Insurance for Individuals

Insurance for Individuals

In response to recent medical insurance premium increases, new forms of individual health plans are emerging.

Newest on the scene are HSAs, short for Health Savings Accounts. These plans combine a high deductible health plan (HDHP) with a Health Savings Account (HSA) funded with tax-deductible contributions equal to the amount of the deductible—whether an individual or family plan.

For more information about the rules governing this new health plan, contact us directly. We can send you information, prepare quotes and help you make informed decisions regarding which coverage is appropriate for you.

(Note: group HSAs are available as well. Call us for more information.)

Our individual health insurance clients tend to be:

• starting a sole proprietor (S-Corp, LLC, partner) business
• looking for a lower cost health insurance premium
• looking for a less expensive alternative to health continuation (COBRA or Minnesota Continuation)
• needing insurance until they qualify for Medicare at age 65
• losing their dependent status on a medical plan
• in between jobs

In addition to helping individual clients with life insurance, we work with companies who need coverage to fund buy-sell agreements or want to insure key employees for various reasons.

We also work with healthy, non-smoking employees who feel voluntary group life insurance is not priced competitively for their needs. These people are good candidates for individual term life insurance plans which offer very affordable guaranteed level premiums for 20- and 30-year periods.

Most people have no idea how poorly they would fare should they need to file a claim under their employer’s group Long Term Disability plan. Coverage typically replaces 60% of pre-disability pay up to stipulated maximums (usually $5,000 per month) and pays to age 65.

So, in the event of a claim, an employee takes an immediate 40% pay cut. But, that’s not the only problem:

• If the employer has paid 100% of the long term disability premium, then the benefit payable will be taxable and subject to withholding. This fact increases the employee’s pay cut from 40% to around 60%.
• Under the typical plan described above, the only employees who would receive the $5,000 maximum benefit would be those making $100,000 per year or more. Those making under $100,000 would receive 60% but not hit the maximum; those making more than $100,000 would receive the maximum but it would be less than 60% of their former pay.
• Those with very serious disabilities might wind up being eligible for Social Security disability benefits; however, most long term disability plans allow the insurer to reduce benefit payments by the amount of benefit received from Social Security.

There are solutions to improve long term disability coverage, but they all require action prior to the onset of a disability:

• Allow employees to opt to have their long term disability premium added to their W-2 at year-end. This should make their benefit tax-free.
• Put in place a Salary Continuation plan through your employer. This is especially important for owners of C-corporations.
• Employees making more than $100,000 who are covered under a typical group long term disability plan should consider buying individual coverage as a supplement.
• Those who do purchase individual long term disability policies should be aware that most coverage terminates at age 65. What this means is that your benefit, starting at about age 60, is steadily shrinking while your premium remains the same. We have helped several clients consider the possibility of dropping disability coverage at around age 60 and replacing it with long term care insurance. This makes sense for those who have accumulated sufficient assets so that income protection for a short period of time is no longer a concern. A greater concern at this point is the damage a long term care situation could do to accumulated assets.

Disclaimer: The following tax-related information is not a complete explanation of insurance tax information, and should not be used as financial advice. Please contact your tax advisor for full details.

Those people eligible for Medicare now have several options for health plans.

1. Original Medicare Plan
2. Medicare Supplement Plans
3. Medicare Advantage Plans
4. Medicare Cost Plans
5. Medicare Prescription Drug Plan (Medicare Part D)

With so many options it is not surprising that many people seek help in making their decisions. If you are approaching age 65 and would like to discuss the choices available to you under Medicare, especially if you (or your spouse) is still working and you are under the company medical plan, please e-mail or call us. We help you make informed decisions regarding which coverage is appropriate for you. We can send you information, prepare quotes, and will be happy to meet with you to discuss your particular situation.

Unfortunately, the need for long term care isn’t limited to a few unlucky people. Thanks to improved medical care, interventions and medications which lengthen the average life span but don’t necessarily prevent deterioration, the need for long term care is increasingly common.

Young people, too, end up in long term care situations more frequently than you might guess. A commonly quoted statistic claims that 40% of those needing long term care in this country are between the ages of 18 and 64. Most of those are not living in nursing homes but in the community, and are often cared for by family members.

Over one’s lifetime, the chance of needing home health care or nursing home care is currently estimated at a little over 50%. That’s possibly half the American population needing long term care. Said another way, that’s approximately 38 million baby boomers needing long term care over the next 30-50 years!

Employers who want to encourage long term care insurance ownership can sponsor a discounted long term care insurance program for employees and family members. They can also purchase long term care insurance for key employees and their spouses.

Beware the urge to put off applying for long term care insurance! A client became interested last spring, decided to apply in the fall, and suffered a stroke in between. Even though the stroke left no residual effects, he found himself suddenly uninsurable. A few carriers will let him apply in two years--if his health holds.

- Kathy Shea, BMC long term care insurance advisor