| Answers
Q:
What is the difference between group and individual medical
insurance?
A:
Group medical insurance is defined by the following:
- The employer must pay at least 50% of the employee
premium (although some carriers require 75%) but the
employer is not required to pay any of the dependent
premium
- Eligible employees are those who work a minimum
of 30 hours per week for the employer. Contract (1099)
workers can be eligible if the employer elects to
make ALL contract employees who work a minimum of
30 hours per week eligible
- At least 75% of the eligible employees, not covered
by another plan (usually group), must enroll
- Insurance companies require a copy of the most recent
Texas Workforce Commission report that lists all employees with an accounting
of all those listed who are not applying for the group
insurance or proof of employment for those not listed
who are applying. If the business is too new for a
TWC report, the insuring company will want to see
payroll records or other documents.
- Group plans normally exclude work-related injuries.
This is significant for those employers who have opted
not to cover themselves on their Workers' Comp plans.
- Groups of 2-50 cannot be turned down by a company
for medical conditions but premiums for the entire
group can increase as much as 67% based on the medical
condition of the employees and covered dependents
in the group.
- Employees with prior 18 months of "creditable
coverage" and who have not had a lapse of coverage
of more than 63 days will normally be covered for
pre-existing conditions.
- Employees and eligible dependents must enroll within
30 days of their effective date to be on the plan
or they might not be accepted until the next "Open
Enrollment" period.
- Group benefits are usually much better and more
extensive than individual plans and usually have more state-mandated benefits resulting in much
higher premiums.
- State Continuation laws, allowing an employee to
continue coverage at the employee's expense for up
to 6 months following termination, applies to all
groups in Texas. COBRA laws, allowing continuation
of health and dental insurance following loss of coverage,
apply to groups with 20 or more employees.
Individual Insurance
- Employers CANNOT pay any portion of an employee's
individual medical insurance plan since the 1996 and
later "Small Group Reform" acts were passed
in Texas.
- Individuals with 18 months of prior "Creditable
Coverage" with no more than a 63-day lapse before
the effective date of their new individual plan will
be covered for pre-existing conditions. HOWEVER, such
individuals can still be declined for coverage or
have specific conditions excluded from coverage.
- Individual coverage is NOT guaranteed to be issued.
If an applicant has certain serious conditions listed
on the THIRP forms, is declined for individual insurance
or has an exclusion rider added to an individual policy,
that person might be eligible for the Texas Health
Insurance Risk Pool. For information about THIRP,
contact them at 888.398.3927 or www.txhealthpool.com.
- All individual plans cover medically diagnosed complications
of pregnancy, but most offer no coverage or only very
limited coverage for normal childbirth expenses.
- Individual policies generally cover work-related
eligible expenses if there is no Worker's Compensation
in place.
- Individual policies are available for a child only.
- Policy benefits are usually lesser than the group
benefits but the premiums are much less also.
Q: What is a Health Savings Account, also known as an HSA?
1. HSAs are essentially tax-free medical savings accounts.
You can think of an HSA as a 401(k) or an IRA dedicated to paying for your medical expenses. You contribute to the account with pre-tax dollars if you save through your employer's plan, or your contributions are tax-deductible if you have an individual plan. Contributions are invested much like your retirement savings (investment options vary by provider), which allows for compounded growth of your savings over time.
When you have qualified medical expenses, you can use the money you've built up in your HSA to pay for them without incurring any tax consequences.
2. You need a high-deductible health plan to qualify.
To be eligible for an HSA, you also need to have medical coverage under what's called a high-deductible health plan (HDHP). For 2008, an HDHP is defined as any health plan with an annual deductible of at least $1,100 and annual out-of-pocket expenses not exceeding $5,600 for individuals.
For family coverage, an HDHP must have an annual deductible of at least $2,200 and annual out-of-pocket expenses not exceeding $11,200. You also can't be over 65 or have any other medical coverage other than your HDHP.
According to Hewitt's research, more than 20 percent of companies already offer, or plan to offer, an HDHP with an HSA this year. Combining the two lessens the pain of having to shell out so much money from your own pocket before your coverage kicks in.
3. You contribute to HSAs just like retirement accounts.
For 2008, the maximum amount you and/or your employer can contribute to an HSA is $2,900 for individuals and $5,800 for families. Those age 55 or older can make additional catch-up contributions of up to $900 for 2008. These amounts will probably increase each year.
As with IRA contributions, you have until April 15 of the following year to make your annual contributions.
And as I mentioned above, your unused contributions aren't lost if you don't use them within a given year. Rather, they simply remain in your HSA and continue to grow over time with interest or investment earnings (depending on how you have them invested) until you use them.
4. Eligible expenses go beyond those that count against your deductible.
Many of the expenses you can pay for with money from your HSA go to cover the high deductible you must meet before your insurance starts paying. But you can also use the funds in your HSA to pay for other medical expenses not typically counted toward your deductible -- such as some over-the-counter medications, dental care, vision expenses, hearing aids, COBRA insurance, or qualified long-term care insurance.
You can find a complete list of qualified medical expenses in IRS Publication 502.
If you're younger than 65, you can use the money in your HSA for anything other than these qualified expenses. However, much like with an IRA, you'll be responsible for ordinary income taxes — and there's a 10 percent tax penalty on the amounts you use.
5. HSAs offer real flexibility, and portability.
Who hasn't felt confined by their HMO or PPO plan when they need to see a doctor who isn't in the plan's network?
Paying for your doctor visits through an HSA also encourages smart consumers to actually start asking doctors about their fees. This, in turn, could even create an incentive for medical providers to keep their fees competitive.
Another huge benefit of HSAs is that they're portable from employer to employer, or from one provider to another. When you leave your job, you get to take the balance of your HSA with you and either roll it over to your new employer's HSA plan or open an individual plan with another provider. With an HSA, you're in control of your money.
6. Once you hit 65, the money is all yours -- penalty free.
Let's say you contribute to your HSA for years and years, and actually have lower medical expenses than you expected. When you turn 65, you can start tapping into your HSA for any reason, not just qualified medical expenses. You'll still pay ordinary income taxes on non-qualified expenses because you funded it with pre-tax dollars, but there's no penalty.
7. HSAs aren't the same as HRAs or FSAs.
I know, all that alphabet soup can be confusing. Let me break it down for you.
HRAs are health reimbursement accounts much like HSAs, with two major differences: Only employers fund HRAs, and HRAs aren't portable. In other words, if you change jobs or health insurance companies, you may lose any balance in your HRA.
FSAs are flexible spending accounts, and there are generally two types. First is the health care spending account, which is used almost identically as an HSA, but with one major difference: Whatever you don't use at the end of a calendar year is forfeited (commonly known as a "use it or lose it" plan).
Next, there's the dependent care spending account, which is used for tax-advantaged payment for child- or elder-care. Neither of these plans are portable from one employer to another.
How to Find Out More
For more details about health savings accounts and high-deductible health plans, the Treasury Department offers here.
Check it out, and get ready to take control of your medical care and how you pay for it. Taking advantage of tax benefits like this one — for expenses you'll have anyway — is an excellent way to save today for a better tomorrow. And, you get the benefit of lower health insurance premiums. You can pay the insurance company more or pay yourself!
Q:
Who needs life insurance?
A: You do, if:
- You have a spouse, children or other dependents
(an elderly parent, for example) who rely on you for
financial support.
- Your death would disrupt someone’s life preventing
that person from working or functioning normally for
a period of time.
- You want to leave a legacy to your alma mater, a
favorite charity, or a political cause.
- You want a safe savings account for your retirement.
- You want a reliable source of funds to borrow or
use as you see fit . . . your own “bank.”
- You might do any of the above in the future . .
. buy now to guarantee access later in the event of
a change in your health.
Q:
How much insurance do I need?
A: That depends.
It depends on when you die and why you needed the insurance
in the first place. If you need help with this decision,
please contact us. We’ll ask questions and help
you decide on the right options for you and your family.
Q:
Which type of life insurance policy should I buy?
A: Buying life insurance, like any other financial
purchase, is an individual decision based on your particular
needs.
For example, term insurance may be suitable if you
are young and want to make sure a spouse and young children
would be taken care of if you were to die unexpectedly.
For the older, more established family, the fixed premium
and the build-up of cash value in whole-life policies
might be more attractive.
If you purchase whole-life insurance, ensure that the
policy is needed and intended to be maintained over a long period.
It can be quite expensive if you allow it to lapse in
the early years.
The basic types of life insurance are:
Term Insurance
Term insurance provides for payment of the death benefit
only if the person insured should die during the term
of the policy. If the insured survives the “term”
or period of time covered by the policy, there will
be no coverage or the premium will escalate to an unaffordable amount.. Features include:
- Low premium initially or for a guaranteed period
(5, 10, 15 or 20 year term)
- Protection for a specific period of time
- May be renewable and/or convertible
- Premium increases with each new term
Whole-Life Insurance
The whole-life insurance policy provides for a death
benefit for the insured for his or her “whole
life.” Premiums are normally paid throughout the
life of the insured, although cash values can sometimes
be used to offset the premiums.
Features include:
- Protection until the end of the life of the insured
- Fixed premium, usually for the life of the insured
- Cash value accumulation
- Higher initial premium than term
- Should be purchased with the intention of keeping
for life or for a long period of time.
This, of course, is only a summary of what is available.
The main issue is, "do you need to protect yourself
and your family?"
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