All about buying Life Insurance for your Children.

Many would assume that life insurance on a child is a waste of money since the child will not die for many years. While statistically true, there are cases where a death benefit is paid on a child although rare. However, buying a permanent life insurance policy for a child benefits them significantly in the future from much lower premiums. Also, depending on how the policy is funded after 18 years of paying premiums there may be enough policy value that it can be tapped in the form of a loan from the policy to help pay for college.

When I was born a local insurance company gave all babies born in the hospital a small whole life policy with the first year at a substantially reduced premium. It worked because my parents kept paying the premium and eventually changed it to a larger policy as I got older. I converted the policy again later as I graduated college and still have the remnants of that policy today. I am thankful I got the policy started out young as my cost remain now far below what I would pay for the same policy purchased now.

Parents and grandparents with this forethought really do help the kids out for their future. In addition to better pricing getting a child a permanent life policy before something happens where they become uninsurable, really helps them secure their insurance needs when they are still eligible. This is perhaps the biggest reason, even more than the pricing reasons.

Buying a policy for a child is a relatively simple process. The parent or grandparent with the parent’s permission can buy the policy. It can then later be gifted to the child, subject to gift tax limits (to give it without any gift taxes kicking in). Policies are typically limited to $100,000 death benefit until the children are older. There are exceptions when specific reasons can be validated for a greater amount of insurance. However since kids typically are not working it is a fairly high bar to cross before a greater amount can easily be issued.

There are some carriers who will issue more death benefit on permanent policies with slightly older kids and reasonable explanations.  We help you pick the right plan based on the needs and reasoning for the extra insurance. For assistance from an advisor with life insurance in Houston we can help you understand and pick the most appropriate coverage.

Ultimately thinking ahead and securing insurance for a child is one of the best gifts the child doesn’t even understand they received. Later in life though they should be grateful for the forward thinking when the child was still young.

Must I sign up for a Medicare Advantage Plan?

Unfortunately, some on Medicare have been told they must sign up for one of the plans. This is of course NOT an accurate representation of the Medicare rules. In fact agents who tell people this to make a sale are doing so at the risk of having their license pulled. There are absolutely no mandates anyone sign up for Medicare Advantage, of really even for Medicare Part B or even the drug plans. (Granted penalties exist for not signing up at the first opportunity when it comes to Part B or Drug Plans.) 

Medicare Advantage Plans are there for those on Medicare as an option instead of Original Medicare. For those who want something different than Original Medicare, Medicare Advantage Plans are one option. Of course you can also add to Original Medicare a Supplement plan and a Drug plan and depending on how you set it all up have coverage that keeps your out of pocket costs well in control.

In the event someone tells you that you need to sign up, must sign up, or are required to sign up for a Medicare Advantage Plan know that it is completely your own choice. It is best to weigh the benefits against the restrictions that come with a Medicare Advantage Plan before deciding to sign up. If you decide that it is the most appropriate way to go, sign up for the one which best meets your needs.  But, the key is to remember that you are not required to sign up for one.

We are here to help with your Medicare Supplement insurance in Texas, Arizona, or Florida, give us a call and discuss how we can offer you great protection at the right price.

What can I do to help cut my health insurance premiums?

Health insurance premiums seem to climb year after year at a rate not many of us can live with. To this end, a question that comes up, what can I do to help moderate the price increases, or even cut my health insurance premiums?  I will focus first on what individuals with individual coverage can do and then groups. Individuals within groups unfortunately have fewer choices, but it is not a lost cause.

Those on individual health insurance are not tied to any employer based decisions which is key to being about to make changes when you need to do so.  Those in group insurance plans are much more restricted.  So, first off, unless you are undergoing current medical treatment or have acquired other uninsurable reasons since you got on the current plan, you can always move between carriers to whichever one happens to have the best rates going on at the moment.  Often one of the carriers in a market will be looking to increase market share and their rates are highly competitive.

You can swap your current plan for a higher deductible as well. Generally for those in power to choose the health plans, a higher deductible or more cost share covered by the insured individual, the lower the premium will be. Of course if you are already on a high deductible plan you may not have a lot of upward increase in deductible before there are no other plans to choose.

If you are on medicine for high blood pressure or other ailments that can often be negated thru enhanced diet control and more exercise, it may be worth a visit to your doctor to see what you can do to perhaps improve your health and get off a medication or two. Sometimes getting off of certain medicines and showing a clean bill of health off these medicines over a period of three, six, or even twelve months will allow a new application to be reviewed in which they drop your rates to standard levels. In some cases this alone could drop your premiums by 20% and you would feel better at the same time.

For those who control group benefit plans your options are usually similar to what individuals can change. If you are a fully insured plan, where the insurance company is taking all of the risk, different plan designs and carriers may offer improved premiums. The additional of wellness programs and forced participation in these programs can result in cost savings over time as the health of the insured population improves.  However if you are self insured there is more that can be done to cut costs.

For self insured groups you have quite a bit of control over the actual benefits offered within the plan. That is subject to change to some degree in 2014 under healthcare reform but at present it is still an option. You can take benefits which are being over utilized and change the structure of those benefits and add more cost sharing or in some cases eliminate those benefits altogether. One example of such a benefit eliminated from many plans not too long back is bariatric surgery.  It was a very costly benefit used by few that ran the cost of the insurance plan up for the employers.

Self insured groups can also fairly easily charge more for smokers and to other groups who create higher risks and tend to create higher medical costs. This may not save as much for the group overall as it may for those who live healthier lifestyles.

Insurance is by its very nature a risk sharing scenario where healthy and sick all pay into the pool to cover the illnesses for everyone based on plan design.  Thus some get back more than they put in and others put in far more than they take out. In fact with healthcare most would feel they put in more than they get back out all the time, however when they need the care they want the fund to be in place to take care of them.  It is the putting in more than you get out coupled with the increasing premiums that tend to make people upset and ask why does the premium keep rising and what can I do about it?

Do I need a Medicare Prescription Drug Plan?

Back a few years ago Part D of Medicare was introduced to provide outpatient prescription drug coverage under Medicare, providing for coverage not previously provided. For most this was a great benefit addition as previously everyone who was given a prescription had to go pay for the medicine completely out of their own pocket. (We are of course talking about those on Medicare.) There were some options to purchase coverage, but those were somewhat limited.

In a typical scenario under the old Medicare (pre 2006) if you worked to age 65 and then retired, or just chose to go from employer coverage to Medicare, you would have prescription coverage and then none. Thus, those who were really using lots of prescriptions may have kept on working to have the drug coverage. Of course that was not the reason that drug plans were added to Medicare.  It just gives an example of how adding the coverage changed things. A second example is those who retired healthy and as they aged needed to begin medicine or increase the medicines they are on. In these cases getting the medicine often depended on the ability to pay, and those with no resources were not getting medicine and often getting sicker or dying.

In order to provide a full continuum of care Medicare deemed it necessary to include drug coverage as part of their overall scope of coverage.  The Drug Plans like Part B of Medicare do require participation in the premium by the beneficiary. Unlike Medicare Part B though where there is generally a single premium paid by everyone to the government, Part D (Drug Plans) have various premiums and the premiums are paid to the insurer. Also, Part D plans are not run by the government but by individual insurance companies who contract with Medicare to provide these plans.

What was set up by Medicare is the opportunity for private companies to offer the Medicare Drug Plans. They each annually bid to offer the plans. Medicare updates annually a standard plan, or model plan which sets the basic level of coverage required by any plans. The private carriers then must design plans they think will capture the part of the market they want, and in doing so ensure that the plan benefits are at least as good as the model plan.  Medicare does not sell to the public so unless a private carrier decides to offer exactly the model plan, and few do so, you will have to choose from one of the enhanced plans offered in your geographic area.  Most of the plans do enhance the benefits offerings, especially on lower cost drugs to make them more accessible and your monthly costs more predictable.

With that background, you can see that we now for a few years have had available drug plans for the general Medicare populous. We have seen these plans stabilize in terms of their offerings, unlike in the first couple of years when they were figuring things out and trying to gain the initial market share. With more stable plans and a few kinks worked out, we have a good benefit now for the various folks taking the plans. Now, with things going generally smoothly, let’s think about why you may or may not find having a plan beneficial and answer the question is it a plan a must? The answer not surprisingly is generally yes a plan is beneficial for you.

For those who are eligible, and do not have other credible coverage, it is important to keep in mind if you later add coverage, you will be paying a monthly penalty of 1% per month from when you were eligible and the grace period ended. So if you wait a few years your penalty will be significant.  I will not get into the specifics of calculating the actual penalty here because one of the parts changes each year and you would need to look at what your penalty will be at a specific time to judge does the penalty outweigh the savings of not taking coverage.  Now you wonder who would be weighing this?

I often get the question out of folks who are not taking any medicine, do I really need to take coverage now or just add it when I begin medicine and need it. First, you can only add the coverage during your initial enrollment period or at the end of each year for the next year, or when you meet certain special circumstances enrollment eligibility periods. Generally though, if you skip enrollment during your initial enrollment period you must wait until the end of the year. This means you end up adding 12% of penalty for each year you skip enrolling.  

Another scenario that comes up is folks who have other drug coverage, such as coverage in a retiree plan or thru the Veterans Administration.  In these cases, where the coverage does provide for at least as good of coverage as is mandated in the standard Medicare Drug plan, then you do not incur a penalty if you don’t sign up for a Medicare Drug Plan when first eligible.  Of course there is no requirement for you to not sign up either. In some cases despite having for example VA benefits available does not make them convenient to use and when this is the case it may be beneficial to go ahead and take a Medicare Drug Plan. Ultimately you have to balance the cost/benefit for your own scenario.

Generally there is a low-cost plan option that works well as a place saver, to prevent the penalty from kicking in. Also, these plans serve to help you in the event that all of the sudden, you are taking costly prescriptions. Again you have to balance the cost even for one of these plans against the possible costs of an unexpected prescription and future penalties.

I believe with the information above you have some insight into what you need to consider when making a decision to take or skip out on purchasing a Medicare Drug plan. We help our clients with that decision all the time.