Life & Health Insurance Advisor

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1 Life & Health Insurance Advisor MRCT Benefits Plus is a comprehensive employee benefits, wellness and Human Resources consulting firm offering a variety of financial services to businesses and individuals Affordable Care Act December 2013 Volume 6 Number 12 Coming in 2014: Changes to Your Health Plan The coming year will bring changes to individual health plans, thanks to the Affordable Care Act (ACA). Will they affect yours? 1 Changes that apply to all individual plans: Starting in January 2014, all individual plans, whether grandfathered or not, cannot: Y Discriminate due to pre-existing conditions or gender. The ACA prohibits insurance companies from refusing to sell coverage or renew policies because of an individual s pre-existing conditions. Also, in the individual and small group market, the law prohibits insurers from charging higher rates due to gender or health status. Y Place annual limits on cov- 230 S. Bemiston; Suite 900 Clayton, MO (314) FAX (314) This Just In You can keep your coverage? On November 14, the Centers for Medicare & Medicaid Services issued a transitional policy in response to consumer concerns over cancelled individual health plans. The policy allows insurers to continue certain health plans they otherwise would have to terminate or cancel because they do not comply with Affordable Care Act (ACA) provisions that become effective on January 1, The policy temporarily exempts certain individual or small group plans from compliance with specific provisions of the ACA that are driving up the cost of coverage. For individual plans, these include the ACA s prohibi-

2 Affordable Care Act Life & Health Insurance Advisor December 2013 erage. You may have heard the ACA prohibits new individual health plans and existing group plans from imposing annual dollar limits on coverage amounts. However, this prohibition applies only to essential health benefits. Essential health benefits must include items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. The annual limit prohibition does not apply to non-essential benefits; your health plan can impose coverage limits on other benefits in accordance with existing law. Y Drop or limit coverage for individuals participating in clinical trials. Starting on January 1, insurers cannot drop or limit coverage for individuals who participate in a clinical trial 2 Changes that do not apply to grandfathered plans: If your plan is grandfathered, it might be exempt from certain provisions that will apply to other plans. Unlike other health plans, job-based plans and grandfathered individual plans are not required to comply with ACA provisions that require other health plans to: Y Provide certain preventive care benefits with no out-of-pocket costs to participants. Y Offer new protections when you are appealing claims and coverage denials. Y Comply with rules that limit payments or require prior approval for out-of-network emergency room services. However, plans that are grandfathered can offer these benefits and protections if the plan issuer so chooses. If your plan is grandfathered, your plan materials will include a statement saying the plan issuer considers the plan to be grandfathered. Generally, a grandfathered plan must have existed on March 23, 2010 and must have covered at least one person continuously from that day forward. Plans can lose their grandfathered status if they make certain significant changes that reduce benefits or increase costs to members. What If My Insurer Drops my Plan? America s Health Insurance Plans (AHIP), a trade organization for health insurers, responded to the media frenzy over individual health plan cancellations by pointing out that: Y Most policies in the individual market are not grandfathered and therefore have to come into compliance with the ACA requirements starting on January 1, 2014 or This Just In tion of pre-existing condition exclusions, prohibition on rate discrimination based on health status, requirement that all health plans cover ten essential health benefits, and a prohibition on insurers cancelling coverage for members who participate in clinical trials for treatments for life-threatening diseases. The policy applies to coverage in effect on October 1, 2013 and that renews between January 1, 2014 and October 1, Please note that the policy is optional: insurers can still cancel coverage that doesn t comply with the ACA. If your policy has been or will be cancelled, we can help you find coverage. Please contact us to discuss your options. when those policies renew throughout the year. Y The primary reason most policies are not grandfathered today is because people chose to change their policies or purchased new coverage after the law was enacted (March 23, 2010). According to regulations released by the U.S. Departments of Health and Human Services, between 40 percent and 67 percent of [health insurance] policies are in effect for less than one year, and that these high turnover rates dominate benefit changes as the chief source of changes in grandfather status.

3 Life & Health Insurance Advisor December 2013 The Health Insurance Portability and Accountability Act (HIPAA), a law in place before the Affordable Care Act was passed, generally requires individual health insurance policies to be guaranteed renewable at the end of the 12-month contract. The insurance company can increase premiums, increase costsharing, and/or reduce the scope of benefits covered. However, the insurer may stop offering the plan entirely if it meets all of the following requirements. It must: Y Provide you with at least 90 days notice in writing. Y Offer you the choice to buy any other individual plan it offers in that market. Y Treat all covered individuals the same, regardless of health status. Y Follow any additional state requirements. The only time an insurer can cancel an individual plan without offering you the chance to buy a new plan is if the insurer chooses to end all individual health insurance in a state. If an insurer ends all coverage, it can t offer coverage in that state s individual market again for five years. It also must notify the state and all plan holders in writing at least 180 days before stopping coverage. If your health plan has been cancelled, we can help you find new coverage on the individual market. The new coverages required by the Affordable Care Act will likely mean your plan will cost more, but many individual plans will provide broader coverage than in the past. For more information, please contact us. Medicare The A, B, Cs of Medicare If you re about to turn 65, you can enroll in a Medicare program. Medicare isn t just a one-size-fits-all program, however. It has four parts, described below. Original Medicare Together, Medicare Parts A and B form Original Medicare. Medicare Part A/Hospital Insurance Who gets it? U.S. citizens and lawfully admitted aliens who have lived in the U.S. for a five-year period when they turn 65 automatically qualify for Part A. In addition, Part A covers individuals who develop end-stage renal disease or certain other disabilities. To check your eligibility, see the confidential online enrollment checklist at the medicare- Website. What does it cover? Part A helps cover inpatient care in hospitals, including critical access hospitals and skilled nursing facilities. It also helps cover hospice care and some home health care. It does not cover custodial or long-term care. Who pays for it? The federal Medicare withholding tax funds Medicare Part A, a fee-for-service plan managed by the federal government. Generally, when you have Part A coverage, you use your red, white and blue Medicare card when you get health care. You can go to any doctor or provider that accepts Medicare and is accepting new Medicare patients, or to any hospital or health facility. You pay a set amount for each health service received (a deductible) before Medicare pays its part. Then Medicare pays its share, and you pay your share (your coinsurance or copayment) for covered services and supplies, unless you have a Medigap policy or other supplemental insurance that may pay these costs.

4 Medicare Life & Health Insurance Advisor December 2013 Medicare Part B/Medical Insurance Who gets it? Anyone eligible for Part A is eligible for Part B coverage. However, you must apply for this coverage. What does it cover? Medicare Part B helps pay for doctors services and outpatient care related to the treatment and prevention of a disease or medical condition. It also covers some other medical services that Part A doesn t cover, such as physical and occupational therapy services, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary. For most beneficiaries, the government pays a substantial portion 75 percent of the Part B standard premium and the beneficiary pays the remaining 25 percent. However, higher-income individuals will pay higher premiums, using a sliding scale based on your modified adjusted gross income (AGI). Your AGI is the total of your adjusted gross income and tax-exempt interest income. If you file your taxes as married, filing jointly and your AGI is greater than $170,000, you will pay higher premiums for your Part B and Medicare prescription drug coverage. If you didn t sign up for Medicare Part B when you first became eligible, you may be able to sign up during the general enrollment period, January 1 through March 31 of each year, at your local Social Security office. Your Medicare Part B coverage will start on July 1 of the year you sign up. Medicare Part D Since 2006, individuals in the Original Medicare Plan have been able to buy Part D, which adds prescription drug coverage to the benefits you receive through Parts A and B. This coverage may help lower your prescription drug costs and protect you against higher prescription costs in the future. Private insurers provide Part D coverage; participants choose the plan they want and pay a monthly premium, which averages about $32. As with Part B coverage, higher-income individuals will pay an additional monthly adjustment amount based on their AGI. Like some other types of health insurance, if you decide not to enroll in a prescription drug plan when you are first eligible, you may pay a penalty if you decide to join later. Medicare Supplements Private insurers sell Medicare supplements, also known as Medigap insurance, to cover costs that Original Medicare doesn t cover, such as copayments, coinsurance, and deductibles. Some Medigap policies also cover services that Original Medicare doesn t cover, like medical care when you travel outside the U.S. Medicare supplements written since 2006 cannot cover prescription drugs. You can choose from various Medigap policies, which must cover a standard list of benefits. However, different insurers use different methods to price their policies, so it pays to shop around for the best rates. Medicare Part C/Medicare Advantage Plans Medicare-eligible individuals can buy a Medicare Advantage plan, also known as Medicare Part C, from a private insurer. Medicare Advantage plans replace Original Medicare (Parts A and B). Medicare Advantage plans must cover at least the standard menu of benefits covered by Original Medicare; insurers set their own premiums. In addition to the Parts A and B benefits, many Medicare Advantage plans also include prescription drug benefits. Some also offer at least partial coverage for services excluded by Original Medicare, such as diagnostic hearing tests and hearing aids. Private insurers cover these additional services as an inducement to get Medicare-eligible individuals to enroll in their plans. Private insurers get reimbursed by the federal Medicare program for each Medicare beneficiary enrolled. Most private insurers use health maintenance organization (HMO) or preferred provider organization (PPO) plans for Medicare Advantage. These plans, with their limited networks, help them control costs and offer additional services. If you like a PPO or HMO, a Medicare Advantage plan could save you money. However, if you travel or have more than one residence, a Medicare Advantage plan might not work for you. We can help you compare your Medicare options. Please contact us for more information.

5 Retirement Planning Life & Health Insurance Advisor December 2013 Life Changes that Could Affect Your Retirement Planning Life changes, both positive and negative, can affect your retirement planning. The following article lists some of the major life changes and how they could affect your retirement plans. A retirement plan can generally pay benefits only to a participant s named beneficiaries, so you will want to review the beneficiary designations on your retirement accounts after marriage, divorce, death of a spouse or the birth or adoption of a child. Marriage: Many plans require your spouse to be your primary beneficiary, unless your spouse gives written consent to an alternative beneficiary. Divorce: After a divorce, a plan participant s ex-spouse may become entitled to a portion of the retirement account balance. Depending on the type of plan and the amount of benefits, the ex-spouse may have access to his or her portion of those assets immediately or at some point in the future (usually upon the participant s retirement or death). Most plans require an ex-spouse to file a Qualified Domestic Relations Order with the plan administrator before the plan can pay him/her any portion of a participant s retirement plan benefits. A court can award all or a portion of participant s retirement plan assets to his or her spouse, former spouse, child or other dependent by issuing a QDRO, which the plan must honor. The QDRO can order the plan to pay the participant s retirement plan benefits to an alternate payee. The court s order can be in the form of a state court judgment, decree or order, or court approval of a property settlement agreement. Children: After the birth or adoption of a child, you might want to designate that child as a secondary beneficiary. Most plans require a married participant to obtain the spouse s written consent to change beneficiaries and/or the form in way the plan will pay out benefits. To change beneficiaries: Y Contact your employer (for an employerprovided plan) or your plan administrator (individual plans) to request change of beneficiary forms; and Y Complete the forms as instructed, obtaining your spouse s signature if required, and submit to your employer or plan administrator. Disability: The IRS permits a person with a permanent and total disability to receive distributions from a retirement plan free of the 10 percent additional tax typically charged on distributions received before age 59½. Distributions still count as taxable income. Your retirement plan document will specify the terms and conditions for disability distributions. Financial hardship: A retirement plan may allow participants to take distributions for immediate and heavy financial hardships. IRS regulations provide a safe harbor for distributions needed for: Y Medical care expenses for the participant, spouse, dependents or beneficiary; Y Costs directly related to the purchase of a principal residence (excluding mortgage payments); Y Tuition, related educational fees and room and board expenses for the participant or his/her spouse, children, dependents or beneficiary; Y Payments necessary to prevent the participant s eviction from or foreclosure on his/her principal residence; Y Funeral expenses for the participant or his/her spouse, children, dependents or beneficiary; or Y Certain expenses to repair damage to the

6 Life & Health Insurance Advisor December 2013 participant s principal residence. (Source: Distributions must be limited to the amount necessary to satisfy this financial need. The 10 percent penalty tax applicable to most early distributions will apply to hardship distributions, in addition to income taxes. You cannot repay funds withdrawn for hardship to the plan, so participants should think twice before using retirement funds for foreseeable events, such as tuition. We can help you set up alternate plans for these expenses, and suggest insurance coverages to cover disability and other hardships. The information contained within this newsletter is provided for informational purposes only and is not intended to substitute for obtaining tax or financial advice from a financial services professional. Please contact us for more information Health Savings Account Contribution Limits Contribution limits for health savings accounts (HSAs) adjust annually for inflation. The IRS has released limits for 2014, as follows. Y Contribution limit/account holder with single coverage under a high-deductible health plan: $3,300 (up from $3,250 in 2013) Y Contribution limit/account holder with family coverage under a high-deductible health plan: $6,550 (up from $6,450 in 2013) Y Additional catch-up contribution for individuals age 55+: $1,000 (unchanged) To have a health savings account, you must have health coverage under a high-deductible health plan, with no other health insurance (except for certain limited-purpose plans, such as critical illness or cancer insurance, hospital indemnity coverage, long-term care or disability coverage). Qualifying plans must have a minimum deductible and maximum out-of-pocket expense limit; these amounts adjust annually. In 2014, high-deductible health plans must meet these criteria: Y Minimum deductible/self-only coverage: $1,250 (unchanged from 2013) Y Minimum deductible/family coverage: $2,500 (unchanged from 2013) Y Maximum annual out-of-pocket costs (deductibles and copayments, but not premiums)/ self-only coverage: $6,350 (up from $6,250 in 2013) Y Maximum out-of-pocket costs/family coverage: $12,700 (up from $12,500 in 2013) HSAs have many advantages, including: Y No income criteria. Even those without an income (such as a stay-at-home spouse or retiree not yet eligible for Medicare) can contribute to an HSA, and there is no phase-out for higher earners. Y You control your account. Unlike employment-based healthcare accounts, such as flexible spending accounts (FSAs) or health reimbursement arrangements (HRAs), you control your account, which remains yours even if you change jobs or retire. Y You can invest your HSA funds in a variety of investment vehicles. Y Funds can accumulate year to year; HSAs have no use or lose provisions. Y Even though you can no longer make contributions to an HSA after enrolling in Medicare, you can use funds in your HSA to pay eligible healthcare costs, even Medicare premiums. Y Contributions are triple tax-advantaged: you can deduct contributions you make from current taxable income; funds grow tax-free; and you can make withdrawals used for qualified healthcare expenses free of income tax. To learn more about HSAs and highdeductible health plans, please contact us. 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