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Insurance

Former President Barack Obama signed an order into law back in March 2010, which later became known as Obamacare. He did so with the hope that it would revolutionize the way Americans handled their healthcare.  However, if Obamacare was to ever survive, it required a large number of healthy individuals to sign-up for healthcare.

To “persuade” healthy individuals to sign up for plans, Obamacare included a mandate. This required everyone in the United States who didn’t have other healthcare to sign up for healthcare on either the state or government exchanges… or else.

trumpcare

This meant that if you had healthcare from your employer, you were covered. If you signed yourself and/or your family up on the exchanges, you were covered. But if you currently had no health insurance, and did not have an employer that offered it to you, then you either had to sign up for healthcare on the exchanges or face a financial penalty. In 2016, the penalty for not having health insurance was $695 per adult, $347.50 per child, OR 2.5% of your adjusted gross income (whichever number was higher), with a maximum amount per family of $2,085.

Now, on its face, that amount might make you think, “Geesh, I better get health insurance.” The sad reality of the mandate, though, was that it wasn’t punishing enough.  Let’s take a healthy individual, who hypothetically needs to pay $500 a month in health insurance premiums. Many of them would rather just pay the $695 one-time penalty than fork over $6,000 for health insurance premiums in a given year.

Related: Another Insurance Giant Pulls Out of Obamacare

The end result was tens of millions of Americans still declining to sign up for Obamacare, which meant the amount of money in the health insurance pool was far lower than what was predicted.  To compensate, health care providers increased the costs for existing exchange owners, sometimes as much as 115% year over year.  Hanging by a thread, the law needed Hillary Clinton to be elected president in order to survive. Instead, it was given Donald Trump.

Obamacare Mandate

Goodbye Obamacare Mandate

It may feel like Donald Trump has been president for four months and not four weeks. However, if you can think all the way back to President Trump’s first executive order, it was one to remove the enforcement of the Obamacare mandate. To put it simply, President Trump ordered the U.S. government to defer to the individual, rather than the government, should a dispute arise regarding the enforcement of the mandate. This didn’t really mean much the day he signed it because its implementation was unclear. However, last week the IRS put out a statement that said, “If you don’t answer the healthcare question on your tax return, we will still accept your return.”

Wait… what?

So, Line 61 of your 1040 tax return will ask if you had healthcare coverage for more than 9 months in the 2016 tax year.  Before this change in policy, you had three options to answer the question:

  • You can check YES, and show proof of coverage
  • You can check NO, and expect the penalty amount above to be included in your return
  • You can check EXEMPT, and show proof of exemption

Now, there’s a fourth option for every US taxpayer:

  • Naa Na Naa Na Naa Naa, I’ll never tell you

To be clear here, there is no guarantee that if you leave the question unanswered, the IRS will simply look the other way.  The IRS has not explicitly said they will be avoiding all Obamacare penalties for the 2016 tax year. However, considering they’ve decided to allow taxpayers to leave this question blank, it’s highly unlikely that they plan to create more work for themselves and audit individuals who choose to avoid the question.

Thus, in one stroke of the pen, the mandate is done. This all-but-means that Obamacare has been effectively killed, and the need for a replacement healthcare plan is of great urgency.

What Will a Trumpcare Mandate Look Like?

Knowing that the end is near for Obamacare (you might say it’s already here), the next logical question is: Will there be a Trumpcare mandate and, if so, what will it look like?

Well, I’m here to tell you that a gentleman by the name of Tom Price proposed a conservative healthcare plan back in 2015…and wouldn’t you know it, he’s just been confirmed as the new Health and Human Services Secretary. Without getting into specific detail about the entirety of the plan, I’d like to focus squarely on his idea for how to make a mandate work in the future.

The crux of Obamacare, and the part that Republicans have always hated, was that it forced people to buy health insurance, even if they didn’t want it. But you see from the text above that the only way a national healthcare plan would work is if everyone contributed, healthy or otherwise. So, how can a Republican plan provide enough money so that those with Obamacare do not lose coverage AND people that don’t want health insurance don’t have to buy it?

Tom Price proposed two main ideas:

  • This should not be national health care. It should be private and sold across state lines, which is expected to increase competition and lower prices.
  • Pre-existing conditions should be included, so long as the consumer has had 18 consecutive months of healthcare coverage.  If someone without healthcare suddenly gets sick and tries to buy coverage, they can be charged appropriate rates based on a previous medical condition. Also, their current healthcare costs can potentially be increased by 50% annually, for up to three years.

The best analogy I can think of is comparing this idea to your auto insurance policy. If you’ve just signed up for auto insurance and get into a big accident, your insurance provider is likely to increase your rates substantially. However, if you’ve been with your auto insurance carrier for years, you likely have small (or large) accident forgiveness, so your rates are not increased. Similarly, if you’re healthy and have avoided buying health insurance for years and then get sick, don’t expect to walk through the door with a low-cost health insurance policy.

Resource: 15 Auto Insurance Discounts You May Be Missing

Now, this is not to say that the healthcare proposal Congressional Republicans put forward will include a mandate specifically like the one above. It is simply an idea on how to go about getting people to pay for health insurance, without forcing them to pay for health insurance. You can bet any plan that we see proposed in the next few weeks will receive extreme scrutiny from tens of millions of Americans, so the benefits and drawbacks will be widely known.

Make sure that when the dust settles, you’ve done your research on whatever 2018 health insurance looks like, and do the best for you and your family. Something tells me you won’t be short of options.

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After pulling out of a merger deal with Aetna, major insurance company Humana announced that it will drop out of the Affordable Care Act exchange in 2018. The company had already been scaling back its plans available on the exchange. For 2017, it was only selling policies in 11 states.

Although Humana has been a relatively small provider in the Obamacare healthcare marketplace, its pulling out of Obamacare may signal more changes to come. Humana cited an “unbalanced risk pool” as its reason for pulling out of the marketplace. But Humana, like many insurance companies, is likely anxious about the future of the entire Affordable Care Act.

Related: Insurance Giant Aetna Pulls Out of Obamacare

Congress and President Trump have promised to “repeal and replace” the ACA, but haven’t given many details about their plans. Because of this, many insurance companies have already pulled out of the healthcare marketplace.

According to the Kaiser Family Foundation, 18 states have only one or two insurers in their marketplaces in 2017. In general, insurer participation increased between 2014 and 2015, but dropped significantly between 2016 and 2017. Alabama, Alaska, Oklahoma, South Carolina, and Wyoming each have only one insurance company operating in their exchanges. Many states maintain diverse exchange offerings, but participating insurers are still on the decline.

So what does it mean for you?

As noted above, Humana was only offering health insurance plans in 11 states for 2017. If you’re one of the consumers currently covered by a Humana plan through the individual marketplace, you’ll have to find an alternative plan next year. You can, however, keep your current plan through the end of the year.

On a grand scale, Humana’s change of heart won’t directly affect many consumers. With that said, Humana’s exit puts even more pressure on the Republican Congress and White House administration to make some serious changes to the healthcare law.

More Ahead: President Trump’s Proposals for Childcare

With more insurers leaving the marketplace, those that remain are likely to increase their 2018 rates in an attempt to ward off further financial losses. Those costs will fall to the consumers if the law isn’t altered or replace quickly and efficiently.

It remains to be seen what sorts of changes the Trump administration and the Republicans in Congress have for the Affordable Care Act. But with major players like Humana pulling out, the pressure is on to come up with a solution–one the insurance companies can live with–sooner rather than later.

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Retirement is a huge financial undertaking, as we all know. It requires plenty of planning to ensure that all of your needs will be met once your career, and working income, ends. It needs to be able to cover your costs of living, some fun money to actually enjoy your years, and expenses such as healthcare. Of course, the latter become becomes even more important as we age, but many seem to overlook the magnitude of this expense in their planning.

The average person between the ages of 55 and 74 with retirement savings has only $104,000 to $148,000 tucked away in a defined benefit account. What’s even more concerning is that this statistic only reflects 48% of American households. The rest of them have no retirement savings at all.

Those with retirement savings tend to also have other resources to depend on, such as non-retirement investment accounts. On the other hand, those without retirement savings tend to have less of those resource, too.

What does this mean for costs associated with retirement? It means that many Americans will struggle to afford to retire at the standard age of 65. And those who do will have trouble meeting their monthly expenses, including health care.

In fact, 74% of married partners said they worry about unexpected medical costs in retirement. With the cost of health care in retirement being such a big concern, it’s important to consider the actual numbers and plan accordingly.

How Much Does Health Care Cost In Retirement?

According to a 2015 study conducted by Fidelity, a couple, both aged 65, can expect to spend about $245,000 on health care during their retirement. That’s over $12,000 a year — or $1,000 a month — based on average life expectancy!

Why is this so expensive? When you factor in copays, out-of-pocket costs, and dental and vision care, you’ll easily see how the numbers add up quickly. That’s exclusive of any insurance premiums, too.

Speaking of health insurance, here’s a breakdown of how insurance provided by the government works:

Medicare Part A

Hospital Insurance

As long as you or your spouse paid Medicare taxes while working, you won’t have to pay a premium for this coverage.
It mainly covers hospital inpatient care, skilled nursing facility care, hospice care, and home health care.
Medicare Part B

Medical Insurance

Most people will pay $104.90 per month.
It mainly covers services from doctors, outpatient care, durable medical equipment, and some preventive services.
Medicare Part C

Medicare Advantage Plus

Monthly premium varies greatly, but can be up to $200 per month.
It mainly covers everything in Parts A and B and is run by Medicare-approved private insurance companies.
Medicare Part D

Prescription Drug Coverage

Monthly premium varies greatly, but can be up to $100 per month.
It mainly helps cover the cost of prescription drugs.

As you can see, if you opt for all parts of government-provided medical insurance, you can pay up to $400 in monthly premiums per person. This is exclusive of the other costs associated with health care as mentioned above: copays, out-of-pocket expenses, and auxiliary care.

There are ways plan for these expenses, however. The main thing you can do is start saving early.

How To Plan For Health Care Costs In Retirement

Your first plan of attack should be your employer’s retirement account, if one is offered. According to the American Benefits Council, nearly 80% of full-time workers have access to an employer-sponsored defined benefit account, such as a 401(k)/403(b). So if you’re one of many offered this benefit, make sure you take advantage.

Saving even just a small percentage of your salary will make a big difference if you start early. You can begin by saving a mere 3% of your salary, then gradually increase your contributions until you reach 10%. This is generally considered the target amount to save.

This is just a recommendation though. If you can contribute even more, by all means do so.

If you max out your 401(k)/403(b) by contributing $18,000 in 2016 ($24,000, if over the age of 50), investing in an individual retirement account (IRA) is a great next step. Although the annual contribution limit for IRA’s and Roth IRA’s is much lower than that of 401(k)s/403(b)s, the extra savings will help you cover cost of your future health care.

Lastly, saving money in a Health Savings Account (HSA) is a great way to plan for covering medical expenses in retirement. If you are currently enrolled in a high-deductible health insurance plan, you are eligible to contribute to an HSA.

HSAs offer a triple tax benefit. First, HSA contributions are tax deductible. Second, the interest earned on money in an HSA is tax-free. Third, you can withdraw money from your HSA for qualified medical expenses tax-free, as well.

HSAs can be considered retirement funds because there is no carry-over limit, unlike Flexible Spending Accounts. So, the money you contribute today can be used for health care costs in retirement years later.

How To Offset Health Care Costs Once In Retirement

In today’s economic environment, retirement doesn’t necessarily meaning relaxing on sandy beaches. The unfortunate reality is that many people must continue to work in order to supplement Social Security and their minimal retirement savings.

Working a part-time job during the early years of retirement can greatly offset the cost of health care. In fact, you could even save some of your earnings from your part-time job and put it into a retirement savings account to use in future years.

Here are a few ideas of part-time jobs you can take up that won’t be taxing on your health:

  • Consultant: Transfer all the skills you accumulated from your day job over the years and use those expertise to help other companies accomplish their goals.
  • Freelancer: Use your talents to do one-off assignments for businesses. This could include graphic design, writing, proofreading, and much more.
  • Blogging: It can take a while to make money from a blog. But once you get the ball rolling, this gig can bring in a lot of income.

Other Things To Consider

Aside from Medicare, Social Security, and your retirement savings, there may be other ways to cover the cost of health care in retirement.

One thing to consider is COBRA. Under the Consolidated Omnibus Budget Reconciliation Act, federal law requires that companies with more than 20 employees give them the option to continue receiving coverage under the employer’s health plan for at least 18 months.

With COBRA, however, you’ll be responsible for the entire cost of the health plan. While working, your employer likely paid for a large percentage of the premium. This expense will be wholly your responsibility with COBRA.

You may want to consider continuing your employer’s health plan before enrolling in Medicare. Your employer’s health plan will likely cover more medical expenses.

On that note, if you want a more comprehensive health insurance plan after your COBRA benefits end, you can consider enrolling in a Marketplace health insurance plan. If you don’t enroll in Medicare, you may qualify for lower out-of-pocket costs and premium tax credits. You could also use the two in combination; but you won’t receive the same tax credits for the Marketplace health insurance plan.

Wrapping Up

There is a lot to consider on the topic of health care costs in retirement. If you’re young, the lesson here is to start saving early, because the cost of health insurance and medical care is only increasing. If you’re approaching retirement age, you may want to consider working part-time during your early retirement years, in order to offset the costs of health care. And if you’re already retired, it wouldn’t hurt to tuck away any extra money each month, in case unexpected health concerns pop up.

How are you planning to cover your health care expenses in retirement? Is it a big concern to you yet?

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This year has been a rough one for health insurance companies of all sizes. With the recent news of Aetna withdrawing from most of its Obamacare exchanges, many Americans are beginning to worry about their shrinking options, skyrocketing premiums, and where they’ll even find services.

Scarily enough, Aetna is not alone in its decision, and joins two other insurers in withdrawing from the program. What does this mean for Americans and their healthcare, and what does it mean for the marketplace?

What’s Happening?

No matter which side of the political spectrum you favor, healthcare has been a tinder pile of a topic over the last few years. With the implementation of the Affordable Care Act (ACA) – better known as Obamacare – in 2014, the United States became the last remaining developed country to institute universal healthcare. Previously, we were the lone wolf: 32 out of 33 developed nations had already adopted such programs.

Of course, as we have come to understand, “universal healthcare” does not mean free healthcare for many. The United States opted to implement an insurance mandate system, meaning that its citizens are required to either obtain private coverage, qualify for an exemption, obtain State Health coverage, or pay a tax (penalty) for not carrying health insurance. Depending on your income level and the marketplace options available to your area, this could potentially turn into an expensive venture for your family.

One of the selling points of the more comprehensive version of Obamacare that passed, at least in the eyes of the insurance companies, was that the mandate would force more healthy Americans to buy policies. The idea being that the average American would want (and need) to avoid paying the high penalty taxes for their family. This is especially true since the tax is increasing every single year.

In turn, this padding of healthy customers’ premiums (and their policies that would, ideally, go largely unused) would help the insurance companies offset costs… costs involved with providing care for the older and sickly customers that flocked to them for new coverage.

Unfortunately for the insurance giants, this doesn’t seem to be happening.

Why Isn’t It Working?

For many Americans, the reality is disturbingly ironic: paying the government fine for forgoing coverage is actually cheaper than, well, paying for coverage. The only caveat to their practice (and it’s a scary one)? It’s imperative that they stay healthy.

This is, of course, the exact opposite of the intent behind the penalty, and has brought the insurance companies’ fears to the table. They are now losing money in a system that should have guaranteed success. And many of them are pulling out in response.

Their scales are being tipped by the influx of “sickness care.” With decreased memberships from healthy families, insurance companies like Aetna, UnitedHealthcare, and Humana are now scrambling to find balance.

In fact, Aetna lost $430 million just in the first half of 2016 alone. This prompted them to announce last week that they will drop almost 70 percent of the counties in which they have previously offered coverage, beginning in 2017. Whereas they sold policies in 778 counties (within 15 states) this year, they will offer coverage in a mere 242 counties (in only four states) next year.

Of Course, They’re Not Alone…

Aetna is in good company following their pullout. They join giants Humana and UnitedHealthcare Group – the nation’s largest health insurer – who have both already withdrawn from the ACA in some capacity. More are likely to follow, too. In 2014, only 30% of insurers turned a profit in their individual divisions, which dropped to around 25% for 2015.

In April, UnitedHealthcare announced that it will drastically downsize participation for 2017. They are decreasing coverage from 34 states and nearly 800,000 people, to a measly three states. (Seeing as they lost almost $1 billion on Obamacare in 2015 and 2016, the move isn’t too surprising.) Humana has also decided to withdraw from nearly 1,200 counties throughout eight different states.

All three of these companies have cited a financial hemorrhage as their reason for pulling out. Too many young and healthy Americans are choosing the penalty tax over paying premiums. This means that insurers just don’t have enough padding to continue on the same path.

Add to it that many Americans who were previously uninsured – due to preexisting conditions, inability to afford plans, or lack of motivation to navigate coverage – are elderly, sick, or just taking full advantage of having healthcare for the first time in a while. They have flocked to their new in-network providers, requiring care for coughs and cancers alike. This sudden cost has shocked the system, it seems.

Even Blue Cross Blue Shield is thinking about jumping ship. The company has already said that it would consider withdrawing from Obamacare, dependent on future marketplace trends. One of its plans, Highmark, lost more than $773 million in its first two years with the exchange system. Their CEO deemed kind of loss “unsustainable.” And BCBS of Minnesota has already dropped individual plans.

In fact, a Blue Cross Blue Shield Association report studied new Obamacare enrollees – the first investigation of its kind – and the results were alarming. It found that new ACA members have considerably higher rates of serious illnesses like hypertention, HIV, diabetes, and Hepatitis. Most of these are lifelong illnesses, with medical care and costs following them over many decades.

This study also found that Obamacare members’ costs of care were 22% higher than those Americans in employer-based health plans. They had more ER visits, more prescriptions, and more inpatient hospital care.

Regardless of the ‘why’ involved, the fact remains:  the insurance giants just can’t plug holes fast enough to keep their fiscal ship from sinking.

How Does This Affect Americans?

You might be saying, “Well, I already have coverage. How does this affect me?” Maybe you’re not yet covered, but plan to just go with whichever remaining company offers service in your area. Okay, great.

Except, you’ll likely suffer the aftershocks, too.

For the counties retaining coverage from these three companies, your premiums are likely to increase in response. Sure, Humana, UnitedHealthcare, and Aetna have chosen to pull out of their least lucrative counties. That doesn’t mean that they aren’t still losing more money than they’d like on the bottom line.

If your coverage has been eliminated by one of these withdrawals, you’re guaranteed to feel the effects. You will, of course, need to find a new plan. This may or may not cost more than you have already been paying. You might be forced to change doctors, hospitals, and treatment facilities, too. Your new plan may not cover the providers with whom you’ve already established care.

For counties losing insurers, you’ve just been robbed of one more bargaining chip. Less providers in your area means less competition, and less incentive to decrease premiums. If you’re one of the unlucky areas that will be reduced to just one or two providers, you’ll likely see a noticeable jump in premiums. In fact, more than 650 counties across the country will experience this. Or, like Pinal County in Arizona, you could be left with NO providers. A state-mandated monopoly is rarely beneficial for the consumer: “Take it or leave it.”

In fact, many insurers were already planning to raise their rates by double-digit percentages in 2017. This is sure to put a pinch on everyone’s wallet. Even Anthem Inc., the second largest insurer in the country (behind UnitedHealthcare, of course), announced that it plans to implement “substantial premium increases” next year in order to offset its ACA losses – as high as 30 percent!

What the Future Holds

It will be interesting to see how Obamacare plays out over the coming years. A lot will depend on whether the government can work with the insurers to fix a system that is limping along. An influx of sick enrollees combined with less-than-desirable participation from healthy families has created a sinkhole for insurance companies.

The only companies happily in the black are those with very strict guidelines, higher premiums, and limited care provisions. The rest are bleeding out, it would seem. If something isn’t done quickly to help the system, it is sure to crack under the pressure.

Premiums will surely rise in 2017, and possibly beyond, as will the penalty tax. Whether or not healthy Americans will choose to enroll and balance the system, or opt out of its chaotic current state, is yet to be determined.

As for me, I’m going to go ahead and book some checkups now. Who knows what 2017 will bring…

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Financial Upgrades You Need After Becoming Parents

by Robert DiGiacomo

New baby? No doubt this new arrival has turned every aspect of your life upside down in the best possible way. Now is the time to make sure your financial house is in order. Here’s a 10-step account and financial checklist to lay the groundwork for your little one’s successful future. New account checklist for […]

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Burst Sprinkler Line, Property Damage, and Renter’s Insurance

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Dining Room and Kitchen Ceiling

A week ago today I was in Phoenix. I had been there for a few days, and I had been planning to spend a month with my girlfriend away from the cold New Jersey weather. It wasn’t a vacation. We each needed to continue working, but figured we might as well do so where the […]

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High Deductible Health Plan? It Pays to Shop Around.

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Chiropractor

This is a guest article by Sara Stanich, a Certified Financial Planner (CFP®) practitioner and Certified Divorce Financial Analyst (CDFA™) based in New York City. Sara is one of four financial experts participating in Consumerism Commentary’s Naked With Cash series. She blogs about financial planning topics at Cultivating Wealth. In this article, Sara addresses high […]

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How the Affordable Care Act (Obamacare) Will Affect My Insurance

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Nurse with Blood Pressure Intstrument

In just a few days, one of the major provisions of the Affordable Care Act will go into effect. The health insurance marketplace will open. The public discussion about this marketplace and about Obamacare overall is full of partisan politics, so it’s difficult to see beyond the rhetoric and get an idea of what this […]

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Variable Annuities Customers Facing Benefit Reductions

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Money - Variable Annuities

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Now Covered By Umbrella Insurance

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Umbrella insurance

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