Health insurance: Two other numbers to look at

Most people, of course, have almost no control over their health insurance:  They get what their employer provides (if they have a good job) or else they get nothing.  Whether they pick their own policy or not, the first two numbers everyone looks at are thepremium and the deductible.  Well, here are two other numbers that are at least as important.

The premium and the deductible, of course, are very important–those are the numbers that determine whether you can afford thepolicy and when it starts paying something if you get sick.

If you think of your insurance as being a sort-of prepaid medical package–you pay a monthly premium and they provide whatever care you need–then the deductible (and the co-pays) are what matter.  If you think of it as insurance though, there are two other numbers to pay close attention to:  the out-of-pocket maximum and the policy limit.

The out-of-pocket maximum

Even after you pay your deductible, your insurance only pays a percentage of your bill.  (It used to be universally 80%.  Now you often see 90% for in-network coverage and 50% for out-of-network coverage, but in policies that you buy yourself, just about any numbers can show up.)

This is all well and good as long as you don’t get seriously ill or have a bad accident.  If you do, though, even 10% of your medical care can add up fast.  An extended stay in the hospital–even a short stay in intensive care–can reach hundreds of thousands of dollars.  If that happens, your 10% plus co-pays would be in the tens of thousands of dollars–enough to ruin the finances of many households.

That’s what the out-of-pocket maximum is all about.  Once your share of the charges hits the maximum, the insurance should pay the rest.

The out-of-pocket maximum is the single most important number in determining if your insuranceis really insurance.  If your finances are such that you could pay the maximum without going bankrupt, then your insurance policy is about the size you need.  If they aren’t, then you don’t really have insurance at all–you’ve got one of those increasingly common pre-paid medical packages.  (And you’ve got a bad one–one that leaves you vulnerable to ordinary bad luck ruining your finances along with your health.)

One other thing to be aware of regarding the out-of-pocket maximum is that it often doesn’t apply to out-of-network coverage:  you not only have to pay 50% instead of 10%, but the amount you pay may not count toward the limit, leaving you on the hook for virtually unlimited expenses.

The policy limit

Just like any insurance, medical insurance has a policy limit–the most they’ll pay.  When I got my first job, $1 million was common.  Nowadays I see a lot of policies with $3 million or $5 million limits (although I’ve also seen policies with limits of just $300,000).

A policy limit is necessary for the insurance company in order to be able to calculate how much they’re on the hook for–without that information, they have no idea what premium to charge.

The policy limit doesn’t come into play very often.  Usually, insurance companies will aggressively deny coverage for expensive stuff right from the start–long before they even approach the policy limit.  But it’s always possible to argue about coverage for procedures that the insurance company doesn’t want to pay for–you have access to appeals, arbitration, lawsuits.  In the extreme, it’s even possible to get the legislature involved, passing laws that require insurance companies to pay for certain things.  That’s not true about the policy limit.  Just like with other kinds of insurance, once you hit the policy limit, the insurance company has no obligation to pay any more money.

If your health insurance is to be real insurance–the kind that protects your finances from being ruined by bad luck–then you’ll want to pay special attention to the out-of-pocket maximum and the policy limit.  Appropriate amounts for those values will matter far more than the deductibles, co-pays, or even the premiums.

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Do You Need Long-Term Care Insurance?

According to the Department of Health and Human Services, those of uswho reach age 65 will have a 40% chance of entering a nursing home, and 10% will stay in one for five years or more. So does this mean you need long-term care insurance? Possibly.
Those numbers don't take into account the millions of aging adults who will need some kind of in-home care as their health falters. By 2020, 12 million older Americans will need long-term care, according to one government estimate. Most will be cared for at home by family members.

Long-term insurance is marketed as a way to fill in the financial gaps if you have a chronic illness or disability and need help with the activities of daily life, like bathing and getting dressed.

"The additional expense of long-term [care] can be $40,000-$90,000 a year," says Rich Arzaga, founder of Cornerstone Wealth Management. "The average American cannot survive this risk and expense." Nor can you count on the government to bail you out when the time comes: Medicare doesn't pay for "custodial care." Medicare pays only for medically necessary, skilled nursing facility or home health care. It may not give you the choice of the best care in your area. And while Medicaid pays for certain types of care for the low-income elderly, who is eligible and what services are covered varies from state to state, and is determined by such things as income and personal resources.

"Many folks wrongly believe that letting the government pay for their anticipated long-term care needs is the best solution, but Medicaid programs are in trouble funding-wise in every state," says Wilma Anderson, a registered financial consultant. "In the future Medicaid may become even harder to qualify for. If you don't plan for LTC, you may have limited or no choices to pay for care when your health changes."

Here are four things to consider when planning for long-term care:

How will you pay the bills?: Many financial planners and elder care experts say long term care insurance is a good place to start. It typically helps pay for things that your medical insurance won't, like in-home care, or remodeling your home so you can stay in it longer. But as with all forms of insurance, it's vital do your research.

Investigate the cost of a stand-alone long-term care policy: The younger you are, the lower the premium will be. The cost really depends on factors like family health history, age, how much insurance you think you'll need, how long you'll need it, where care is received, and more, explains Marion Somers, PhD, author of Elder Care Made Easier: Doctor Marion's 10 Steps to Help You Care for an Aging Loved One.

Shop around for the best policies and prices. Benefits vary: Weigh the scope of coverage, benefit and waiting periods, inflation protection and other factors against your income and health needs.

Read the fine print: "Insurance companies may try to offer added-value features beyond the basic benefits, but most of them don't add much value at all. Be thoughtful and realistic about your needs and priorities," says Ryan Malone, founder of InsideElderCare.com.

Truthfully, says Somers, "Not everyone needs long-term care insurance, but everyone needs a plan."

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Got Insurance? Enough? You Sure?

Many U.S. homeowners haven't insured their homes against earthquakes and other disasters, but the devastating losses in the wake of the recent earthquake and tsunami in Japan may cause people to give their insurance policies another look.

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Earthquakes have occurred in 39 states since 1900, according to the Insurance Information Institute, a nonprofit supported by the insurance industry. Earthquakes have caused damage in all 50 states, according to the group.

April 18 marks the 105th anniversary of the great San Francisco quake of 1906. That temblor caused an estimated $524 million in property loss at the time; it would have cost $96 billion had it occurred in 2009, according to AIR Worldwide, a provider of risk modeling software and consulting services. With a standard homeowners policy, you're not covered for damage to your home or possessions in the event of an earthquake, meaning the damage occurring from the shaking and cracking. Flood damage also is typically not included in your basic policy, says Scott Spencer, world-wide appraisal and loss-prevention manager at Chubb Personal Insurance. To be covered for both, you have to buy an endorsement or separate policy. "Most people are not adequately insured for a total loss, but total losses are so rare," says Amy Bach, executive director of United Policyholders, a nonprofit advocate for insurance consumers. But, "if you lose the bet and something really bad happens, it can be pretty awful to not have the coverage you thought you had." Even in California, only 12% of residents have earthquake coverage. That's partly because earthquake coverage in high-risk areas can be prohibitively expensive, Ms. Bach says. While people pay in the range of $500 to $2,000 a year for basic homeowners insurance, the total cost of insuring an older home in San Francisco with earthquake insurance, for example, can cost an additional $2,000 to $5,000, Ms. Bach says. The cost of coverage varies based on where in the country you live and how old the home is, since newer building codes often make structures more resilient, according to Pete Moraga, spokesman for the Insurance Information Network of California, a nonprofit aimed at educating consumers. Get a Fast Approval on the cash you need this Season. California isn't the only part of the country where earthquakes pose a risk. For example, earlier this year, a 4.7 magnitude earthquake occurred in Arkansas -- the most severe quake the state experienced in 35 years, according to the Insurance Information Institute. Flood insurance is typically less cost-prohibitive to those who need it. To protect a home against flood damage, recognize the area's flood history and know if your home is in a flood zone, Mr. Spencer says. Earthquake insurance is available through private insurance companies, as an add-on. In California, it's available through the California Earthquake Authority, says Jeanne M. Salvatore, senior vice president of public affairs for the Insurance Information Institute. Flood insurance is made available through the National Flood Insurance Program as well as private insurance companies. On the other hand, wind damage caused to a home by a tornado is generally covered through your standard homeowners insurance, Ms. Salvatore says. The tornado season runs from April through July, but some of the most severe storms hit in the spring, according to theInsurance Information Institute. And in most states, wind damage due to a hurricane is also covered in the standard contract, Mr. Spencer says. That said, some policies in certain states exclude wind coverage -- though that practice isn't typical. "Wind deductibles are more common than policies excluding wind all together," he says, adding that the policies require homeowners to pay either a percentage or a flat dollar amount for losses due to wind-related damage. So it's worth checking to make sure your policy will adequately cover any losses. Insurance is determined based on what it would cost to rebuild your home, not its market value -- and the cost of construction has gone up in recent years. The replacement value of your home may have been $250,000 when you bought it 10 years ago, but it might cost $500,000 to build it today. Coverage should be re-evaluated regularly, Mr. Spencer says. To protect against increased construction costs, homeowners can add extended replacement-cost coverage to their basic policies, Ms. Bach says.

She also recommends buying building-code upgrade coverage, which ensures that if the codes have changed and you need to rebuild, the insurance company pays for the increased costs. When you add these items, Ms. Bach says, raise your deductible to at least $1,000 to keep your premium affordable. Get the NEW Android Powered LG Optimus Q! Finally, research insurers, selecting one that offers a good quality of coverage -- not just the lowest price, Mr. Spencer says. 

[caption id="" align="alignnone" width="200" caption="Source: Wikipedia"] "Many people think insurance is insurance and you buy a policy and they're all the same," he says. "But the offerings are as vast as cars. You can buy a Dodge Neon or a Cadillac Escalade.
 

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401(k)s: When Opting Out Makes Sense

In spite of legislation that has made it more difficult for workers to opt out of their 401(k) plans, as many as one in five do just that. And a surprising number of advisers say that's not necessarily the wrong choice.

No one can be forced to save for retirement, but automatically enrolling employees in 401(k) plans was supposed to come close.

And in the five years since the Pension Protection Act gave companies legal cover to default their workers into the plans, participation is up -- opting out is apparently too much of a hassle for most employees. But even at companies that enroll every new employee as a matter of course, the dropout rate remains between 10% and 20%, a figure that seems stubborn to change, experts say. "Frankly I'm stunned that it's that high," says Roger Wohlner, of Asset Strategy Consultants. "You can lead a person to water, but you can't make them drink. More education is clearly needed here and more access to advice."

Companies have recently stepped up education efforts to convince employees it's in their best interest to rejoin the plans, but the tactic that has proven most successful is automatically re-enrolling employees every year, says David Wray, president of the Profit Sharing/401k Council of America. "Companies find that over time, employees get worn down, and they get a few more people each year."

Most people who opt out of their 401(k) plans do so because they need the money, Jeanne Thompson, Fidelity's vice president of retirement insights, says. Younger and lower-paid workers are the likeliest to drop out with 25% of employees earning between $20,000 to $40,000 not participating compared to just 8% of those earning more than $100,000, she says.

Among plans administered by Fidelity, 10% of automatically enrolled employees opt out of their plans, and another 8% reduce their contributions from the default, which typically ranges from 3% to 6%.

Still, the dropout rate is lower than in plans that don't automatically enroll their workers.
Nationally, 31% of employees do not participate in their company-offered plans, according to the Bureau of Labor Statistics. For low-wage workers, that proportion jumps to 58%, according to Fidelity.

For those who aren't in dire financial straits, conventional wisdom holds that dropping out of one's 401(k) is generally as foolish as dropping out of high school. But there are some exceptions. If there is no company match, says Charles Buck, a financial planner in Minnesota, investors may be better off with a Roth IRA, if they qualify. A Roth IRA at a brokerage will offer more investment options, he says, many with lower fees. Also, for young people who may be saving to buy a house, a Roth IRA allows savers to withdraw their principal, penalty-free. Buck's advice to his own 30-year-old son: "Participate only to the limits of the employer match, and fund a Roth IRA with the rest."

Other advisers say that poor investment choices, or high expenses, can be a good reason to opt-out of a 401(k) plan. The best 401(k) plans charges employees as little as 10 basis points, says Mike Alfred, CEO of BrightScope, which rates plans nationwide. "There are also plans with expensive insurance costs that can run as high as 9% -- investing in a high fee 401k plan can cost a worker hundreds of thousands of dollars in lost savings over their working career when compared to a lower cost plan. In cases where all-in fees get that high, it's hard to argue with an adviser's assertion that the participant might be better served to invest elsewhere."

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Hidden secrets of your safety… what in life insurance?

Every aspect of life is circled with risk, and only proper planning makes one live above and overcome the risks. It is not unusual to find people who lived rich, but later become very poor because no proper foundation was laid for the risks associated with such level of affluence. Protecting the family and providing for them, in the event of the unexpected, is critical to determining how far the family can cope when the breadwinner is not there.

This brings us to the relevance of life insurance, and how different types of life insurance can take care of our needs, now or in the future.Whether or not as a breadwinner, you will be there to provide for the family; in the event that you are unable to pay off your loan should death occur, and what happens to your assets and mortgage plans.

Finance experts say one of the instruments you should consider adding to your portfolio is life insurance. For personal financial planning, life insurance can be of great value. There are some major areas of your financial plan that can benefit from a life insurance policy, being a part of the overall plan.

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Ugochukwu Onyeka, an insurance agent, noted that when you are determining the need for life insurance, you should consider what amount you will need, to protect your family in the event of death. “You should also analyse other areas of your life, that would be financially affected in the event of your death, and purchase enough life insurance to cover those needs and more”. Both term life and whole life insurance policies will have some features that can help you with this.

Life insurance can be used in financial planning to help you secure a loan. If you need to borrow money to start your own business, most banks and lending institutions will be concerned that if you were to die, the loan would be defaulted. To get some protection against this, it is advised that you purchase a life insurance policy that pays a death benefit of that amount, and use it to secure the loan you need. This will save your family from being responsible for the loan.

Life insurance policies, especially most whole life insurance policies, have a cash value, and you can use your built up cash value as an additional means of saving money, in case of an emergency. Because the cash value of your policy tends to increase over time.

Unlike with a bank account, where you earn interest on your principal and must pay income tax, your insurance policy will produce almost the same interest returns, and pays many times over in benefits if you should die. Your policy builds cash value when you put money into it and you do not pay any income tax on the cash values.

You can also borrow money against the cash value of your policy without any penalties. Your cash value will remain intact for you to use as you want. In some policies you may be able to borrow money at zero interest rate, and you can have the payments deducted from your final death benefit upon your passing.

To protect your family and loved ones from financial ruin, and take care of any outstanding debt you may have, you are going to need adequate life insurance. No matter which type of policy you choose and what the features and benefits are, nothing begins, until you actually pay for the coverage. Before you commit yourself to any plan, make sure you get a life insurance quote.

People say that insurance is always sold, nobody likes to buy it. Because some of us hesitate to even discuss it. May be due to fear of death, we do not want to accept the obvious fact of life. If you have some dependants or someone relies on your income, you definitely need a life insurance cover. One of the most important benefits of life insurance, is that in case of your death, you are able to protect your loved ones against financial consequences.

There are two main types of life insurance policies available in today’s life insurance market. They are term life and whole life. Each has its own unique purpose and fills a particular need in the market place.

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Health-Insurance Changes for 2011

Here's what to expect when your employer gives you choices during open-enrollment season this fall.

What differences can I expect to see in my health insurance for 2011 during my employer's open-enrollment season this fall?

Employers will be making some changes to their health insurance plans for 2011 because of health-care reform — such as offering coverage to children up to age 26 — and as a way to help control rising health care costs. A recent survey of large companies by the National Business Group on Health found that employers estimate their health-care-benefit costs will increase by an average of 8.9% in 2011, compared with an average increase of 7% this year. These employers are continuing to boost premiums and co-payments, but they're also beefing up programs that encourage employees to lower their medical expenses.

Higher Premiums and Co-Pays

Sixty-three percent of the employers surveyed plan to increase the percentage that employees contribute to the premium (on average, employees contribute 17% of the premium for individual coverage and 27% for family coverage). And 46% plan to raise out-of-pocket maximums. About 40% of employers also intend to increase in-network or out-of-network deductibles.
These large employers have already been boosting employees' share of the premiums and co-payments over the past few years, and they realize that increasing employee costs cannot be their only solution — especially because many workers have had stagnant wages and may have a spouse who lost a job, says Helen Darling, president of the National Business Group on Health.
If employers increase co-pays too much, the employees may not seek care they need, which could lead to greater medical expenses in the future. And the claims costs have a direct impact on these employers, who are self-insured and pay claims from their own money, using an insurance company only for administration (a common practice for many large companies). These employers are targeting some of their increases at areas that will help encourage employees to be more careful about costs — such as increasing cost sharing for non-emergency care at an emergency room.

The Solution
If you have a choice of several plans, factor your potential out-of-pocket costs into the equation rather than looking just at premiums. Evaluate the new rules for co-payments carefully when deciding which type of care to use throughout the year.

 
More High-Deductible Health Plans and Health Savings Accounts

Sixty-one percent of the employers surveyed said they plan to offer a consumer-directed health plan in 2011 (usually a high-deductible health plan combined with a health savings account), which helps lower health-care costs because it encourages employees to become better health care shoppers. In fact, 20% of the employers plan to make the consumer-directed health plan the only choice. Those that are offering several options are steering employees toward the high-deductible plans by reducing premiums and often contributing money to the employees' health savings accounts.

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The Solution
These extra incentives may make a high-deductible plan worthwhile, even if you aren't in perfect health. Also, most high-deductible plans now cover preventive care without cost sharing before you reach the deductible. Look carefully at the high-deductible plan option this year and consider adding some of your own money to an HSA (if you're eligible). Contributing to an HSA lowers your taxable income, and your money grows tax-deferred for the future and can be used tax-free for medical expenses in any year — even after you switch to a new job.

Better Deals for Primary-Care and Wellness Programs

Many employers intend to reduce or eliminate the co-pays for primary care and preventive care, which can help catch problems early and lower medical expenses in the long run. Employers have been experimenting with various forms of wellness benefits over the past few years, and most now give people bonuses for participating in wellness programs rather than penalizing them if they do not. "They like carrots more than sticks," says Darling. Forty-one percent of the employers are offering discounts for participation in wellness programs, and the average incentive to employees is $380; 22% of employers offered discounts on premiums for participating in tobacco-cessation programs.

[What your doctor may not tell you]

The Solution
Employers realized that they needed to provide workers with better incentives to sign up for wellness programs. So if participating in one seemed like a hassle in the past, it may be worth a second look this year. Also, get a list of free preventive-care services and make the most of them throughout the year.

Extra Charges for Brand-Name Drugs

Over the past few years, more employers have been charging varying levels of co-pays for different types of drugs. Sixty-three percent now have a three-tiered design for their prescription-drug coverage, charging the lowest co-pay for generic drugs, the middle rate for preferred brand-name drugs and the highest co-pay for other brand-name drugs.
People also have to jump through more hoops to get their drugs. Seventy-three percent of employers now require prior authorization before they will let you use certain drugs, and many are using step therapy, which requires doctors to try a lower-cost drug first before certain higher-cost drugs will be covered. Employers are also changing co-pays to encourage you to get your drugs from a cheaper source. For example, some will fully cover the cost of maintenance medications only if you use mail-order pharmacies. If you choose to get the medication at a local pharmacy instead, you pay the difference between the cost of mail order and the retail price.

[See How Behind Are Your Retirement Savings?]

The Solution
If you take medications regularly, look carefully at how the drugs are covered and your potential out-of-pocket cost. Switching to generics, when possible, will always save you money, and the cost savings becomes even more pronounced if your employer charges a lower co-pay for the lowest-cost drug. Also reconsider where you buy your medications if your employer provides a higher level of coverage for mail-order pharmacies. And find out about any prior authorization or step-therapy requirements before using a new medication so you don't get hit with surprise charges if you don't follow the rules.

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Open enrollment cutoff for Medicare plans moves up

A new deadline for privately run versions of the government's Medicare program may trip up customers who typically wait until the holidays to settle on their health insurance coverage for the coming year.

This fall's open enrollment deadline for Medicare Advantage plans and Part D prescription drug coverage has been moved up nearly a month to Dec. 7. The new deadline aims to help prevent coverage problems arising from late-December enrollment decisions, but it also could pose a quandary for many beneficiaries.

Medicare Advantage plans cover more than 11 million people. They offer basic Medicare coverage topped with extras, such as vision or dental coverage or premiums lower than standard Medicare rates.

Most beneficiaries enroll after they turn 65. Then they have an open enrollment window every fall in which they can drop their coverage and switch to another plan. Here are some questions to consider this fall.

— What deadlines will change?

Beneficiaries will receive their annual notice telling them about any changes in their coverage for next year by Sept. 30, which is a month earlier than last year. Insurers then will start marketing their 2012 plans on Oct. 1.

This year's open enrollment runs from Oct. 15 to Dec. 7. That's a longer stretch than last year's window of Nov. 15 to Dec. 31.

But the health care overhaul calls for the earlier deadline to ensure that new coverage begins as planned on Jan. 1, according to a Senate Finance Committee aide. The new date provides more time for applications to be processed by the end of the year.

— Will the deadline changes affect many beneficiaries?

Medicare Advantage customers will have enough time to consider their options and enroll in another plan if they avoid waiting until the last minute, said Judith Stein, executive director of the Center for Medicare Advocacy, a Connecticut-based consumer group.

But last-minute stragglers are common. Plans can receive as much as a quarter of the applications for coverage they normally get during open enrollment in those last three weeks of December, according to Matt Burns spokesman of UnitedHealth Group Inc., the largest Medicare Advantage coverage provider with more than 2 million customers.

Many people take time to make their coverage decisions. Beneficiaries start seeing Medicare Advantage ads in the fall. Then they might talk to their families, stew on the decision, and wait for the holidays to pass, said Dr. Jan Berger, chief medical officer at Silverlink Communications Inc., which works with Medicare Advantage providers.

— What happens if you miss the deadline and make no changes?

This can get complicated.

If the plan is still offered for 2012, then a customer who doesn't make any changes remains enrolled. But details of that plan may change.

If the plan is discontinued, customers may be switched to another Medicare Advantage plan offered by the same insurer. They also could be dropped into regular Medicare, which does not provide prescription drug coverage.

Options do not completely dry up if a beneficiary misses the Dec. 7 deadline. From January 1 to February 14, Medicare Advantage customers can drop their plans and enroll in regular Medicare. During this time, they also can pick a Part D prescription drug plan to go along with that coverage, but they cannot jump to another Medicare Advantage plan.

Here's another wrinkle: Beneficiaries can enroll any time during the year in a Medicare Advantage plan that has prescription drug coverage if they receive a low-income subsidy or if they have access to a plan with a five-star quality rating. The catch: Only a few plans attained that rating for this year, said David Lipschutz, an attorney with the Center for Medicare Advocacy.

The government will announce a new list of five-star rated plans next month.

— Should Medicare Advantage customers review their coverage even if they don't plan to make changes?

Absolutely.

Plans can change how they cover expenses from year to year. Customers may find that prescription drugs that were covered last year aren't covered in the new year, or they may suddenly face a big bill for a costly treatment like chemotherapy. Any changes will be laid out in the annual notices consumers receive from their insurers.

"People really, really need to look carefully and not assume that because something worked last year it will work this year," Stein said.

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