While it appears that most of the state and federal exchanges will be up and running for 2014, small group plans will not take part in these government offerings.  For small group employers, this simply means that group health insurance will need to be obtained through an agent.

Comparing Small Group Health Insurance

It is good to know that most small group brokers are able to help businesses shop coverage with several different carriers simultaneously. Quotes can typically be obtained using one set of universal applications.

Businesses can always request generic quotes without the use of underwriting, but this will not provide accurate information. If a business wants real numbers, then submitting medically underwritten apps on all employees is the prudent thing to do.

Affordable Care Act – Obamacare

The Affordable Care Act requires all companies with 50 or more full-time employees to offer group health insurance. A full time employee is one that works 30 hours or more weekly.

Comprehensive group health insurance can be expensive for groups this size that lack the means to self-insure. In response to the ACA, some insurance companies are offering so called “skinny” or mini-medical plans.

It is unclear whether these less comprehensive insurance plans will stand up to the regulations of the ACA as the rules have not yet been finalized. If mini-med plans are deemed credible, then groups can still offer less expensive, less comprehensive coverage to their employees while avoiding the fees, fines and taxes associated with the ACA.

Talk With An Independent Insurance Agent

There is quite a bit of conflicting information regarding the rules and regulation surrounding the Affordable Care Act. If you own or operate a business of any kind, it is important to know what to expect.

By speaking with a knowledgeable group health insurance agency like ours, you can be prepared for what lies ahead. Keeping your employees off the health insurance exchanges while offering credible coverage that satisfies the ACA regulations will go a long way to saving your business time, money and frustration.

Contact Us For More Information

Hyers and Associates is a full-service, independent health insurance agency. We offer group insurance policies of all kinds as well as sponsored and voluntarily ancillary benefits.

Contact us today to learn more about your options so that your business is Obamacare compliant for 2014.

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Like all insurance plans, it is important to understand the gaps in any policy you might choose.  The gaps in Plan N are reasonable for most and usually do no expose the insured to significant expenses.

There are three distinct gaps with a Plan N supplement and we will explain the costs associated with each below.  Contact us for quotes by clicking on the button above.

Plan N Doctor’s Office Copay Amounts

Plan N is unique in that it is the only Medicare supplement that has a doctor’s office copay associated with it.  This simply means that doctors can charge you a fixed copay for a visit.  In this way, it is very much like most traditional health plans for consumers under age 65.

The maximum Plan N copay is $20 for a doctor’s office visit.  This fixed amount has not increased or decreased since the advent of Plan N in the summer of 2010.  Medicare officials could always choose to change this number if they wished.  If they do, it will affect all N plans – both new and old.

It is interesting to note, that not all doctors will collect the $20 from their patients.  And in other cases, the copay can be less than $20 depending on certain formulas and coding practices by your doctor’s office.  If you are someone who visits one or more doctors on a regular basis, Plan N may not offer significant savings if you often encounter the $20 copay.

The Medicare Part B Deductible

Like Plans G and D, Medicare supplement Plan N does not cover the Part B deductible.  Of the two Medicare deductibles this is the smaller one – Part A is the larger one.  Part B applies to doctors visits and out-patient procedures whereas Part A occurrences are for hospital and in-patient procedures.

For 2013, the Part B deductible is only $147.  In 2012, it was $140 and for years 2011 and 2010 it was $162 and $155 respectively.  As you can see, it is not a very large number as far as insurance deductibles go.

The risk with Plan N (albeit a slight one) is that Medicare officials would increase the Part B deductible significantly in the future.  As this would affect all N plans both past and present, any major change could negate the lower monthly premiums associated with Plan N.

Entitlement programs like Medicare may have to undergo future changes to account for the government expenditures and the rising national debt, but it is unlikely the Part B deductible will change drastically for those already enrolled in Medicare.  The Part B percentage increase year over year has always been modest.

Plan N appears to be a safe bet when accounting for the Part B deductible.

Plan N Does Not Cover Part B Excess Charges

Part B excess charges only apply to doctors who do not accept Medicare assignment - which is the customary amount Medicare bills for health care services.  The maximum Part B excess amount is 15% above what Medicare deems to be customary.

Plan N does not cover Part B excess charges, but these fees are not widely encountered.  In some states, like Ohio for instance, Part B excess charges are unallowable.  If you are considering Plan N in a state like Ohio, then you need not worry about excess charges.

Should you ask, your doctor will tell you if s/he does not accept Medicare approved amount.  You would then have a choice of finding a doctor that does accept Medicare assignment.  In most cases, the excess amounts are reasonable unless you encounter a significant doctor’s fee.

Contact Us To Learn More About Medicare Supplements

Hyers and Associates is an independent insurance agent specializing in Medicare supplements, Advantage plans, and prescription Part D coverage. We license direct with all of our carriers.

If you are considering Plan N or any other supplemental plan, contact us today and we can help you compare rates while helping to make sure that your are purchasing the coverage the best suits your needs and budget.

Medicare Quotes

Our clients appreciate that they can shop for new or replacement coverage with us direct.  And we appreciate their loyalty and that’s why we are always on the lookout for new carriers that are competitively priced in certain areas.

Standard Life High Deductible Plan F Supplement

Standard Life and Accident (SLAICO) offers several lines of insurance, but their High Deductible Plan F Medicare supplement insurance is very competitively priced in most states. Rates for applicants will vary depending on a number of factors including age, gender, zip code of residence, and tobacco use.

There are a number of reasons you might be considering HD Plan F for your supplemental insurance coverage, but the one we hear most often is low premiums. It does not make good financial sense to enroll in HD Plan F unless there are significant premium savings – and SLAICO’s rates hit the mark.

In many cases, HD Plan F with Standard Life can be more than $100 less per month than a traditional Plan F.  For those who are looking to save premium dollars while still insuring against catastrophic claims, HD F can be a very good financial decision.

About Medicare Supplement High Deductible Plan F

HD Plan F works very much like a traditional Plan F save for the fact that is has a yearly deductible.  For 2013, the deductible is $2,110 which is a $40 increase over year 2012.  Benefits will not be paid until the policyholder has reached his or her deductible.

The deductible amount can change every year (as mandated by the government run Centers for Medicare and Medicaid Services) and those changes will affect all plans.  This simply means that you cannot lock in your deductible based on the year when it was purchased.  Once CMS makes changes, those changes affect all plans – both new and old.

It is also important to note that High Deductible Plan F does not have any network restrictions.  One of the biggest issues consumers have with Medicare Advantage and Medicare Select plans is navigating their networks.

In many cases, HD Plan is as, if not more, affordable than many Select and Advantage plans, but without any network restrictions.  This is an important issue for many Medicare eligible consumers.  They like to know they can use any doctor or hospital that accepts Medicare assignment and HD Plan F allows them that freedom.

About Standard Life & Accident Insurance Company

SLAICO has been offering insurance policies in the senior market for over 50 years. They currently have a A rating with the AM Best rating company – which is the third highest rating available.

They offer several lines of insurance for those both over and under the age of 65, but providing affordable insurance to seniors is a priority. Other types of insurance offerings from SLAICO include life insurance, annuity policies, health insurance and various ancillary coverages.

SLAICO works with agencies like ours in order to provide insurance direct to consumer. There are no additional fees or commissions to place your business through us. You also get the benefit of working with someone with knowledge of the insurance industry at large.

Hyers And Associates Medicare Insurance Agency

We are an independent insurance agency specializing in the senior market and offering insurance policies in several states. We work extensively with Medicare supplements, Part D prescription drug policies, long term care plans and annuities.

Contact us today to learn more about your options.

Medicare Quotes

Deductible and coinsurance amounts will increase January 1 and that will affect the cost sharing provisions of all Medicare supplement plans.  Supplemental insurance plans are not “grandfathered-in.”  Changes to Medicare by CMS affect all Medigap plans – both new and old.

2013 Medicare Part A and Part B Changes

At face value, there are no significant changes to the Medicare cost sharing amounts. As in past years, the limits to what certain Medicare supplement insurance and some Medicare Advantage plans must cover have only increased incrementally. However, these new numbers are something to keep in mind when you experience rates increase on your privately insured Medigap coverage.

The Part B Deductible For 2013 Is $147

The good news for those who purchased or are considering purchase of either Plan G or Plan N is the nominal increase in the Part B deductible. The increase was only $7 – moving to $147 for 2013 – up from the current amount of $140 for 2012.

This means that CMS is working to keep the Part B annual deductible low going forward – at least in the short run. Consumers worried about high out of pocket costs with Medicare supplement plans that do not cover the Part B deductible (like Plans G & N) can rest easy. The cost share is low and will continue to remain that way.

Thus, paying more for traditional Plan F is not necessarily the best option for some seniors. If Plan G is more than $12.25 less per month than Plan F, then Plan G can make good financial sense. There may little reason to pay more for Plan F considering that it only covers an extra $147 for 2013. As always, it’s important to keep in mind that the Part B deductible will likely increase going forward.

What Is the Plan F High Deductible For 2013?

The new deductible for HD Plan F is $2,110 which is a $40 increase from 2012.  For comparison sake, the amount was an even $2,000 in year 2010.  This is a modest increase by most measures, so High Deductible Plan F will continue to be a popular option for many seniors.

The HD version of Plan F is a good choice for those who want to keep their monthly premiums low while eliminating the worry of a network driven plan.  The trade-off is the potential for higher out of pocket expenses however.  Those who are in good health and are comfortable with a $2,000+ deductible oftentimes purchase HD Plan F.  Premiums in many parts of the country can be near $30 a month for those in their mid to late 60′s.

Out Of Pocket Cost Increases For Plans K and L

By many estimates, supplemental Plans K and L were designed to mimic Medicare Advantage coverage.  These two coverage options have more out of pocket and cost sharing amounts than most other Medigap plans.  In return, the monthly premiums are lower and can be well under $100 for seniors in their 60′s and 70′s.

The 2013 out-of-pocket maximum for Plans K and L are $4,800 and $2,400 respectively.  This is a $140 increase for Plan K and a $70 increase for Plan L.  Again, these appear to be reasonable numbers when compared year over year and compare favorably with most Medicare Advantage plans.

Summary

For those who are new to Medicare or who have been enrolled for several years, it is important to note that there are no dramatic changes to the 2013 cost sharing amounts. Medigap Plan, F, G, N, K, L and High Deductible F are and will remain good choices for coverage.

First year premiums and renewal rates will vary depending on several factors. It is always a good idea to speak with an independent agent before purchasing; or while shopping around for new supplemental coverage. This way, you can learn more about the nuances and history of competing insurance carriers that you might be considering.

Contact Our Independent Medicare Supplement Agency

Hyers and Associates, Inc. is an independent insurance brokerage specializing in the senior market. Contact us today to discuss Medicare supplements, Advantage plans, and Part D prescription policies.

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AFLAC is best known for disability and voluntary insurance coverage, but they are now offering very competitive supplemental insurance prices in several states.  There are several reasons that they may be a good choice for your Medicare insurance needs.

More About The AFLAC Insurance Company

American Family Life Assurance Company of Columbus was founded in 1955 and is most associated with their ubiquitous duck commercials and advertisements. AFLAC is a Fortune 500 company with over $117 billion dollars under management. They have an A+ rating from A.M. Best which translates to “excellent.”

For many years, their business operations focused on ancillary benefits in the group and individual marketplace. Their primary focus was on disability income replacement, life insurance, and specialty reimbursement policies. A logical next step was to offer ancillary coverage in the senior markets.

AFLAC Medicare Insurance Quotes And Rates

Medicare supplement policies are straight-forward in what must be covered. A Plan F is a Plan F. No company can offer more or less coverage than what is mandated by the Centers for Medicare and Medicaid Services – CMS for short. When CMS updates the coverage requirements, all companies and plans most change accordingly.

AFLAC offers the most commonly purchased supplemental plans purchased by most seniors. Medigap Plans A, C, D, F, G, and N are all available. At this time, they are not offering Medicare Select (network driven) coverage or High Deductible Plan F.

Traditional policies from AFLAC will be accepted by any doctor or hospital that accepts Medicare assignment. In other words, it does not matter who you purchase your Medicare supplement insurance from – you will be covered by any medical professional that accepts Medicare. This is true whether your carrier is United Healthcare, Anthem or any other smaller Medigap insurance provider.

All companies use different actuarial methods to calculate your rates. Most companies (AFLAC included) will determine your rates based on your current age, state and zip code of residence, marital status, and payment method.

Spousal Discounts For Married Applicants

AFLAC is somewhat unique in that they offer a 7% discount when both spouses purchase Medicare supplement insurance and are accepted. In many areas of the country, this marital discount will help to offer much lower rates than their competition.

You and your spouse do not need to purchase the same plan to enjoy this savings. One spouse can enroll in Plan F and the other in Plan G. So long as both are accepted, then each spouse will receive 7% off of their premiums. You can also reduce your rates by $2 a month if you choose to pay using a monthly bank draft.

Request Medicare Supplement Prices & Information

Our independent agency offers the direct rates from all carriers we partner with. You will not find better rates anywhere else online or in person. We are proud to be a one stop shop for all types of senior specific policies.

We represent several companies in several states to help our clients find the Medigap insurance that best suits their needs and budget. Contact us today to find out more about AFLAC Medicare supplement insurance in your area.

Medicare Quotes

Penalties and Medicare enrollment delays can easily be avoided so long as you are proactive.  It is wise to talk with your human resources manager when you turn 65.  You will want to ask specifically about your group health insurance eligibility.  You can also talk with an insurance agent who is knowledgeable about group plans and Medicare eligibility.

If you are still not satisfied, then you might also reach out to your local social security office.  Oftentimes the representative there can provide valuable advice.  Additionally, it is a good idea to read about your options online and at Medicare.gov.

Employer Group Size – Twenty Is The Magic Number

As it relates to Medicare decisions, the most important factor is the size of your company in terms of employees when you turn 65.  If your group is under twenty employees, then you will need to enroll in Medicare Parts A and B.

You can no longer stay on your group health insurance even if it goes undetected.  Once your group insurance carrier figures out that you are Medicare eligible and that your group does not meet the 20 employee requirement, then the insurance company will no longer pay benefits and can recoup costs for benefits already provided.

In a nutshell, if you are within 3 months of your 65th birthday and still plan on working at a company with fewer than 20 employees, then you should enroll in Medicare Parts A and B and you should also consider Medicare supplemental coverages.

Employer Groups With More Than Twenty Employees

If you are soon to be 65 and working for a group with more than 20 employees that provides group health insurance, then you can safely maintain this coverage if you wish.

Some will choose this option in order to avoid paying Medicare Part B premiums.  Medicare Part B premiums are means tested, so those in higher income brackets will pay more for this coverage as well as Part D prescription drug plans.

If you are happy with your group health plan, then you can delay enrollment into Medicare Part B and stay on your group health plan while also avoiding the cost of Medicare Part B, supplemental, and Part D premiums.

You may choose to enroll in Medicare Part B at age 65 even if you are still under your large group health plan, but it is important to know that you are not forced into Medicare when you continue working for a large employer group that offers group health insurance.

The COBRA Health Insurance Conundrum

One simple piece of advice is this: Don’t take COBRA health benefits when you retire and are over age 65.  COBRA usually lasts 18 months, but by the time these benefits expire, then you will have missed your individual deadline to enroll in Medicare Part B.

If you are over 65, then there are very few reasons, if any, to stay on COBRA for an extended period of time.  Your Medicare Part B enrollment window begins when you leave your job, not when your COBRA benefits end.

If you have waited beyond your 6 month Medicare open enrollment window (after separating from employment) to enroll in Part B, then you will be subjected to a 10% Part B late enrollment penalty when you do try to enroll with the government.  The 10% penalty will be for your lifetime.  And you will have a new waiting period before you can enroll in Part B.  It’s a double whammy and it’s not good.

By avoiding COBRA and talking with your local social security office upon separation from employment or turning age 65, you can be sure that you are enrolling in Medicare at the appropriate time.  You will also want to use this guaranteed issue period to find the supplemental coverage that you feel best fits your Medicare needs.

What About Medicare Supplemental Coverage?

Medicare covers roughly 80% of most health bills.  This is why most seniors purchase a Medicare supplement, Medicare Advantage, and/or Part D plan.  These coverages can help pick up some or all of what is not covered by Medicare.

Supplemental plans are sold by insurance agents (like us) and are private policies whereas Medicare Parts A and B are federally sponsored public plans.  Supplemental plans can also have late enrollment penalties and delays.  And in some cases, you may not be able to purchase any supplement if you have waited beyond your open enrollment or guaranteed issue period of time.

Medicare Parts A and B are only the first half of the Medicare puzzle.  Once you have enrolled in Original Medicare with the government, you will want to use your open enrollment window to explore your supplemental plan options.  It is wise to speak with an independent agency (like us) to decide which plan(s) best fit your needs and budget.

Medicare Is A Little Complicated

There is no doubt that if you are new to Medicare, the enrollment process can be somewhat intimidating.  Above all else, it is most important to enroll at the appropriate time.  Missing your open enrollment window will add a premium penalty and delay your eligibility.

If you are unsure, it is wise to lean on the experts who work with senior insurance programs everyday.  Talk to a chosen insurance agent, human resources manager and/or a Medicare representative over the phone or in person.

Contact Us

Hyers and Associates, Inc. is a full service independent insurance agency specializing in health coverage for seniors.  Contact us today to learn more about your options.

Medicare Quotes

To be clear, this period of time should be referred to as AEP (which is short for the Annual Election Period) but many erroneously call it “open enrollment.”  Technically, that is not correct as there are limitations to the changes that can be made during the AEP window.

The Differences Between Open Enrollment & AEP?

Medicare open enrollment is different for everybody and only happens once in your lifetime – usually at age 65.  Open enrollment occurs when you are first enrolled in Medicare Parts A and B.

During your 6-7 month open enrollment, you can purchase any private Medicare insurance product you want without medical underwriting.  Insurance products that are purchased at this time include Medicare supplements, Medicare Advantage plans, and prescription Part D coverage.

On the other hand, the yearly Annual Election Period is more restrictive and can be used to enroll/disenroll from Medicare Advantage coverage and prescription Part D drug plans.  You cannot use the annual AEP window to change Medicare supplement plans without undergoing any medical underwriting.  More on that below.

How To Change Medicare Advantage Coverage

During AEP, you can disenroll from your Medicare Advantage plan and select a new MA plan that is available in your service area.  Or you can disenroll from your MA plan and rejoin Original Medicare Parts A and B provided by the federal government.  Should you rejoin Original Medicare, you can also purchase a Part D drug plan.

When returning to Original Medicare Parts A and B, you can only purchase a Medicare supplement without medical underwriting if you have been in your Advantage plan for one year or less.  Medical underwriting for supplement plans will vary amongst the various carriers, but the Medicare rule-makers (CMS) only grant a one year free look trial period for MA enrollees.

This simply means that if you have been in your Advantage plan for more than one year and then disenroll during AEP to rejoin Original Medicare with the government, you may have to answer some medical questions in order to purchase a Medicare supplement – like Plan F for instance.

There will be no medical underwriting needed to purchase a prescription Part D plan however.  All plans will accept all applicants so long as you live in the Part D plan service area.

Changing Part D Drug Plans During AEP

You can disenroll from your prescription drug Part D plan and enroll in a new one that may better suit your needs.  So long as your Part D plan was purchased on a stand-alone basis and is not combined with  a Medicare Advantage plan, you can choose any new plan you wish – no questions asked.

You can also enroll for the first time in a Part D plan during AEP if you did not enroll during your open enrollment window when you first became eligible for Medicare Part B.  If you do not have credible drug coverage, you may be subject to the Part D late enrollment penalty.  This penalty is calculated by adding 1% to your premium for each month you were not enrolled and should have been.

If you went without coverage for 11 months for example, then your monthly premiums would be 11% higher than someone who enrolled during their open enrollment window.  The Part D penalty does not diminish over time or disappear the following year.  It will be added to your monthly premiums forever.

What About Medicare Supplement Insurance Coverage?

Many consumers use the AEP window to shop for less expensive Medicare supplement insurance policies.  Considering that Medicare supplements are standardized, this is not a bad idea.

It is important to know, in most cases, there are no rules or regulations that eliminate the need for medical underwriting when switching Medicare supplement coverage during the yearly Annual Election Period.

Put another way, there is no advantage to waiting for the yearly AEP to shop for new supplemental insurance plans – like Plan F, G, or N for instance.  The underwriting requirements will be the same regardless of the time of the year.

If you are unhappy with your Medicare supplement for some reason, then you can shop for new coverage anytime you want.  You will likely need to undergo some amount of medical underwriting to prove insurability however.  There are very few free passes when it comes to changing supplements.

Make It Easy – Work With A Medicare Insurance Agent

I tell everyone to do themselves a favor and work with a knowledgeable agent (like one of ours) so that you know your options before, during, and after your open enrollment or the yearly AEP window.

It does not cost you anymore whatsoever to work with an agent!!!  Prices are controlled by law and regardless of where and how you choose to purchase any of your Medicare insurance policies, the prices for the same coverage will not differ between sources.

There is a lot of misinformation out there when it comes to Medicare, so work with the experts.  Too many seniors make mistakes and find themselves paying penalties and/or purchasing unsuitable coverage.  It is wise and prudent to talk with someone at an agency like ours about all of your options before making any decisions.

Hyers and Associates, Inc.

We are an independent insurance agency specializing in Medicare insurance policies.  We offer Medicare supplements, Advantage plans, and prescriptions Part D policies.

Contact us today to discuss your personal needs.

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That is one of the primary advantages of working with an insurance agency like ours; you can view the direct rates from several different carriers side by side without having to contact each company directly.  And several companies (like UA) only offer policies through their agents.

About The Company And Its Products

United American was founded in 1947 and has an A+ rating with A.M. Best.  They have kept this rating for 35 + years which is a testament to their financial strength, size and stability.  Very few insurance companies can boast of such a high rating for such a long period of time.

UA offers a wide variety of insurance products in the life and health markets.  Policy offerings include life, health, critical illness, cancer, Part D, group retiree and Medigap coverage.  They may be best known as a Medicare supplement provider however.

Like many insurance providers, UA offers a few niche products in certain states that are very competitively priced.  One such product is High Deductible Plan F and one such area is the state of Florida.

United American Medicare Supplements In Florida

The demographics and cost of health care in Florida usually make for expensive insurance products for seniors.  There are only a handful of Medicare supplement insurance providers in Florida that offer competitively priced policies.

Fortunately, United American is one of those companies.  At present, they offer some of the lowest priced High Deductible F Plans across the state.  That is great for seniors who want a low priced Medicare insurance plan with a reasonable deductible.  (As of 2012, the HD Plan F deductible is $2,070 yearly.)

In fact, High Deductible Plan F will usually be nearly $100 less per month than a traditional Plan F.  For those who are looking for lower monthly premiums, but are leery of Medicare Advantage coverage, then HD Plan F with United American can be a very good choice.

High Deductible Plan F Medigap Expenses

With HD Plan F, seniors know exactly what their out-of-pocket exposure will be on a yearly basis.  There is the added benefit of not having to worry about network or restrictions for care out of state.

Like all traditional Medicare supplements, HD Plan F has no network restrictions.  Policy holders can receive care from any doctor or hospital that accepts Medicare assignment – both in state and out of state.

Like all Medigap plans, High Deductible Plan F premiums are likely to increase year over year, but it helps when the percentage increase affects a much smaller starting number.

And The Centers for Medicare and Medicaid services can increase the HD F deductible, but any changes will affect all plans – both new and existing.  For instance, the HD F deductible was $2000 in 2011.

Contact Us For Quotes And Coverage

Hyers and Associates is a full service Medicare supplement insurance brokerage offering policies direct to consumer across the United States.

We license with dependable and reputable providers so that our clients can purchase the Medigap coverage that best suits their needs.  We can also help with prescription Part D coverage.

Contact us for quotes and information today!

Medicare Insurance Quotes

Legislative changes of this magnitude certainly come at a cost and in order to pay for Obamacare, investors must now share more of the burden in the form of a 3.8% surtax on investment income.  This will be in addition to any future rollback of the Bush tax cuts already proposed for the wealthy.

Explain The Obamacare New Investment Tax

This new tax that was passed in 2010 when Democrats controlled the House, Senate and Executive branches and affects joint filers with adjusted gross income of more than $250,000 and single filers with income above $200,000.  Earned income amounts above these thresholds will be subject to the new tax, but income below will remain at current levels.

The tax is slated to begin January 1, 2013 assuming Congress upholds the legislation and barring no significant changes to the political landscape in the November 2012 elections.

How Much Is The Obamacare Investment Tax?

In a nutshell, certain investment and income taxes will increase by 3.8% from their current levels assuming no other legislative changes or expiration of current tax rates.  Capital gains for high earners will jump from 15% to 18.8% on long term holdings.

In addition, there are also changes to the payroll tax.  What once was a flat tax is now a means adjusted, progressive tax that will raise the Medicare payroll tax for joint filers with income above $250k and singles above $200k.

The Medicare tax will increase 0.9% to 2.35% from the current 1.45% on wages and self employment income.  The Medicare tax is uncapped, so this new tax will apply to all income and wages above the aforementioned thresholds.  High earning self employed persons will pay this amount twice.

What Investments Are Subject To The Health Care Tax?

Most tax experts believe that ordinary dividends and income, interest income, short and long term capital gains, rents, royalties, taxable annuity income, sales of primary residences above the $250,000/$500,000 exclusion, gains from sales on second homes and passive income will all be counted and subjected to the 3.8% surtax.

That is to say that almost all investments, save for a few, will now be subjected to these higher rates.  Primary residence sales that result in large capital gains will not avoid this new tax.  Joint filers are afforded a $500,000 exemption on the sale of a primary residence and single filers are allowed $250,000.

However a couple with $200,000 in adjusted gross income who has a $100,000 capital gain above the $500,000 primary residence exclusion amount would have to pay an additional 3.8% on the extra $50,000 above the joint $250,000 limit.  Income and capital gains tax are combined and not mutually exclusive.

Investment properties and second homes are offered no exclusion upon sale and capital gains above the $250k joint and $200k single amounts would be subject to the 3.8% tax increase.  This can be problematic for those with significant real estate holdings, but read on.

How Can I Avoid Or Reduce The New Investment Tax?

For those who are selling investment properties and residences that will result in significant capital gains, one such strategy may be a structured sale. With a structured sale annuity, the owner can defer constructive receipt of the capital gains and defer them over several years.

At present, structured sales have been accepted by the I.R.S when setup and executed properly by qualified tax professionals along side annuity insurance agents.  By taking payments over several years, the capital gains can be spread out and in many cases help to keep investors below the new tax thresholds.

What About Other Tax Deferred Insurance Products?

When considering investments with tax advantages, there are two insurance products that can be helpful for many investors.

The first is a simple and straightforward investment account known as a tax deferred annuity.

When compared to bank certificates of deposit, mutual funds, and dividend paying stocks (among others), a non-qualified tax deferred annuity can shelter income for the life of the owner.  There are no forced distributions with a non-qualified annuity and the deferred income tax can be spread out over several years during the owner’s lifetime or amongst the annuity beneficiaries at settlement.

Perhaps even a better investment is life insurance.  Life insurance policies grow tax deferred, but in contrast to an annuity, the proceeds are payable income tax free to the named beneficiaries.  There is really no better investment when it comes to wealth transfer than a whole or universal life insurance policy.

What About A Roth IRA Conversion?

Converting your traditional IRA to a Roth IRA can be beneficial when done properly.  Considering that time is running out in 2012 before the new investment tax takes hold, now is a good time to consider a Roth IRA conversion.

It goes without saying that you would want to speak with your tax advisor before converting any qualified account, but it should be noted that distributions from a Roth IRA are considered income tax free by the I.R.S. and thus would not be counted towards your adjusted gross income.

Those with sizable IRA accounts might consider a total or partial Roth IRA conversion now in order to potentially reduce taxable required minimum distributions at age 70 1/2 and beyond.

Contact Us To Discuss Tax Avoidance Strategies

Hyers and Associates Inc. is a full service, independent life and annuity insurance agency. We specialize in wealth transfer and tax avoidance strategies for those in higher income tax brackets.

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It is important to understand that these new taxes (or penalties) will be phased in over the next few years and do not take affect right away.  And with a program that is so politically charged, there could be changes by Congress or the president after the elections in November 2012.

Understanding The Individual Health Care Mandate

The Supreme Court has allowed for significant latitude when it comes to Congress’ ability to tax its citizens.  While Congress cannot force consumers to buy health insurance under the Commerce Clause, it can assess a tax or penalty for those who do not comply.

Beginning in January of 2014, individuals and families must have “essential” health insurance coverage each month or be subjected to a financial penalty.  Those who are below the federal poverty level, can prove hardship conditions or are part of a few other small minorities will be exempted from the new legislation, but not many.

How Much Is The Obamacare Tax Penalty?

Those who choose not to purchase health insurance under the Affordable Care Act will face a financial penalty enforced by the Internal Revenue Service.

The yearly tax penalty for not having essential coverage will be the greater of a flat dollar tax per individual or a percentage of the individual’s income.  In other words, the penalty will vary from household to household.

In 2014, the flat dollar tax amount per individual is $95; in 2015 the amount is $325; and in 2016 the maximum is $695.  For dependents under age 18, the flat dollar amount is half of the individual amounts above.

After 2016, the tax penalty will be indexed to inflation and capped at 300% of the flat dollar amount for families who choose not to purchase health insurance.  Thus, the amount of the penalty will vary for families depending on the number and age of dependents as well as if the maximum cap applies.

• For example: A family with two adults and one child under age 18 would pay a penalty of $1737.50 in 2016. (1/2 of $695 for the dependent plus $695 x 2 for each adult = $1737.50)
• A family with two adults and two children over age 18 would cap out and pay $2,085 in yearly penalties in 2016. ($695 x 300% = $2085)

Factoring In Taxable Income To Calculate The Penalty

Here is where it gets a little tricky.  The higher your household income, the higher your penalty for not complying with the health care mandate. This wrinkle begins in 2014 when the majority of the Affordable Care Act will be implemented.

The law states that the percentage of taxable income is the amount in excess of a household’s tax filing threshold phased in at 1% in 2014, 2% in 2015, and 2.5% in 2016.

• For example: Assuming the tax threshold is $10,000 in 2014 and $50,000 of income for a single filer, the tax penalty would be calculated by subtracting the $10,000 threshold from the $50,000 in taxable income to arrive at $40,000.  That $40,000 would be subject to the 1% penalty rate in 2014 for a total of $400.

An individual with a household income of $50,000 would owe roughly $400 in 2014, which of course is higher than the flat dollar amount of $95 mentioned previously.

Again, the penalty is the greater of the flat dollar amount per individual or a percentage of the individual’s income. In a nutshell, this tax is begin means tested by the ACA.

However, the annual penalty is to be capped based on an amount equal to the national average for premiums of a qualified health plan with a “bronze level” rating by the government and offered through state or federal health insurance exchanges.  As these exchanges have not been setup yet, these numbers are still unknown.

How Will The Health Care Tax Be Implemented?

If an individual or family does not purchase essential health insurance coverage while also not meeting any provisions that allow for an exclusion, then they will be subjected to the tax/penalty.

The fine will be administered federally and reported/calculated on the non-compliant person(s) tax return.  The mandate is to be enforced by the Treasury Department via the Internal Revenue Service.

The fine can be withheld from the offender’s yearly tax rebate if one is due from the Federal government or if none is due, then collected through normal and customary means. In other words, one could expect a letter from the I.R.S in the form of a past-due notice.

It is important to note that at this time the law states that individuals cannot be subjected to criminal penalties, fines, or levies when found to be in non-compliance.

At this point, it is somewhat unclear as to whether late penalties would be implemented for those who do not comply with the mandate or if their maximum penalty would simply carry over to the next year.

Purchasing Health Insurance To Avoid Penalties

While the new health care rules and regulations are yet to be implemented, what is clear is that health care will likely be forever changed by the approval from The Supreme Court of this sweeping legislation.  Most consumers will simply buy health insurance in order to avoid I.R.S. fines/taxes/penalties etc.

Hyers and Associates, Inc. is a full service independent insurance agency and will help you find the coverage you need at the best rates available in your area.  Contact us today for assistance with your health insurance needs.

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