Life & Health Insurance Advisor

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1 Life & Health Insurance Advisor MRCT SmartBenefits is a comprehensive employee benefits, wellness and Human Resources consulting firm offering a variety of financial services to businesses and individuals 230 S. Bemiston; Suite 900 Clayton, MO (314) FAX (314) Health Insurance April 2014 Volume 7 Number 4 Can Medicaid Take Your House? The Medicaid expansion brought about by the Affordable Care Act could increase situations that would allow Medicaid to seize property of a deceased recipient to reimburse the cost of his/her care. Is your home vulnerable? Read on for details. The History Since the Medicaid program began in 1965, it has permitted states to recover costs from the estates of deceased recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child. The 1965 Medicaid law also gave states permission to impose liens on property in the estates of deceased Medicaid recipients. Post-death liens prevent the estate from being settled and the property distributed to the recipient s heirs before all claims against it, including Medicaid s, are satisfied. Until 1993, estate recovery was optional for states. But in 1993, Congress made estate recovery mandatory. A provision in the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) requires state Medicaid programs to seek recovery of benefits paid for nursing facility services, home and community-based services, and related hospital and pre- This Just In You can keep your coverage again. Last November, the Obama administration responded to pressure from employers and consumers and allowed people to keep existing plans that did not meet the minimum requirements of the Affordable Care Act. In March 2014, the Obama administration issued another extension, which will apply to policies issued until October 1, Administration officials said the extension will give consumers more time to find the coverage that works best for them and their families. The extension could affect as many as 500,000 Americans. The delay in enforcement applies to individual and small group plans (fewer than 50 employees). In 2016, it will also apply to employers with 50 to 99 employees, which will be redefined as small businesses in 2016 and required to buy health coverage

2 Health Insurance Life & Health Insurance Advisor April 2014 scription drug services for beneficiaries age 55 and older. They also have the option of recovering payments for all other Medicaid services provided to these individuals, except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries. The Problem The Affordable Care Act (ACA) itself does not mandate estate recovery. Instead, the ACA expanded the pool of potential Medicaid recipients age 55 and older, subjecting them to a previously enacted law. Call it the law of unintended consequences. To help lower-income individuals meet the ACA s health insurance coverage requirement, it allows states to provide Medicaid eligibility, effective January 1, 2014, for individuals under 65 years of age with incomes up to 133 percent of the federal poverty level (FPL). Individuals seeking coverage on the affordable insurance exchanges who qualify can enroll in Medicaid. However, if you are eligible for Medicaid, you can t receive a government subsidy to buy private health coverage. You can enroll in Medicaid, pay full price for a private market plan or go without coverage and pay a fine. You can also apply for a hardship exemption. The IRS says it will exempt people who are eligible for the Medicaid expansion but live in states that don t offer it. People who are under age 55 needn t worry, but if you are age 55 or older, enrolling in Medicaid could make you subject to estate recovery. This means that if you have assets but little income, enrolling in Medicaid could end up costing your family your home. Federal officials recently urged states not to apply the estate recovery rules to residents who sign up for Medicaid to meet the ACA s insurance requirements. Washington and Oregon have already amended their recovery laws to exempt new Medicaid enrollees, which would limit recovery to recipients of nursing home and other long-term care services in these states. However, the states of California, Colorado, Iowa, Massachusetts, Nevada, New Jersey, New York, North Dakota, Ohio and Rhode Island have said they will pursue estate recovery. This means Medicaid enrollees in those states could be subject to estate recovery for ordinary medical expenses paid by Medicaid, not just nursing home and other long-term care expenses. States may not recover from the estate of a deceased Medicaid enrollee who is survived by a spouse, a child under age 21, or a blind or disabled child of any age. States also must establish procedures for waiving estate recovery when recovery would cause an undue hardship. Still, if you have assets to protect and live in one of the ten states that plan to pursue Medicaid recovery for new enrollees, we suggest you discuss your situation with an estate planning attorney before enrolling in Medicaid. Expanded Medicaid Coverage not Available in Many States When the ACA was passed, it required states to provide Medicaid coverage for adults between ages 18 and 65 with incomes up to 133 percent of the federal poverty level, regardless of their age, family status This Just In on the SHOP small business health exchange. States must agree to let non-compliant policies continue; 28 states are allowing pre-2014 health plans to continue, reported Healthcare Payer News. For 2015, you will also get another month to enroll in a health plan. The 2015 open enrollment season will start as scheduled on November 15, Instead of ending on January 15, 2015 as originally scheduled, it will extend through February 15, or health. A later U.S. Supreme Court ruling made the Medicaid expansion voluntary for the states. As a result, 24 states have opted not to expand their Medicaid programs. They are Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming. In these states, therefore, you have fewer worries about Medicaid estate recovery. However, many adults with incomes below 100 percent of the federal poverty level fall into a coverage gap. They have incomes too high to qualify for Medicaid under their state s current rules. But their incomes are too low to qualify for subsidies to buy private coverage in the health insurance marketplace. We can help you evaluate your health insurance options both on and off the health insurance exchanges please contact us for more information.

3 Long-Term Care Life & Health Insurance Advisor April 2014 Ten Reasons to Buy Long-Term Care Insurance Now An estimated 12.4 percent of Americans aged 65 and older have private LTCI coverage; however, growth in the market has leveled. That could spell trouble for the aging baby boom and millennial generations. Here s why you should consider buying long-term care insurance now. 1 You have a high chance of needing long-term care. If you live to age 65, you have a nearly 70 percent chance of experiencing a disability and needing some paid or unpaid help with basic daily living skills. On average, women require such help for 3.7 years, men for 2.2 years. The government estimates the number of people who will need long-term care will reach 27 million by Many people need professional longterm care services, whether due to the severity of their disability or their personal circumstances. If the average 65-year-old needs about three years of long-term care, he or she will spend about two-thirds of that time at home and one-third in either a nursing home or assisted living facility, according to a 2005/6 study. (Kemper, Komisar, and Alecxih, Long-term care over an uncertain future: What can current retirees expect? ) 3 Facility-based long-term care costs a lot. The 2013 Genworth Financial survey found that a single room in an assisted living facility costs a median of $3,450 per month, or $41,400 per year. A semi-private room in a nursing home cost a median of $207 a day, or nearly $75,000 per year. A private room costs even more, reaching a median of $83, Home-based care also adds up. Care from a licensed home health aide, who can help a disabled person with bathing, dressing and transferring, costs a median of $19 per hour, while adult day care costs a median of $65 per day. 5 Your health insurance plan does not cover long-term care services, most of which are non-medical and consist of assistance with the activities of daily living. These include bathing, dressing, using the toilet, transferring (as from a bed to standing or standing to a chair), incontinence care and eating. 6 Medicare also does not pay for typical long-term care services. It will cover a maximum of 100 days in a skilled nursing facility, hospice care or home health care only if you need skilled care, such as skilled nursing service, physical therapy or other types of therapy, if you are admitted to a Medicare-certified nursing facility within 30 days of a hospital stay of at

4 Life & Health Insurance Advisor April 2014 least three days. It will not pay for assistance with the activities of daily living. 7 Although the Medicaid program pays about 60 percent of all long-term care costs in the U.S., you might not want to rely on it if you need long-term care services. First, since Medicaid is designed to cover the needy, you must spend down your assets to become eligible. Second, Medicaid does not cover the cost of living in an assisted living facility, although it will cover certain home-based care services and nursing home care. Finally, your nursing home of choice might not accept Medicaid. The National Survey of Residential Care Facilities by the National Center for Health Statistics found that 60 percent of residential care communities do not serve Medicaid beneficiaries. (The survey included assisted living facilities with nursing homes; as stated earlier, Medicaid does not cover costs of an assisted living facility.) 8 Private long-term care insurance (LTCI) policies often provide broader coverage than Medicaid. All LTCI policies cover nursing home care or care in an assisted living facility, if you need a lower level of care. Many also cover the cost of homebased services, such as home health aides and adult daycare. Coverage of these services can allow you to stay in your own home if you cannot care for yourself completely. 9 Private LTCI gives you the coverage you need without requiring you to spend down your assets. Buying coverage can protect your estate for your heirs. 10. You ll never be younger than you are now. As with most types of health insurance, you ll pay less when you re young and healthy. Premiums for LTCI generally remain level for the life of the policy, unless the insurer raises rates for all insureds in your rating class. Of course, if you buy coverage early, you could pay more in premiums over your lifetime. The American Association of Long- Term Care Insurance recommends that most people apply for coverage in their mid-50s. You can lock in lower rates if you re in good health. In addition, some policies will allow you to buy a base amount of coverage now and add to it in future years. Should you buy long-term care insurance? If you will qualify for Medicaid, or will qualify shortly after entering a nursing home, don t waste your money. Likewise, if you have enough saved to pay for four to five years of nursing home care for you and your spouse, you probably don t need insurance. (Be sure to consider the effects of inflation when estimating how much long-term care will cost when you are likely to need it.) Anyone else should consider buying this valuable coverage. You ll get the best coverage and options from a standalone policy; however, many life insurance policies now offer long-term care coverage through an optional rider. For more information on long-term care insurance, please call our office. Old Life Insurance Policies Could Have Value You found Great-Grandpa s life insurance policy in an old trunk? Don t throw it out! Life Insurance Unlike many types of insurance, most life insurance policies don t have claim-filing deadlines. You can file a claim many years after the insured has died and the insurer should pay the policy s face value, as long as the policy was in force (paid up and not expired) at the time of death. Of course, if you find a very old policy, it might not be as easy as calling your family s insurance agency for assistance. Insurance companies change, merge, get sold or change names. Some will sell blocks of policies to other insurers, especially if they decide to stop writing a particular type of policy or stop selling coverage in a particular state. Some insurers even go out of business. If the phone number, address or name for the insurer are no longer valid as listed on the policy, contact the insurance department of the insurance company s home state. The insurance department will have records on the insurer s current contact information,

5 Life Insurance Life & Health Insurance Advisor April 2014 along with any information on mergers, name changes or other changes. If the insurance department has contact information for the insurance company, or its successor, you can contact the company to find out whether it ever paid a claim on your policy. Be prepared to provide a copy of the death certificate. Most civilian life insurance policies exclude death due to war or the action of a military force. For this reason, members of the military automatically receive up to $400,000 in life insurance coverage through the Servicemember s Group Life Insurance (SGLI) program when they begin active duty, inactive duty for training or enter the Reserves, unless they specifically opt out. Servicemembers can convert these policies to Veterans Group Life Insurance (VGLI) or a commercial life insurance policy within a certain time period of leaving active duty. Military members who served before the Vietnam War might have coverage under a different program. These include United States Government Life Insurance (USGLI), generally issued to Veterans of World War I; National Service Life Insurance (NSLI), generally issued to Veterans of World War II; Veterans Special Life Insurance (VSLI), generally issued to Korean War-era veterans; Veterans Reopened Insurance (VRI), generally issued to World War II and Korean veterans with service-connected or serious non-service connected disabilities; or Service Disabled Veterans Insurance (S-DVI), issued to Veterans who separated from service on or after April 5, 1951, with service-connected disabilities. The last program is the only one still open to new issues. For information on these policies, contact the insurer listed on the policy or the Veterans Administration. What If You Aren t a Beneficiary of the Policy? If a policy names you as a beneficiary, you can usually receive the policy proceeds free of income tax. If the policy names more than one beneficiary and one or more have already died, the insurance company will generally divide the proceeds among surviving beneficiaries according to whatever percentage or term each beneficiary was supposed to receive under the policy. The American Council of Life Insurers explains it thus, If a spouse was to receive fifty percent of the proceeds, for example, and the children the remainder in equal amounts, the spouse s share will be distributed equally among the children if the spouse dies prior to or just after the insured individual. If no beneficiaries remain, the proceeds become part of the insured s estate and will pass to heirs according to his/her will. If the insured had no will, the insurer will follow state law regarding distribution of policy proceeds to family members. Life insurance can provide financial benefits for several generations for more information on life insurance, please contact us.

6 Life & Health Insurance Advisor April 2014 Insurance and Your Taxes The ability to deduct premiums and/or benefits can make certain types of coverage more affordable. Health insurance (including dental and vision): Premiums your employer pays for group coverage do not count toward your taxable income; any benefits these policies pay you also receive tax-free. If you have individual coverage, any premiums you pay qualify as an itemized deduction, subject to limits. For years beginning after December 31, 2012, you may deduct only the amount of total medical expenses that exceed 10 percent of your adjusted gross income (7.5 percent if you or your spouse are 65 or older). Life insurance: You cannot deduct life insurance premiums, but in most cases your beneficiary will receive death benefits taxfree. Permanent, or whole life, policies offer other tax advantages. The policy s cash value will grow tax-free, and policy loans are generally not treated as taxable distributions. Long-term care insurance: As with medical insurance, you receive any premium contributions your employer makes on your behalf tax-free. Any premiums you pay count as eligible medical and dental expenses, up to a limit that increases with age. For tax year 2013, someone age 40 or less can include up to $360 in premiums in eligible medical expenses. By age 51, the includable amount reaches $1,360; by the time you are older than 70, it jumps to $4,550. Benefits you receive under a qualified long-term care contract are generally excludable from income. Disability income insurance: Tax treatment of your disability income insurance premiums and benefits depends on who pays for coverage. Premiums do not qualify as a medical expense, so if you have an individual policy, you pay premiums with after-tax dollars. However, you receive any benefits tax-free. If your employer provides group coverage, any premiums it pays do not count toward your taxable income; however, benefits you receive will be taxed in proportion to the employer s contribution to premiums. Please note that this information is not complete and might not apply to all situations; please consult your tax advisor before taking any action. SmartsPro MARKETING The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing does not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher s permission. All rights reserved SmartsPro Marketing. Tel