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What is the Difference Between a Medicare Advantage Plan and a Medicare Supplement Plan?

Retirement is one of those times in life for which you cannot over-prepare. For many years you probably focused quite a bit on saving a nest egg and strategizing to receive the most Social Security benefits possible. But because the cost of healthcare is often the most significant cost faced by retirees, understanding your Medicare options is crucial to establishing a satisfactory budget in retirement.

Having said that, many people are not aware of all their different options with regard to Medicare. We tend to assume that we’ll turn 65, sign up for benefits, and then receive healthcare services. But that’s not exactly how it works. Medicare doesn’t actually cover 100 percent of your healthcare costs, and you can choose from many different plans to help manage those expenses.

For example, one of the first choices you will make involves Original Medicare (possibly with the addition of a Supplement Plan) versus Medicare Advantage.

Original Medicare plus a Supplement Plan. Original Medicare, or parts A and B, provide for much of your healthcare needs but certainly not everything. That’s why many enrollees also elect a Supplement Plan. A Supplement Plan, often called Medigap, simply covers some of the costs that are not covered by Original Medicare.

For example, your Supplement Plan might kick in to cover co-payments, deductibles, Medicare Part B excess charges, or emergency services when traveling outside the country. In exchange for one monthly premium, you can reduce unexpected expenses and usually keep your budget more predictable. Supplement Plans can be used only with Original Medicare, and if you need a prescription plan (Part D) you must enroll in that separately.

Medicare Advantage. Medicare Advantage plans are provided by private health insurance companies as an alternative to Original Medicare, but these plans must meet certain minimum standards (and you’re technically still enrolled in Medicare). These plans combine Parts A and B, and sometimes offer additional coverage such as a prescription drug plan. You will still be subject to certain premium amounts, along with co-payments and deductibles according to the plan. Some prefer Medicare Advantage because they find it easier to understand the benefits offered under on plan, and feel that their budgets are more manageable this way.

With Medicare, there is no single plan that is best for everyone. Your decision will depend upon your budget, healthcare needs, and personal preferences. If you need help comparing plans and understanding the differences between them, contact us and we’ll be happy to help.

What Employers Need to Know About COBRA Subsidies

The economy has provided a bit of a roller coaster over the past year, with many Americans losing their health insurance along the way. In many of these cases, job loss and other circumstances have opened up COBRA coverage for these individuals.

COBRA coverage allows those who have lost their jobs, and therefore their group benefits plans,to continue their health insurance coverage. However, because the individual is now responsible for paying the premiums, rather than the employer pitching in for some or all of that cost, COBRA has not always been utilized by many. A job loss typically meant that the suddenly-uninsured could not afford COBRA premiums.

The American Rescue Act, recently passed by Congress and signed into law, seeks to change those circumstances. Now, group health plans subject to COBRA must offer a 100 percent subsidy to anyone eligible for coverage (plus their dependents). This requirement began April 1 and will continue through September 30. This means the plan owner, not the eligible individuals, will cover premiums.  ARP regulations clarify that the subsidy provisions apply to all group health plans sponsored by employers, subject to federal COBRA rules under ERISA and/or state mini-COBRA (Cal-COBRA).

This rule change applies to healthcare plans, along with dental and vision coverage, but does not include health flexible spending accounts.

Who is eligible for COBRA subsidies?

The law defines “assistance eligible” individuals (and their families) as those who would qualify for COBRA due to involuntary unemployment or a reduction in work hours. This includes people who would have been eligible for COBRA during the past 18 months, but chose not to elect coverage at that time. They can now enroll and obtain a subsidy to help with premiums.

Former employees who voluntarily terminated employment, or those eligible for COBRA for other reasons, cannot claim the subsidy.

How are premiums paid?

Premiums will be paid upfront by the employer or the insurer, and then reimbursed via federal payroll tax credits. Employers should prepare for this expense now, because some time will pass between paying the premiums and receiving reimbursement. Please call our office immediately if you have questions about COBRA subsidies or how these rules apply to your situation.

Turning 65 Soon? Here’s What You Need to Know

If you’re set to turn 65 this year, you might already know that you will be reaching the age of Medicare eligibility. Here’s what you need to know right now…

Your signup window is seven months long. It begins three months before the month in which you turn 65, includes that entire month, and then extends for three months afterward. You can enroll in Medicare at any point during this seven-month window.

You can choose from many different plans. You won’t simply sign up for Medicare and then forget about it. You can enroll in Original Medicare (Parts A and B) which are administered by the federal government. Or, you can opt for a Medicare Advantage plan. These plans are run by private insurance companies and must meet certain standards set forth by the Medicare program. Advantage plans roll Parts A and B into one policy that some feel is easier to understand and manage.

Medicare doesn’t cover everything you might need. Medicare does not include dental, vision, and hearing services, or prescription drugs. But because this type of medical care is important to your overall health, as well as costly, you might want to consider supplemental insurance plans to help you manage these costs. Medicare Part D plans were created to cover prescription drugs, and many Medicare Advantage plans include Part D. Some also include coverage for dental, vision, hearing, and other important services.

You might not be required to enroll. If you’re still covered by another healthcare plan, such as a group policy provided by an employer, you might not be required to enroll in Medicare just yet. However, you might wish to do so, to obtain more coverage.

You don’t want to be late. If you don’t enroll during your original enrollment window, Parts A, B, and D will impose a late enrollment premium later. This means your premiums are permanently higher than they would have been, if you had signed up on time. This late “penalty” does not apply to those who were not required to enroll.

As you can see, enrolling in Medicare involves some pretty complex rules. As your enrollment window approaches, call us to discuss your situation so that we can help guide you through these important decisions.

Apply Now: Covered California Plans Just Became Even More Affordable

For those of you not yet participating in a Covered California healthcare plan, we have some good news: Under the American Rescue Plan, an increase in subsidies will make marketplace plans more affordable than ever!

How much more affordable? While the American Rescue Plan directs more funding to healthcare needs, you’re probably most interest in the end result for consumers. Here are some basic facts on how these new policies affect most people:

  • One in four enrollees will be able to upgrade their healthcare plan to a higher tier, with lower out of pocket costs, for the same or even a lower premium than what they’ve been paying
  • Four out of five people will be able to locate a plan costing $10 or less per month after tax credits
  • 50 percent will be able to enroll in a silver-tier plan for $10 or less per month
  • Those making over 400 percent of the federal poverty level will save an average of over 600 dollars per month
  • 14.9 million Americans who currently lack health insurance coverage will now be able to access an affordable plan, including many Californians

What should you do now? If you are not already enrolled in a Covered-California healthcare plan, now is the time to apply. The American Rescue Plan created a Special Enrollment Period, which will open April 12 in California and will run through the rest of 2021.

About 590,000 Californians are currently enrolled in “off-exchange” plans, meaning they chose healthcare plans offered directly through health insurance providers rather than those offered through Covered California. About 68 percent of these enrollees of off-exchange plans would be eligible for a premium reduction if they apply through Covered California instead. If you fall into this category, you should apply with Covered California to locate a plan commensurate with your current policy (or even upgrade to one that suits you better). At the same time, you will be able to access subsidies that can significantly reduce the cost of your premiums.

Those already enrolled in Covered California plans can also receive new or larger subsidies. This Special Enrollment Period will allow you to log into the system and update your information.

Yes, you technically have all year to apply, but it’s important to get started now. You can access savings sooner, with your plan taking effect on the first day of the month following the month in which you apply.

To learn more, call our office to discuss your situation and how this Special Enrollment Period can benefit you.

 

 

 

Which Medical Expenses Are Tax Deductible?

During a pandemic year, you might be especially concerned with the cost of healthcare and your out-of-pocket expenses. Luckily, certain provisions in the income tax code do allow you to claim a deduction for these expenses, according to certain limits.  Read on to learn which of your expenses might be deductible on your 2020 tax return, and how these changes can benefit you.

Unreimbursed medical expenses. You are normally allowed to deduct any medical expenses not reimbursed by your healthcare plan, such as dental and vision care, mental health care, preventive care, and any other medical expenses that are not covered and therefore paid out of pocket. Glasses, contact lenses, hearing aids, and dentures can also be claimed. You can even deduct mileage when you must travel to receive healthcare, and other travel expenses such as parking fees, tolls, or bus fare.

If those expenses total more than 7.5 percent of your adjusted gross income, you will receive a deduction on your taxes. However, many people do not itemize deductions because their total deductions do not exceed the standard deduction. As you can see, the unreimbursed medical expenses deduction can be a bit complicated.

Covid-related medical expenses. Many healthcare plan administrators announced that they would be covering 100 percent of Covid-related care, regardless of each patient’s deductible. But if your plan wasn’t one of those, or if you experienced other medical expenses related to Covid treatment, you can claim these as a deduction on your tax return. Covid-related expenses are subject to the same rules listed above.

Some expenses are not deductible. While they appear to be healthcare-related, some unreimbursed medical expenses cannot be counted toward your tax deduction. These include, but are not limited to,

  • Cosmetic surgery
  • Nonprescription drugs (except insulin)
  • Vitamins and other supplements
  • Diet food
  • Nonprescription nicotine products

Also, if you pay for medical expenses out of a flexible spending account or health savings account, you can’t claim those as a deduction because those accounts are already tax advantaged.

How to claim medical expenses on your taxes. If your unreimbursed medical expenses exceed 7.5 percent of your adjusted gross income, and your total deductions exceed your standard deduction, you will probably want to file an itemized return. Use IRS Form 1040 and attach Schedule A. Talk to your tax professional about these procedures if you have any more questions about this tax deduction, and to ensure that you’re calculating your deduction correctly.

 

 

Health Insurance Special Enrollment Is Open Now: Here’s What You Need to Know

In response to widespread unemployment and the associated loss of health insurance benefits, President Biden opened the health insurance marketplaces on February 15. Until May 15, anyone who needs a health insurance plan for any reason can enroll. Normally, enrollment is only open in the fall, and individuals or families must experience certain qualifying life events in order to gain access to a special enrollment period.

During this time, you can enroll in an ACA-qualified health insurance plan, possibly with a tax credit or subsidy to help cover the cost of your premiums. Here’s what you need to know about this enrollment period.

You can decide between a tax credit or a subsidy. If you qualify for a subsidy, it reduces the cost of your monthly premiums. However, because these subsidies are based upon your income, regaining employment or a significant boost of income later in the year could render you ineligible. You might end up owing some of the subsidy back to the government. If you suspect that might be the case for you, opting for the tax credit instead might be a good idea.

Consider premiums versus out-of-pocket expenses. Lower-premium plans look more affordable on the surface, but come with higher out-of-pocket expenses such as the deductible. These can be acceptable plans for those who seldom utilize healthcare services, but can become expensive for those who are likely to seek more care. As you weigh your options, consider how likely you are to incur out-of-pocket expenses, and whether a higher-premium plan might help you better manage your budget.

Consider whether a short-term plan is best for your situation. Short-term healthcare plans can bridge the gap when you’re temporarily unemployed, retire a few months before Medicare eligibility, and in certain other temporary situations. If you expect your employment or insurance options to change drastically in the near future, this could be an option for you.

Consider your COBRA options. Typically, staying on your employer’s plan via COBRA can be expensive, since the laid-off worker must pay for the entire cost of premiums. But if you’ve already reached your deductible for the year, it could be a wise choice. Also, the American Rescue Plan provides coverage for COBRA premiums until September 30, making this a viable option for many.

It’s free to consult with a health insurance broker. Premiums are the same whether you consult a health insurance broker or not, so you might as well take advantage of their expertise. Give us a call to discuss your health insurance needs at this time, and we can help you learn more about the options available to you.

You Need These Forms Before Filing Your Tax Return

As Spring approaches, so does tax season. Most of you are gathering your documents and preparing to file your 2020 federal income tax return, along with your state return. But before you get started, we wanted to remind you to watch your mail for two important forms that you will need to complete your taxes: Forms 1095-A and 1095-B.

Not only do you need to document your earnings for the year; you must also provide proof of health insurance coverage. The Affordable Care Act already required that most Americans maintain healthcare coverage for each tax year, and now the state of California also imposes an Individual Mandate. While the federal penalty for failing to maintain coverage is currently set at zero, the state law does impose a fee upon those who did not enroll in a policy. Therefore, it is vitally important to retain proof of your health insurance coverage for the year, which is provided to you by your health insurance company. They will send you Form 1095-B in the mail.

In addition, those who receive a subsidy to help with the cost of health insurance premiums also need to reconcile that amount. Each year, subsidies are estimated based upon expected earnings, but underpayments and overpayments can occur. You must use Form 1095, which you will also receive in the mail, to demonstrate the correct amount of your subsidy. You should also receive this form in the mail soon, if you have not already.

Covered California will send Form FTB 3895 California Health Insurance Marketplace Statement to all enrolled members. It is used to fill out Form FTB 3849, Premium Assistance Subsidy, as part of your state tax return. Use the California Franchise Tax Board forms finder to view these forms.

You are not required to submit these forms with your tax returns, but you must use them to correctly compute your taxes. You should also keep these forms in your files, so that you can provide proof in the event your return is ever audited.

If you need more help understanding how to use Forms 1095-A and 1095-B, please give us a call and we will be happy to assist you.

The Benefits of an Insurance Broker When Shopping for Health Insurance

Whether you’re a business owner shopping for a group health insurance plan, or an individual searching for the right individual, family, or Medicare plan, this decision carries a lot of weight. You’re looking for a plan that meets your needs and fits your budget. You also hope to enroll in a plan that is easy to understand, that provides customer support, and that helps prevent any billing surprises.  A few bells and whistles wouldn’t hurt, either.

Those are all reasonable objectives, but it can become difficult to balance them all during the comparison shopping process. Working with a health insurance broker can simplify that process in a number of ways, and help you locate the right plan for your needs.

What a health insurance broker does. Brokers are licensed health insurance agents who do not work for one particular insurance provider. Instead, they work independently to match their customers – either businesses or individuals – with the health insurance plan that best suits their needs and budgets.

What a health insurance broker does not do. Because brokers work independently, they have no interest in steering you toward a particular plan or “selling” you on “their” company. Instead, they work with a variety of insurance providers and are biased toward none of them. These companies pay a commission to brokers that is already worked into their premium structures, so that you aren’t charged any more for using a broker to locate your plan. In fact, you might as well utilize this service because it is free!

What you can gain by working with a health insurance broker. Aside from helping you compare and choose the right health insurance policy, brokers provide other benefits to their customers. This professional will remain available to answer your coverage questions, provide customer support, help you solve billing issues, and remind you of important deadlines or changes to your plan. If you’re a business owner, your broker will also assist you in explaining plan benefits to your employees.

Working with a health insurance broker will also save you time, because these professionals are already familiar with all the health insurance options on the market. Simply describe your priorities and needs, and your broker will know where to begin the search for the right health insurance plan.

Working with a health insurance broker doesn’t cost you anything!  Brokers get paid by the insurance companies, and they can offer you the same rates that you would get if you went directly to the insurance company.  So you get the assistance and support of a broker with no added cost!

If you’re interested in individual, family, Medicare, or group health plans, give us a call and we will put our experience to work for you.

Understanding Medicare Advantage Plans and Open Enrollment

Once you become eligible for Medicare at age 65, you might discover that the options aren’t as simple as you had imagined.

If you sign up for Original Medicare, you will enroll in both Parts A and B (which serve as hospital insurance and medical insurance). Part A is usually free to most beneficiaries, and Part B charges a premium. You might also wish to add Medicare Part D (for prescription drug coverage). Even still, you will owe copays and deductibles.

Medicare Advantage combines Parts A and B, and often Part D. For some beneficiaries, this feels like a lot to juggle. Some prefer a comprehensive plan that bundles the above services, plus others in many cases, for one monthly premium. In that case you can opt for a Medicare Advantage plan, also called Part C. These plans are packaged and provided by private insurance carriers, and must adhere to Medicare standards.

Many Advantage plans include additional services, such as limited vision or hearing services, dental care, fitness programs and more. Each Advantage plan is quite unique, so it pays to evaluate each plan carefully.

In many cases, you will receive care from a network of providers in your area. You might still be billed for services received outside of your network. So, while Medicare Advantage can be a convenient way to manage expenses, it is not a guarantee that you won’t ever incur out-of-pocket expenses.

Medicare Advantage Enrollment is open now. If you do opt for an Advantage plan, the most important thing to remember is that you are subject to a different open enrollment period. While you can also partake in certain aspects of the general Medicare Annual Election Period in the fall, Open Enrollment for Medicare Advantage runs between January 1 and March 31 each year.

During this time, you can evaluate your current Medicare Advantage plan and enroll in a different one. You can also drop Advantage and go back to Original Medicare if you choose.

If you’re feeling uncertain of your Medicare Advantage plan, and would like to evaluate your other options, give us a call during Open Enrollment. We can help you narrow down your options and select a plan that is right for you.

“Oops! I Missed Medicare Annual Enrollment!”

Each year, Medicare beneficiaries have the opportunity to make changes to their plans during Annual Enrollment from October 15 to December 7. Now that December 7 has passed, we occasionally hear from clients who are wondering what to do. “Oops, I missed Medicare Annual Enrollment,” they tell us. “What do I do now?”

Fortunately, you’re not necessarily stuck in a plan that isn’t just right for you. There are several courses of action you can take now, depending upon your circumstances.

Make changes during Medicare Advantage Open Enrollment. Annual Enrollment and Open Enrollment are often confused for one another, but they serve two different purposes. If you’re enrolled in a Medicare Advantage plan, you can participate in the Open Enrollment period between January 1 and March 31. During this time, you can switch from one Advantage plan to another Advantage plan, or drop Advantage and go back to Original Medicare.

Unfortunately, you can’t switch from Original Medicare to an Advantage plan at this time.

But before you drop your Advantage plan, consider your network of providers (which you might lose if you drop Advantage). You also won’t benefit from the out-of-pocket spending cap anymore, because Original Medicare does not have that feature.

Enroll in a five-star Medicare plan. Each fall, Medicare plans are reviewed and rated. If you’re not currently enrolled in a five-star plan, you can switch to one between December 8 and November 30. But you can only switch once, and you must choose a five-star Medicare Advantage plan, Medicare Cost plan, or Medicare Prescription Drug plan.

Take advantage of the Medicare Special Enrollment Period. If you experience certain life changes, such as a move or contract change, you can take advantage of a Special Enrollment Period and change your plan. A list of qualifying events can be found here.

Any time you find yourself dissatisfied with your Medicare plan, please do give us a call. We can assess your situation and help you determine whether you are eligible for any of the above opportunities to make changes to your plan.

 

 

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