
Politico (11/23, Haberkorn) reports, The Obama administration on Monday outlined rules to restrict health insurers' spending beginning next year, a key provision of the health care overhaul that aims to improve value for consumers. These "rules will have vast implications for how insurance companies spend money as well as for other aspects of the health care industry. President Barack Obama, in an email released Monday, said the rules 'will make our health care marketplace more transparent and ensure you get the best value for your premium dollars. And it is just one of the many parts of the Affordable Care Act that are already making our health care system stronger.' Meanwhile, HHS Secretary Kathleen Sebelius "on Monday said insurers' administrative costs, marketing and 'in some cases, rising salaries and bonuses' have grown far too much in recent years."
The AP (11/23, Alonso-Zaldivar, Murphy) reports, "The regulation unveiled by the Health and Human Services department calls for insurance companies to spend at least 80 cents of the premium dollar on medical care and quality. For employer plans covering more than 50 people, the requirement is 85 cents," and "insurers that fall short of the mark will have to issue their customers a rebate." Notably, "administration officials said it will prevent insurers from wasting valuable premiums on administration, marketing and executive bonuses. 'While some level of administrative cost is certainly necessary, we believe that they have gotten out of hand,' said...Sebelius."
The Washington Post (11/23, Goldstein) reports, "The Obama administration issued rules on Monday defining a promise to consumers in the new federal health-care law that insurers will spend at least $4 out of $5 they collect in premiums on medical services and other efforts to improve patients' health." These "rules say that, starting in January, insurers must reveal far more information than required in the past about how they allot their money." Sebelius said that they will "guarantee that consumers get the most out of their premium dollars."
The New York Times (11/23, A22, Pear) says that the regulations "will require many health insurance companies to spend more on medical care and allocate less to profits, executive compensation, marketing and overhead expenses." Notably, the "rules, intended to benefit consumers, vastly expand federal authority to direct the use of premiums collected by companies like Aetna, Humana, UnitedHealth and WellPoint. While some states have had such requirements, Monday's announcement is the first such mandate by the federal government and grows out of the new national health care law." Sebelius pointed out that because of the rules, "Millions of Americans will get better value for their health insurance premium dollar."
McClatchy /Kaiser Health News (11/23, Appleby) reports, "Millions of Americans might be eligible for rebates starting in 2012 under regulations released Monday, which detail the health care law's requirement that insurers spend at least 80 percent of their revenues on direct medical care." These "regulations closely follow recommendations that the National Association of Insurance Commissioners sent to the Department of Health and Human Services this fall after months of meetings and debate involving industry and consumer representatives." In response to the new rule, "insurers, who'd objected strongly to the recommendations in October, toned down their criticism Monday, saying the new rules 'take a first step' toward minimizing market disruption for plans sold to individuals," although "it remains possible that the rules could affect employer-offered coverage, America's Health Insurance Plans said in a statement."
Monday, November 22, 2010
New law's health insurance regulations could mean rebates for consumers
By Julie Appleby, Kaiser Health News (LATimes.com) -- Millions of Americans might be eligible for rebates starting in 2012 under regulations released Monday detailing the health care law?s requirement that insurers spend at least 80 percent of their revenue on direct medical care. Insurance plans covering more than 50 people must spend at least 85 cents of every dollar on care.
The regulations closely follow recommendations sent to the U.S. Department of Health and Human Services by the National Association of Insurance Commissioners (NAIC) after months of meetings and debate involving industry and consumer representatives.The government estimates that 45 percent of people who buy their own coverage are in plans that currently don?t meet the standard. If the law were in effect now, about 9 million would get rebates, either directly, if they buy their own coverage, or through their employers if they are in job-based coverage.
"This will guarantee that consumers will get the most out of their premium dollars," HHS Secretary Kathleen Sebelius said at a news conference Monday.
There are some exemptions:
-- Employers and insurers that offer "mini-med" policies, which often cap coverage or have limited payouts, will be given at least an extra year to gather data before falling under the requirement. -- States may apply to have the requirement adjusted if meeting the 80 percent spending require would destabilize their individual market, Sebelius said. Four states ? Maine, Iowa, South Carolina and Georgia ? have already said they would seek adjustments.
-- Some small plans will not have to provide rebates, at least for the first year.
During the debate leading to the NAIC?s recommendations, insurers pushed for the broadest possible definition of what constitutes medical spending, including the cost of paying claims, signing up doctors to their networks or running customer service call centers. The final recommendations are narrower, which is what consumer groups had urged.
The regulations allow, for example, insurers to include many quality improvement costs, along with payments to doctors, nurses, hospitals and other providers in their medical expense calculations but not the cost of broker commissions. Consumer advocates were pleased.
?Few Americans understand how much of what they spend on health insurance goes to administration,? said NAIC consumer representative Timothy Jost, a law professor at Washington and Lee University School of Law.
Currently, he said, insurers covering 20 percent of Americans spend about 30 percent of their revenue on administrative costs, a percentage that will result in rebates unless they reduce those costs.
When the NAIC sent recommendations to Sebelius in October, insurers objected. The recommendations, would "reduce competition, disrupt coverage and threaten patients? access to health plans? quality improvement services," America?s Health Insurance Plans president and CEO Karen Ignagni said in a statement in October.
Kaiser Health News is an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan healthcare policy research organization. Neither Kaiser Health News nor the foundation is affiliated with Kaiser Permanente.
Companies urging employee health assessments
By Barbara Williams, The Record -- Do you smoke? Exercise? How many servings of vegetables do you eat each day? How many alcoholic drinks do you have in a week?
These are just a few of the questions found on health risk assessments that a growing number of North Jersey employers are asking workers to fill out if they want to be covered by the company health plan.
Some companies are offering financial incentives to those answering the queries. Others are raising the premiums for those employees who do not respond."We're seeing employers offering gift cards, raffles to win an iPhone, or lowering the premiums," said Michael McGuire, chief operating officer of UnitedHealthcare of New Jersey. "About 75 percent of the companies are offering incentives and about 25 percent are charging employees for not filling them out."
Health assessments are just one tool in the expanding effort to contain health costs. They help companies target what their employees need to become healthier — such as wellness programs that may include weight-loss coaching, health club discounts or yoga classes.
"For a lot of employers, a health assessment is the first step," said Christine Stearns, vice president of health and legal affairs at the New Jersey Business and Industry Association. "After they get those results, they know what they're dealing with in their population and what type of wellness programs they might want to implement."
Employers often have a financial incentive for getting workers to fill out the questionnaires: Health insurers like Cigna and AmeriHealth will lower a corporation's premiums if a certain percentage of employees fill out assessments or participate in wellness programs. By helping companies target their wellness programs, health insurers believe they will save on medical costs in the long run.
A nationwide trend
Those incentives have helped health assessments become a trend nationwide, experts said. According to the Society for Human Resource Management, the number of companies nationally that asked employees to fill out health questionnaires rose from 53 percent in 2006 to 73 percent in 2009.
SGS North America, a national testing and quality inspection company with headquarters in Rutherford, offers $150 to each employee and spouse who complete health assessments and have biometric screenings, which include tests for cholesterol, blood pressure, blood glucose levels, and a measurement of height, weight and body mass index.
"We want healthy employees and families," said Glenn Hasbrouck, benefits director of SGS.
"Employees find out about health problems and then take care of them," Hasbrouck said. "This results in reduced absenteeism, reduced days when people come to work sick and employees who are happier and more productive in their jobs. In the long run, it reduces disability and medical claims."
The questionnaires are tabulated by the health insurance companies or a third party. The employers are not given the results for individual employees, but do receive information such as: "50 percent of your employees smoke" or "35 percent have high cholesterol."
Some employees question the legality of asking probing health questions — and wonder whether the information will be used against them.
Marshall McKnight, a spokesman for the state Department of Insurance, said employees have some protections. "The law doesn't allow carriers to identify individuals," he said. "A company can't adjust premiums based on a health assessment."
Wellness discounts
This is true, but privacy laws change when a company offers wellness programs, said David Ritson, a management and labor attorney with the Hackensack firm Herten, Burstein, Sheridan, Cevasco, Bottinelli, Litt, Harz LLC.
"For example, if a company has a wellness program to lower cholesterol, then the employer can give a discount for employees that have a cholesterol count below a certain level or charge a higher premium if it's above," Ritson said. "Companies can't discriminate based on questions on a health assessment but they can once a wellness program is involved. The higher premium can be as much as 20 percent of the total cost of coverage, and that amount goes to 30 percent in 2014."
Federal regulations require that if an employee, due to a medical condition, can't meet the wellness program goal he is still entitled to the discount just for participating. This includes smokers who attend smoking cessation classes but still can't kick the habit.
Still, some worry that employers having access to an individual's medical information in any form may ultimately be bad for workers. "The motive for health assessments is good," said David Knowlton, president of the New Jersey Healthcare Quality Institute, a non-profit health care quality policy group. "But people are hired at-will and can be fired at-will, which means a company can tell a smoker to stop smoking or a heavy person to lose weight and if they don't, they can be fired as long as they are not being discriminated against for age, sex, race and religion. But there's no category for being fat — a number of people have tried to sue and consistently lost."
Legal deterrents
Labor law experts said that although the federal laws do have loopholes that employers could potentially use to terminate workers, few would actually try it because the action would most likely result in a lengthy legal battle.
"Employers aren't supposed to vary medical benefits premiums or terminate employees based on health status, but theoretically, it's possible," said Christina Ho, assistant professor of law at Rutgers Law School in Newark. "But there would be a lot of legal risks if they did so."
Despite the concerns, health assessments can help both employers and their workers financially.
"Money spent on preventive care is peanuts compared to hospital costs," Stearns said. "Obesity alone can lead to so many complications.
AmeriHealth, an insurance carrier in Mount Laurel, encourages employers to provide wellness programs and offers companies a 1 percent premium discount if employees fill out health assessments.
"We're hearing strong, positive anecdotal evidence now regarding wellness programs and the evidence is clear that investing money, time and energy in these programs yields a positive result," said Paul Portsmore, AmeriHealth vice president of health services.
Cigna also offers discounts, ranging from 2 percent to 7 percent, to employers for implementing health assessments and a higher discount when employees go for biometric screening.
"About 35 percent of the companies in my area take advantage of the discounts and more and more are interested in wellness programs," said Jeff Berardo, a Cigna regional vice-president.
Another method
Some companies are tackling health care costs without using assessments. Hunter Douglas, a national window treatment company with an office in Upper Saddle River, provides a number of wellness programs and an annual health fair. The company offers lunch-and-learn programs on breast cancer and other diseases, walkathons and access to a fitness center.
"We have considered a health assessment, but you have to ask a lot of personal questions and it's not simple to implement," said Mindy Fabrikant, vice president of human resources. "Our programs are working. Our employees are enthusiastic and we have maximum participation. At this time there doesn't appear to be a need for health assessments."
E-mail: williamsb@northjersey.com
Sunday, November 14, 2010
Employers ready to raise the stakes for health incentives
by Lisa Zamosky, LATimes.com -- Your employer wants you to stop smoking and lose some weight. And the boss is willing to sweeten the pot if you succeed. There's a new twist to corporate wellness programs: Increasingly, employers want to see concrete results before they reward you with premium breaks on your health benefits or with cash and gift cards.
In a September survey of 466 large to midsize employers by the professional services company Towers Watson, 65% of respondents said that for 2011 they'll increase incentives to take part in these programs. And 62% said that by 2012, instead of offering employees incentives to participate in wellness programs like in years past, they'll only pay up after they see demonstrated action and results.Perhaps it'll be agreeing to work with a health coach to better manage your high blood pressure. It could be enrolling in a weight management program or seeing decreases in cholesterol levels or blood pressure over time because of your efforts.
The expectation is that by knowing there are rewards for action and results, employees will find it more attractive to engage in healthier behaviors — and the company's healthcare and productivity costs will decline as a result.
"Employers see unhealthy lifestyle as the biggest barrier to providing affordable healthcare coverage," says LuAnn Heinen, vice president of the National Business Group on Health, a nonprofit association of large U.S. employers. That perception seems justified. A study by Duke University published in October's Journal of Occupational and Environmental Medicine found that annual U.S. employee health and productivity costs associated with obesity alone are an estimated $73.1 billion. And there's no sign of that expense decreasing.
Wellness programs have, so far, mostly brought employers only modest cost savings, if that. A historically low level of employee participation is the main reason experts cite. "You launch programs, and 10% or 15% of the eligible population participates. If you get to 20%, you're doing really well," Heinen says.
Yet despite the less-than-robust returns, employers are redoubling their efforts for the upcoming year. "Even with the economy, there isn't a slowdown in these programs," says Sheri Pruitt, director of Behavioral Science Integration at the Permanente Medical Group Inc., a division of Kaiser Permanente in Roseville, Calif.
A number of factors are driving this. One is the fact that businesses with higher levels of participation in their wellness programs do achieve cost savings. "Some companies have gotten there, and it has had a payoff," says Mike Thompson of PricewaterhouseCoopers' Health and Welfare Practice.
Another is that health reform has placed an emphasis on wellness and prevention. Starting next year, small companies can receive grants if they begin wellness programs that target smoking cessation, nutrition, physical fitness and stress management. And by 2014, employers can increase employee incentives for participating in a wellness program from the current 20% to 30% of the total premium. This has encouraged some businesses to jump into the game or refine existing programs.
The types of activities and incentives employees will see are likely to expand next year. "But you'll have to do more to get them," Heinen says. "It's about doing something, rather than just taking a questionnaire."
For example: If last year you received a gift card or money for completing a health risk assessment (an evaluation of your health risks and the lifestyle activities that contribute to them), this year your employer may offer you incentives to join a program (for diabetes management, say). And, increasingly, employers will require you to achieve the outcomes intended by the programs.
A 2010 annual survey of 507 employers by Towers Watson and the National Business Group on Health found that 42% of large firms will require employees to complete health coaching or a disease management program in order to earn a financial incentive in 2011. And 17% said they either had in place or were considering plans in which employees would have to maintain a healthy body mass index (BMI), normal blood pressure or cholesterol levels, or show improvement toward those goals to earn their reward.
In addition, 40% of employers said that in 2011 they are offering incentives for so-called biometric screening, in which blood pressure, blood sugar, cholesterol and other health parameters are checked.
Increasingly, employers are tying not only health insurance premiums but also benefits packages to their wellness initiatives. Many are offering two levels of benefits. Employees who engage in and sustain good health or are willing to take actions to improve their health may enjoy lower health insurance premiums and have access to a more robust package with fewer out-of-pocket expenses in the form of lower copayments and deductibles.
With all of this nudging to get workers to take better care of themselves, employers are quite aware of the fine line they walk between offering support for healthy choices and making inappropriate demands, experts say. Wellness programs don't work if people think their employer is trying to get them to do things they don't want to do.
"I've seen extreme concern and fear over issues around discrimination when you start doing things like rewarding for certain amounts of weight loss or biometric screens," says Josh Klapow, chief behavioral scientist at Birmingham, Ala.-based ChipRewards Inc., which develops health incentive programs.
But will this new focus on results actually make employees more healthy? Some experts have their doubts. Pruitt, for one, thinks that rewarding people for an outcome without reinforcing all the steps needed to get there isn't likely to be effective. "There is a real lack of understanding among very smart people that there is a science of human behavior," she says.
Klapow agrees that by shifting rewards from participation to outcomes, employers are making a huge assumption that people will be able to figure out and engage in all of the behaviors that lead to the desired outcome. He argues that a successful program would reward people for every necessary step along the way to a goal.
His prescription for a stop- smoking program, for example: "Give points for enrolling, points for every time you participate in class, points for graduating, points for reporting nicotine-free," he says. Sure, give the most points for passing a nicotine breathalyzer — but don't save all rewards for just the breathalyzer.
All agree that figuring out the best way to motivate employees to get healthy and thereby cut costs is going to take time — and trial and error. "I think this is an evolutionary process, and some companies are more mature in that process than others," Thompson says.
health@latimes.com
Copyright © 2010, Los Angeles Times
Friday, November 12, 2010
Health-Care Tax Relief for the Self-Employed
This year a new law will let solo business owners fully deduct health insurance premiums for the first time. Here's how it works. By Karen E. Klein, Businessweek.com
If you are self-employed and your business is a sole proprietorship, single-member LLC, or sole-owner S-corp, you can indeed deduct your health insurance expenses for 2010. This one-year provision is not a part of the health-care reform bill that passed in March, however. It was included in the Small Business Jobs and Credit Act that President Barack Obama signed into law just last month."In this economic climate, any kind of bottom line tax savings is helpful," says Kristie Arslan, executive director of the National Association for the Self-Employed, a Washington-based lobbying group. "This is one of the few small business provisions that's been passed where business owners will actually see lower taxes on Apr. 15, 2011."
Her organization has championed the deduction for more than eight years and unsuccessfully tried to get it included in the health-care reform law.
The new provision corrects what Arslan calls a fundamental unfairness: Self-employed individuals cannot deduct the full cost of health insurance premiums as a business expense on their payroll taxes, as other business entities can do.
Although the new law authorizes the deduction only for 2010, Arslan says it's "a foot in the door" for self-employed individuals, who pay both the employer and employee portions of the payroll tax—a self-employment tax totaling 15.3 percent. Employees typically pay half that amount (7.65 percent) and their employers cover the other half as part of their payroll taxes. The new deduction exempts solo business owners from paying self-employment tax on the portion of their income that they spend on health premiums. "This is a step in the right direction. We're hoping to extend it and make it permanent," Arslan says.
Make sure to ask your tax preparer about taking the deduction when you file your tax returns next year. In order to take advantage of it, you must buy your own insurance (rather than relying on a spouse's coverage or being uninsured) and you must pay self-employment tax on business income (rather than declaring a business loss). The deduction phases out above a $106,800 annual income limit. The provision is specifically geared for those who file a 1040 Schedule C business income tax form or a Schedule E earned income tax form, Arslan says.
Another important caveat: The new deduction does not apply to health insurance coverage that you may provide for any employees you have. There is a small business health-care tax credit, part of the health-care reform legislation, that you may be able to claim for that expense. More information on that tax credit is available at the IRS website.
Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.
Monday, November 8, 2010
Retiring? What about your health insurance?
By Irene Card, The Record -- Approaching retirement requires planning. Next to your income, health insurance is the most important issue to explore because you certainly do not want to have a period in your life when you are not insured for medical care. Your options for health insurance depend upon your age.
Under 65
If you are under the age of 65 and planning to retire, you should first check with your employer to see if you are eligible to stay on the group health insurance plan; that is usually the least expensive way to obtain coverage. Depending on the employer and your years of service, you may be eligible to stay on the plan until your 65th birthday. Or, you may be eligible to continue your benefits under the COBRA law for 18 months. If this is not the case, and your employer tells you there is no health insurance coverage once you retire, you may wish to check with your spouse. If your spouse is employed you may be able to be added to that insurance plan.
If not, your only alternative is to purchase an individual health insurance policy to carry you through until you reach the age of 65. Individual health insurance is expensive. Premiums can range from $460 to well over a thousand dollars per month, depending on the type of coverage you select.
Approaching 65
If you plan to retire in the month in which you turn 65, you will be eligible for Medicare. Your employer may allow you to continue on the group plan, which will be secondary to Medicare. If your employer tells you that you cannot continue on the group health insurance plan, you must choose a Medicare supplement (also known as Medigap) to fill in the gaps and pick up where Medicare leaves off.
Depending on the Medicare supplement (also known as Medigap) you will have one 100 percent coverage. Or, when a person becomes eligible for Medicare, you may choose a Medicare Advantage plan in lieu of the traditional Medicare plan. This is good for a small group of citizens. With a Medicare Advantage plan, you usually have a copayment, you might have deductibles and you must go to providers who participate in the plan.
If you have a spouse, and your spouse is actively employed by a company with more than 20 employees, you may be able to continue health insurance benefits under your spouse's plan. If you do this, and if your spouse works for a company with more than 20 employees, you should refuse Part B Medicare until your spouse also retires.
If you will be 65 and not actively at work on a full-time basis, do not choose COBRA in lieu of signing up for Medicare Part B. I cannot emphasize this enough. COBRA does not count as creditable coverage when applying for Part B. If you have COBRA for 18 months and now you go to Social Security to sign up for Part B, they will tell you that you have to wait for open enrollment which is January through March and your Part B will become effective the following July. This is not good at all. Seek professional advice; without it you may end up paying a penalty for Part B Medicare.
Over 65
If you have been working since your 65th birthday and are now getting up in years and decide to retire, you have a few choices. If you have been actively employed by a company with more than 20 employees chances are you are on the group health insurance plan and Medicare is secondary or you have refused Part B Medicare. This is known as TEFRA. The TEFRA law simply stated, means that if you are 65 or over and actively employed by a company with more than 20 employees, your group insurance is primary and Medicare is secondary.
Many people that fall into this category find that they do not need Part B Medicare until they retire. The same holds true if you are eligible for benefits under the plan that your spouse has because your spouse is still working. When you receive benefits beyond age 65 under your spouse's plan, it is known as the DEFRA law. So, if you don't have a spouse, and you are now getting ready to retire, well beyond your 65th birthday, you will have to make sure that you get enrolled in the Medicare program if you were TEFRA eligible. Find out if your employer will allow you to stay on the group plan as secondary to Medicare.
If not, you will have to purchase a Medicare supplement. It is very important that you get a certificate of insurance if you are on the group plan to prove that you were continuously insured and that you are no longer eligible to remain on the group plan. With a certificate of insurance (a document from the insurance company showing the dates you were covered) you will be able to purchase a Medicare supplement from any company selling them with no waiting period for pre-existing conditions.
You will have to contact Social Security and let them know that you are going to retire and will need Part B Medicare. There will be penalty and you do not have to wait for open enrollment because you can prove that you were TEFRA eligible (covered by a group plan with more than 20 employees). This is the most important step to follow.
If you have been working for a very small company beyond the age of 65, Medicare is primary and you may or may not have a Medicare supplement. There might be a waiting period for pre-existing conditions when you go to purchase a Medicare supplement if this is your situation.
Long term care insurance: The need for long term care is the single greatest threat to your financial security as you get older. Long term care insurance will help protect your assets when you require someone to take care of you, whether you have someone coming to your home, or if you become institutionalized, use an adult day care center, or an assisted living facility, etc. You should certainly explore the financial ramifications of purchasing long term care insurance when you retire if you have not already done so. We will be happy to help you with this.
Irene Card and Betsy Chandler are licensed insurance professionals working at MIC Insurance Services, a health insurance services company. If you have questions relative to this column or other related topics, we invite you to call 973-492-2828.
