It's That Time! Employee Benefits and More

By  Kate Welker, CFP®

This month we want to continue to remind our readers that it will soon be open enrollment through your employer and Medicare, the time of year you are able to review and change your health insurance and other benefits. 

There are several posts on our blog that cover this topic more in depth:

• Last week Rachel discussed how to review your health insurance options and prepare for making that decision in her post “Knock, Knock - Open Enrollment Who?”

• Last year I wrote a guide to the terms and options you may be deciding on in a post titled “Build Your Wealth by Taking Advantage of Benefits Open Enrollment.”

While you are taking the time to review your employee benefits it is also a good time to tackle several other employment related tasks.

• Beneficiary Review- We recommend that you review your beneficiary designations once a year on all of your accounts. Those tied to your employment would be your retirement accounts (Pension, 401(k), 403(b), etc) and any life insurance benefits.

• Benefit Package - If you have a position that comes with flexibility in negotiating additional benefits such as bonus payouts or additional time off, this would be a time to review your performance and approach your supervisor. 

• Salary Benchmarking - It is a good practice to occasionally review your salary for your position and duties. Compare what your compensation is against others in your industry and in your geographical area. If your research shows you are underpaid this would again be another time to approach your supervisor for a discussion. To research this you could use sites such as salary.com or glassdoor.com.

Knock Knock - Open Enrollment, Who?

By: Rachel Poe

Open Enrollment is a time in which individuals are required to opt in or out of health, dental, and vision insurance for the upcoming calendar year. Those who receive benefits through an employer program will usually receive notification and be a part of a company census to gather quotes. While important in itself, it is also noted that, once open enrollment closes, so does your chance to change coverage for the upcoming years (unless you qualify for a life event change). Life event changes consist of some of the following: marriage, divorce, additional children, loss of job, movement from region, etc. 

Open Enrollment for 2021 generally runs from mid-October to mid-December for coverage that begins January 1, 2021.  According to Value Penguin, within individual households, it is important to review these insurance plans compared to 2020’s Affordable Care Act; plans may vary based on coverage and provider. In addition, depending on your state, individuals who opt out of health care coverage provided by ObamaCare will not be required to pay a tax penalty, however, it is important to check your state-level mandates. 

Duke Health offers the following tips to prepare during the open enrollment process.

1. Know your needs - chronic conditions, emergency options, upcoming procedures, risk analysis

2. Family Changes - college, study abroad, new family members

3. Know What’s Covered

4. Identify Your Provider Network

5. Calculate costs

6. Evaluate Health Savings (HSA) and Flexible Savings Accounts (FSA)

7. Consider Other Insurances

8. Don’t Ignore - even if satisfied with the current plan - always review!

WARNING, open enrollment is not the same as Medicaid and Medicare. As a reminder, Medicaid is put in place to aid in low-income households and disabilities. This has no enrollment period and can be applied for at any time. Medicare creates access for individuals 65+ to health care (disabled individuals can apply at a younger age). Coverage begins January 1, 2021 with open enrollment ranging from October 15, 2020 till December 7, 2020. 

While reviewing dental, vision, and health insurance needs, it is equally important to consider reviewing other needs such as long-term care, disability, and life insurances. See this attached pdf to review some questions that may help identify some of the needs, revisions, or gaps within upcoming insurance policies. 

Not sure where to start? Contact us today for a Discovery Call to schedule a Free Consultation to discuss if an employee benefits review and an insurance policy review and recommendation session is right for you!

Medicare Part D - Parts and Pieces

In this weeks blog, Financial Planner Kerrie Beene, CFP® digs into the parts and pieces of Medicare Part D - Prescription Coverage:

What is Medicare Part D?

Medicare Part D is an optional U.S. federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs through prescription drug insurance premiums (most professionally administered prescriptions are covered under Part B)

Do you have to have Medicare Part D?

Medicare Part D is optional.  However, if you do not enroll, you may pay very high prescription drug coverage costs.  Additionally, if you do not enroll when you first become eligible at age 65, you may pay a lifelong penalty if you decide to sign up later. 

For those that choose to sign up, understanding the differences in the plans is very important. In general, the higher the tier, the higher the member’s out of pocket cost for the covered drug.   

Tier 1 - Preferred Generic

This is the lowest tier.  This is the least expensive drugs your plan covers, includes preferred generic drugs. 

Tier 2 - Generic 

This tier includes preferred generic drugs that have proven to be the most effective in their class. 

Tier 3 - Preferred Brand

This tier includes preferred brand drugs and non-preferred generic drugs.  

Tier 4 - Non-Preferred Drug

This tier includes non-preferred brand drugs and non-preferred generic drugs. 

Tier 5 - Specialty Tier

This is the highest tier. It contains very high cost brand and generic drug, which may require special handling and/or close monitoring. 

When trying to decide which plan to choose, it is important to think about the following factors:

• How often you take prescription drugs

• Do you take generic, brand name, or a combination of both

• Deductible preferences, such as, a $0 deductible plan with a higher cost-sharing or a higher monthly premium

• Your copay and coinsurance options

• Know what happens if you go into the Donut Hole

What is the donut hole? 

Most Medicare Part D plans have a coverage gap. This coverage gap is called the Donut Hole. This is the time period after you and the drug plan have spent a certain amount of money for covered drugs, then you have to pay all costs up to the yearly limit. Once you have hit this limit, your plan will help pay for covered drugs again.  For 2020, the gap starts when you’ve spent $4,020 on covered drugs.

In 2020, the donut hole will close for generic drugs.

Picking a plan can be frustrating and confusion.  Just be sure to take the time to understand which tier/plan is best for you and do not hesitate to reach out for guidance. 

Your Wealth, Your Health, and The ABCD’s of Medicare

In this weeks blog, Financial Planner Amy Irvine, CFP®, EA, MPAS®, CCFC explains (at a high level) the alphabet soup of Medicare A, B, C, D and the Supplemental Plans. There is real confusion (understandably) around all the options available.

The ABCD’s of Medicare

This time of year you can’t turn on the TV without hearing an ad for a Medicare Advantage Plan that is “perfect” for you.  I noticed when I was flipping through the Directv guide that there are even infomercials on this topic!

For those of you that are clients, each year we always ask you about your coverage for both medical and prescription needs and we use the online Medicare “find a plan” tool to make sure no major changes are happening in the coverage and formulary’s from one year to the next.  In Steuben County alone there are over 20 Medicare Advantage Plans, some with prescription coverage, some without. There are over 20 Part D plans too. Then there is traditional Medicare with potential supplement plans! To further the confusion, some clients have supplemental plans through their employer, or as a retired military member, they have tricare.  

All this reminds me of that Susan Powers commercial from the 80’s - STOP THE INSANITY!  Although many of our clients are under Medicare age, your parents or grandparents may be struggling to understand the various parts, so feel free to forward them this article.

What is Medicare?

Often I will have people ask if they (or their parents and grandparents) are eligible for Medicaid, when what they really mean is Medicare.  The two are very different systems. Today I’m writing solely about Medicare, as each State administers the Medicaid programs and is an income based program.

Medicare is a health insurance system for individuals over the age of 65 and for those under 65 that have been deemed disabled.

When should I sign up?

If you are already receiving Social Security benefits and become eligible for Medicare, you are automatically enrolled in both Part A and B, but NOT D or any supplemental plans.

If you are not yet signed up for Social Security benefits, then you will need to sign up. We recommend that you sign up 3 months in advance for the age 65 effective date; this gives time for you Medicare cards to be delivered and some wiggle room to sign up for a supplemental plan.  However, according to Medicare.Gov, your window “starts 3 months before you turn 65 and ends 3 months after you turn 65.”

IMPORTANT NOTE: If you don’t sign up during the enrollment period, the may be subject to a late enrollment penalty of 10% for every 12-months that you should have been enrolled.  There are exceptions that apply to this rule, such as if you are still employed and you have coverage through your employer that has 20 or more employees. However, you might still need to sign up for Part A - make sure to ask your employer.

Traditional Medicare - The “Parts”

Part A - Hospital Insurance

• There is usually no premium for Part A.

• There is a deductible for each benefit period ( this is not an annual deductible, you could have several benefit periods throughout the year) of $1,420 for 2020.  This covers the first 60 days of inpatient care.

• Days 61 - 90 have a co-insurance of $355 per day (for 2020)

• Then it moves into what is called lifetime reserves and the co-insurance is $710 per day (for 2020)

• Skilled nursing facility services are covered at a different rate and is only for the short-term, this is not to be used for the long-term

• There are more moving parts to Part A, so be sure to look at the 120 page guide they send out each year for specific details.

Part B - Medical Insurance

• Premium - this is not cut and dry.  The premium depends on your income.

  • The base premium is increasing from $135.50 to $144.30, so if you are having the premium taken from your Social Security, you will see the deposit go down in January.

  • If your modified adjusted gross income is over $85,000 for single or $170,000 for married, your premium is subject to both a Part B and Part D “income Related Monthly Adjustment Amount” aka IRMAA.  Read more here if you are in that situation: Medicare Premiums: Rules for Higher-Income Beneficiaries

• The deductible is increasing from $185 in 2019 to $197 in 2020.

• You pay 20% of the approved services and Medicare covers 80%

• This part is for doctor visits, lab work, ambulance services, durable medical equipment, mental health services, you get the jist of it.  

• Note, some preventative services are covered fully, while others still have the 20% co-insurance.

Part D - Prescription Drug Coverage

• These plans are offered by private insurance companies such as BlueCross, United Healthcare, Humana, etc.  The premium varies widely, as do the copays and coinsurance amounts.  

• The plan you elect should be reviewed EVERY year, as the formulary’s can change.

• If you don’t sign up for Part D when you are first eligible, there is a penalty that will be added on to any premium.  As of 2020, the monthly penalty is 1% per month for EACH monthly you should have had it, multiplied by the national premium average (for 2020 that is 32.74).

• As stated below, there is no supplemental plan that can help with these co-pay / co-insurance amounts, but different States do offer programs to assist with the cost, usually there are income limits on these plans.

Part C - Bundle of A, B and D (sometimes D is still separate)

• These plans are through a private insurer (like Part D).  They can be an HMO (health maintenance organization), PPO (preferred provider organization), PFFS (private fee for service plans), or SNP’s (special needs).  

• You will often find them described as “bundled” plans because they combine the hospitalization services of Part A, medical services of Part B, prescription services of Part D, and sometimes add in vision, hearing, and dental services.

• The private insurers get paid a fixed amount by Medicare for your enrollment.

• Premiums will include the above Part B premium cost, plus there may be an additional premium charged by the private insurer.  Each plan has its own design for the out-of -pocket expenses and may have an in and out-of-network variance.

Supplemental Plans (AKA Medigap Plans)

These plans are offered by a private insurance company as a supplement to traditional Medicare parts A and B.  They have nothing to do with Part D and if you selected a Medicare Advantage Plan, you cannot select a supplemental plan.  As you can see by the chart below, the supplemental coverage varies based on the plan you select.

To add to the confusion, the supplemental plans also use letters of the alphabet - A, B, C, F, G, K, L, N.  As you can see by the chart below, each plan has slightly different coverage:

Photo Credit: AARP.org

Uncork Your Wealth - Discover the Difference Between HSA and FSA

In this week’s blog, Financial Planner Kerrie Beene, CFP® defines two benefit terms that often cause confusion:

The products available to us in the financial and healthcare industry can be confusing.  So, with the use of Health Savings Accounts (HSA’s) and Flexible Spending Accounts (FSA’s), we are combining the two worlds and this can be overwhelming when trying to pick a health care plan.  Healthcare plans vary from job to job and state to state, but most of the time the options include health care plans with HSA’s and FSA”s as one of the available plans, along with other plans. So what is the difference and should I choose one of these options?

Similarities 

• Both HSA’s and FSA’s are used in conjunction with your health care plan.  

• Both also reduce your income tax liability and help pay for medical expenses with pre-tax dollars

• You and your employer can deposit money into the account

• Debit/Credit Card offered to pay for expenses

• Must maintain receipts and records for expenses

Health Savings Account

• Used in conjunction with a High-Deductible Plan

  • For 2019, the IRS defines a high deductible as $1,750 for individuals and $2,700 for a family 

  • For 2020, the IRS defines a high deductible as $1,800 for individuals and $2,800 for a family

• Available to self-employed individuals

• Money deposited into the HSA is tax-deductible

  • Interest and earnings are tax-free 

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• HSA’s are portable

  • The account belongs to you 

  • You keep it even if you switch jobs

  • Money remains in the account from year to year, even if not used

  • Money can be invested within the account

• HSA funds can be used to pay insurance premiums if you are collecting federal or state unemployment benefits or you have COBRA insurance through a former employer

• The IRS also imposes contribution limits on the amount that can be deposited into an HSA account

  • For 2019, the maximum contribution is $3,500 for individuals and $7,000 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

  • For 2020, the maximum contribution is $3,550 for individuals and $7,100 for families, with a $1,000 catch-up amount for those 55 and older (including employer contributions)

Flexible Spending Account

• Used in conjunction with a Health Care Plan

• Not available to self-employed individuals

• Money deposited into the FSA is tax-deductible

• Withdrawals used to pay for medical expenses are tax-free

  • Withdrawals can be used for medical expenses, such as doctor visits, hospital stays, eyeglasses, contacts, dental procedures, prescription drugs, etc.

• FSA’s are not portable

  • The account belongs to your employer 

  • Money must be used by the end of the year or you lose it

    • There are a few exceptions some employers offer, such as being able to carry-over $500 or a 2.5 month grace period to use the funds. (Employers can offer either option, but not both)

• The IRS also imposes contribution limits on the amount that can be deposited into an FSA account

  • For 2019, the maximum contribution is $2,700 

  • For 2020, the maximum contribution is $2,750

• Employers often offer other types of FSA accounts 

  • Dependent Care Account - used to pay for eligible child and adult care expenses like daycare, before and after school care, nursery school, preschool, and summer day camp

  • Other FSA Accounts

    • Adoption Assistance

    • Transit and Parking

The most important things to do when trying to pick a health care plan:

• Understand your available options

• Know your annual healthcare expenses

• Understand the requirements for required documentation for tax purposes

• Don’t be scared to ask questions

Build Your Wealth by Taking Advantage of Benefits Open Enrollment

In this week’s blog, Financial Planner Kate Welker, CFP® defines top benefit terms to help demystify some of the confusing benefit terms.

In the next few weeks you may open your mail or email to see notices regarding open enrollment season through your employer. Open enrollment is a period of time you can make changes to your employee benefit options that are normally restricted. This is also a great time to review your entire benefits package and make any other adjustments as well. Let’s walk through a few options you may be looking at.

Health Insurance is the main thing most people think about during open enrollment. Compare the components of the plans offered and look beyond the premium. You will want to compare the deductibles, co-pays, and which providers are in-network. Also take the time to review the prescription plans against your current medications to see how those are covered.

The FSA or Flexible Spending Account is the next thing to consider. A flexible spending account allows you to contribute pre-tax dollars to cover out of pocket medical expenses including co-pays, medical supplies, dental, and vision expenses. If your benefits include access to an FSA this is a way to lower your taxable income and pay for expenses you would incur anyways. You will have to decide how much to contribute each pay period. Be sure to review the plan terms and not to contribute too much. If you have a balance at the end of the year the plan will allow you to either roll over $500 or spend it within a grace period.

The HSA or Health Savings Account is an option to consider if you have a high deductible health plan. To qualify you must have a deductible of at least $1,350 for an individual and $2,700 for a family plan. The contribution limits are much higher and depend on the type of insurance and other benefits you have. Like an FSA this account is used to cover out of pocket medical expenses and is an income tax deduction. Unlike an FSA, an HSA balance will roll forward year to year and the growth on the account also grows tax-free. Be sure to look for an employer contribution that may be offered and take full advantage of that contribution.

Dependent Care FSAs are like the medical FSAs, but for childcare. This includes daycare, preschool, summer day camp, and after school programs. Also included is adult daycare. If an adult is your qualifying tax dependent and they require care while you work this is an eligible expense. With a DCFSA you are able to contribute up to $5,000 pre-tax.. Some employers also offer a matching contribution into these accounts.

Other Benefits may be available to update at this time as well. Reach out to your HR department to ask about your benefits package and see if there is an option you were not aware of. Some employers offer additional insurances like pet insurance or unique legal services.  

Block out some time for yourself to be able to really read the information you are given and consider your options. Look at the bigger picture benefits like tax savings, lower taxable income reported, employer matches, and the satisfaction that you are getting the most benefit out of what is offered.