Their policy is called the Living Care Annuity and is a viable alternative to annual-pay traditional long term care policies.  The primary advantages of hybrid annuity plans are the absence of ongoing premiums and the leverage gained on the invested dollars.

What Is A Long Term Care Annuity?

Simply put, a hybrid long term care annuity policy is an ordinary deferred fixed annuity with a declared fixed interest rate.  The account grows every year through compounding interest.  Assuming no interest is withdrawn, the interest gains will accumulate tax deferred.

The difference with a hybrid annuity is in the leverage it provides for long term care costs.  The Mutual of Omaha annuity will leverage the invested dollars three times over for nursing home, assisted living, adult day care, home health care and several other LTC types of expenses.

Mutual Of Omaha Living Care Annuity Example

Let’s take the hypothetical example of $100,000 invested in a hybrid annuity.  The $100k would grow each year based on the declared interest rate and would otherwise function like a traditional fixed annuity while in deferral.

However, the $100k would create a $300,000 pool of of money that can be accessed by the owner for LTC expenses two years after the policy has been purchased.  The $300k pool of money would then be available over a minimum of 6 years for a total of approximately $50k per year – plus the interest growth.

If the annuity policy was accessed for long term care, the owner would essentially spend his or her own money for the first two years and for the next four years, s/he would be using the insurance company’s funds.  That is to say, that after the policy has been spent down to $1 in value, Mutual of Omaha then pays the claims up to the individual policy limits.

The $100k initial investment will grow year over year based on the declared interest rate.  Let’s use a hypothetical declared fixed interest rate of 3%.  The $100k would now be worth $106,090 after two years.

Leveraged 3X over, this equals $318,270.  Divided over 6 years, the policy would pay $53,045 per year for a minimum of 6 years or $145.33 per day.  The policy funds could last longer if less than $53,045 was used in any given year.  This is not a “use it or lose it” type of policy.

LTC Rider Costs And Medical Underwriting Provisions

There is an annual cost for the long term care rider provided by the policy.  This cost is subtracted from the declared interest rate each year.

Using another hypothetical example: If the declared interest rate of the annuity policy was 4.0% and the LTC rider costs 1.0%, then the annuity would credit 3.0% for that given year and the example above would be accurate.

Like most annuity policies and long term care riders, interests rates and rider costs can change based on economic conditions, but only within certain reasonable limits outlined in the policy at onset.

There is medical underwriting associated with this policy.  There are twelve pre-qualifying questions as well as a required phone interview for the applicant.  If you have been turned down for other types of long term care coverage, then you may not qualify for this policy, but generally speaking, hybrid annuities require less medical underwriting than traditional LTC policies.

You must prove insurability before you will be able to purchased this hybrid annuity and the policy must be in-force for at least two years before benefits can be accessed for long term care expenses.

Adding Long Term Care Inflation Protection

Mutual of Omaha does offer additional inflation protection on the Living Care Annuity beyond the yearly interest growth.  The annual fixed interest annuity growth will account for some inflation, but possibly not enough.

For those who want additional protection, a 5% compounding inflation rider can be added to the long term care rider at an additional cost to the policy.  Inflation protection must be purchased at onset and cannot be added later to the contract.

Who Might Benefit From A Long Term Care Annuity?

There are potentially two primary benefactors of a long term care annuity; the owner and the beneficiaries.

Owners retain control of their investment and can always withdraw the invested funds (subject to any applicable surrender penalties) at a later date.  The accumulated interest is available monthly although most owners tend to reinvest their gains in order to grow the policy each year.

Assuming little or no long term care is needed, then the owner has an asset that can avoid probate and be passed on to his or her beneficiaries.  This policy can be appealing for those who are concerned about paying for traditional long term care insurance that may never be needed.

Long term care annuities can also be appropriate for those with an existing annuity policy.  Consumers can exchange existing annuities for the Mutual of Omaha hybrid policy on a tax-free basis through what is referred to as a 1035 tax-free exchange.

This can be advantageous for those with significant deferred income in an existing fixed annuity or for those who wish to exit an under-performing or volatile variable annuity account.

Tax Treatment Of Annuity Rider And Policy Payouts

The Living Care Annuity is designed to be a tax qualified policy. The cost of the LTC rider has been setup in order to avoid income taxes.  The future policy payouts are also designed so as not to create any taxable income to the owner  - even if deferred income was transferred in from an old policy.

It is always a good idea to consult with a tax consultant about specific questions regarding the taxability of certain long term care policies.  This post is not to be misconstrued as tax or legal advice.

Summary

Hyers and Associates, Inc. is a independent long term care, annuity and insurance agency.  We represent several traditional and hybrid long term care providers direct and can help you find the policies that best suit your needs.

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This is being done in an effort to make older health insurance polices more attractive and to retain healthy customers with the added benefit of lower out-of-pocket expenses.

The two most prominent providers offering this new benefit are Anthem Blue Cross Blue Shield and United Healthcare, but others are sure to follow.  These two carriers always have the option of reducing or changing this benefit as it is not built into the policy for its lifetime.

Health Insurance Policies With A Vanishing Deductible

It is no secret that many healthy consumers reprice their health insurance each year in hopes of locking in lower premiums.  If the deductible has been reduced by 20-50% however, then the lesser amount will need to factor into the search for a new policy.

In order to obtain an apples to apples premium comparison, the insured will need to compare matching deductibles.  If their current plan has been in force long enough for the deductible to decrease, then a matching number would need to be chosen with the new carrier.

Like all insurance policies, premiums will need to be weighed against the potential for out-of-pocket expenses.  Most consumers will usually put more weight on their premium payments, but this new metric may prevent some rapid policy changes.

How Does A Decreasing Deductible Work?

In a nutshell, policy deductibles will decrease by a predetermined percentage each year so long as the insured has not reached the allotted amount.  In most cases, the maximum credit will be half of the chosen deductible.

If for instance, you chose a plan with a $5,000 deductible, then the maximum credit that could be earned over a three years time would be $2,500.  Should you reach your deductible after three years, then the insurance company would credit you (or a family member) with $2,500 for not having reached your deductible in the past.

Insurance companies have different means of crediting the allotted amount, but it is a nice feature that rewards good health and frugal shopping for medical related expenses.

Anthem’s Deductible Credit Program

This benefit is simply designed to incentivize good health while retaining customers.  The plan is free and available for those enrolled in traditional plans with a $2,500 deductible and those on their Lumenos HSA plans with a $3,000 or greater amount.

Each year that the insured does not reach their deductible, even if it’s only by  $1, his or her plan’s deductible will decrease by 20% in the following year – up to a maximum of 50%.  By year three, the deductible will be halved.

If the deductible is reached, Anthem cuts a check to the insured for the qualifying amount and the program starts over.  Thus, the incentive to change policies after a couple of years is less.  And consumers who don’t often meet their deductible may shop for less expensive health care providers to make sure they qualify for this credit in close circumstances.  See their flyer here.

United Healthcare Deductible Credit Program

United Healthcare offers this benefit for all of their deductible choices.  The credit cannot reduce a health savings account deductible below its required limit by law.

Unlike Anthem, they do not cut a check to the recipient, rather the plan credits 20% reduction each year, up to a maximum of 50%, for the insured.  With either company, your maximum reduction can be 50% after only three years.

In essence, UHC is encouraging consumers to purchase more affordable plans with higher deductibles.  Someone who chooses a very inexpensive plan with a $10,000 deductible can have that number to $5,000 in three years assuming reasonably good health.

This benefit might also affect when the insured chooses to have an elective surgery or procedure.  It could save them thousands simply by waiting until their next policy anniversary if they are in nor harm by doing so.

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We are an independent life and health insurance agency offering direct, online enrollment with several carriers. It does not cost you an extra penny to place your business with us.

We will help you find the health insurance and deductible that best suits your needs.

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Select plans are purchased because they are less expensive than traditional non-network driven supplemental plans.  They are appropriate for those who are comfortable using a preferred network of doctors and hospitals on almost all occasions.

Understanding Medicare Select Networks

Supplemental select policies work much in the same way as HMOs. The insurance company negotiates service contracts with a preferred network of doctors and hospitals. These negotiations usually result in lower costs to administer care to consumers.

The lowers cost are then passed on to the consumer in the way of lower monthly premiums on their Medicare select insurance policies.  There is no additional cost sharing however.  A Plan F is still a Plan F – the insured simply needs to stay in network for his or her medical services.

Routine Costs And Emergency Costs

It is important for the consumer to use the approved network for all routine services. If not, then the select plan may not pay its share of the bill.  In some cases, referrals from a primary physician may be needed to see certain practitioners.

Conversely, emergency services can usually be received out of network without additional costs to the insured. Regardless of whether medical treatment is received in or out of network, Medicare Parts A and B will always cover its share of approved expenses.

Advantages & Disadvantages Of Select Plans

The primary advantage is simply cost. By agreeing to use the approved network, consumers can save money on their Medicare supplement insurance. In some cases however, traditional supplemental plans may be less expensive than even some select plans. It is wise to shop around.

Much like Medicare Advantage plans, the primary disadvantage is simply the constraints of the network. It is important to be certain of any network limitations by first checking with the insurance company and/or the agent before purchasing a policy. And consumers must be aware that certain doctor groups and facilities may be in the approved network one year and out the next.

Consumers who move out of the approved service area will be afforded a 63 day window to purchase a new supplemental plan without the need for medical underwriting. Not all plan designations will be available during a “guaranteed issue” period such as this one, but the consumer will have certain rights to purchase new coverage.

Supplemental Select Plan Quotes

Not all carriers offer select plans as they simply may not want to deal with the hassle of network negotiations. In fact many do not, but some of the ones that do are the larger companies who already have network affiliations through other lines of insurance offerings.

A few companies worth considering if you are in the market for a select plan will be Anthem Blue Cross and Blue Shield, AARP United Healthcare, Assured Life, Gerber Life, Mutual of Omaha and a handful of others.

By working with an independent Medicare brokerage like ours, you can compare both select and traditional Medicare supplements online. We can provide you with the direct rates for both types with several carriers.

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You read that correctly, the Part B deductible is going down which means that some Medicare supplement insurance plans will become more attractive based based on their monthly premiums.  We’ll address that benefit later in this post.

Medicare Part A and Part B Deductible And Coinsurance Increases and Decreases For 2012:

Part B Deductible Decrease for 2012 and Plan G Supplement Premiums

The most significant change to the Medicare deductibles for 2012 is the somewhat dramatic decrease for the Part B deductible out-of-pocket.  This lower amount makes plans that do not already cover the Part B deductible more attractive.  Typically the difference in premiums and coverage will dictate your purchase.

One such Medigap option available for purchase is Plan G.  Plan G covers everything that Plan F does except for the Part B deductible.  If Plan G happened to be $300 less (as can be the case) per year than Plan F and Plan F only covers $140 more in costs, then Plan G is a wise choice.  Plan N might also fall into this category if you live in a state (Ohio for instance) that does not allow for Part B Excess charges.

High Deductible Plan F Changes

The Medicare supplement Plan F high deductible amount is also increasing in 2012.  The deductible was $2,000 in 2011 and will be $2,070 for 2012.  This is not too significant of a change if you already own this plan or if you are considering purchasing it.

The premiums associated with High Deductible Plan F are usually very inexpensive and can be a good choice if you are comfortable with a little more out-of-pocket exposure.  It is important to remember if you wish later to enroll in a more comprehensive Medigap plan, some medical underwriting may be required with almost all insurance companies.

If you own High Deductible Plan J (no longer sold from any company by law) then your deductible will also be increasing to $2,070 f0r 2012.

Medicare Part B Premiums From The Government

Medicare Part B monthly premiums will be $99.90 for most beneficiaries in 2011.  This is slightly more for those who have been paying $96.40, but slightly less than was originally projected by the Centers of Medicare and Medicaid services earlier in the year.

Medicare Part B premiums are means adjusted however and will be higher if you reach certain income levels.  For individuals the percentage increases start with an adjusted gross income of $85,000 and for those who file jointly the increase begins at $170,000 of AGI.

Prescription Part D premiums will also be higher if you are earning the above listed amounts or higher.  If you are turning age 65 and still employed with access to employer group coverage, it is wise to weigh all of your options before automatically signing up for Medicare Part B.  Depending on the size of your group, it may be necessary to enroll in Part B however.

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Hyers and Associates is a full service, independent agency specializing in Medicare supplement insurance.

We work in in several states and help consumers enroll in the Medigap and Part D plan of their choice direct – at no additional cost.

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The dates are a little different this year as the window starts and ends early.  AEP will run from October 15, 2011 to December 7, 2011.  It is important however to remember what changes can and can’t be  made during this window of time.

Disenrolling From Medicare Advantage Insurance

AEP is most commonly used to disenroll from  a Medicare Advantage (MA) plan.  Unless there are other extenuating circumstances, Advantage plans can only be cancelled during the yearly Annual Election Period.  Most MA carriers will require a letter of disenrollment in writing from the insured; a phone call is not always accepted.

Upon disenrollment, a Medicare eligible person can enroll in a new Advantage plan that better suits their needs or return to Original Medicare.  If the latter, then a Medicare supplement and/or prescription Part D drug plan might be purchased in order to fill the gaps in Original Medicare Parts A and B.

It is very important to note, that if someone has been in an Advantage plan for longer than one year, they may need to be medically underwritten in order to enroll in a traditional Medicare supplement insurance plan.  This means that the applicant could be turned down if they are in poor health.

It is usually a good idea to get an application for traditional supplemental coverage in early to make sure that certain health qualifications can be met.  Underwriting requirements will differ between various providers, so working with an independent Medicare supplement agency (like us) can be a wise choice to ensure coverage is obtained.  This way Medicare eligible consumers can ensure a seamless transition to new coverage  that will become effective January  1, 2012.

Switching Prescription Part D Insurance Plans

The Annual Election Period (open enrollment) also allows consumers to purchase a new Part D drug plan and drop their old coverage.  This time period can also be used by consumers who did not purchase Part D coverage during their initial open enrollment window to find a plan.

For those who did not enroll when they were supposed to, there can be late enrollment penalties however.  These penalties amount to a 1% per month addition for each month that coverage was not elected.  For example, if someone (without credible coverage) waited 16 months to purchase a Part D plan, then their monthly premiums will be 16% higher than someone who enrolled on time.

Open enrollment allows those who have stand alone Part D drug plans to purchase more suitable (or less expensive) coverage if their current plan is no longer meeting their needs.  If Medicare Advantage coverage that is coupled with a Part D plan (MAPD) is dropped, then a new Part D plan will likely need to be purchased as well.

Enrolling In Medicare Supplement Coverage

For those who qualify either  medically or through their open enrollment window, AEP can be used to purchase Medicare supplement coverage as well.  If someone is dropping an Advantage plan, then most supplemental insurance providers will require a letter of disenrollment signed by the applicant.  This same letter can then be sent off to the MA provider for processing.

One common misconception about AEP is that this period of time can be used to switch Medicare supplement providers without any medical underwriting.  This is not the case.  Consumers can switch supplemental insurance coverage any time of the year, but most companies will require some amount of underwriting.  If a change is desired, there is no reason to wait until the end of the year to do so.

The only exception to this rule is for those who are dropping a Medicare Advantage plan after one year and re-enrolling back into Original Medicare.  The Centers for Medicare and Medicaid Services allow for a one year  Medicare Advantage trial period.  If after one year the consumer is not satisfied, s/he can purchase most Medicare supplement  insurance plans without the need for medical underwriting.

It is important to note that there are a couple of states that offer a yearly open enrollment window for changing Medicare supplement coverage   without underwriting (Missouri and California  for example), but these states  have specific individual anniversary windows that will not necessarily coincide with the yearly Annual Election Period.

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Hyers and Associates, Inc. is a full service, independent  insurance agency offering Medicare insurance and Part D prescription drug policies direct to consumer in many states across the country.

Contact us today if you have questions or assistance with your Medicare coverage.

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Companies and groups who wish to offer low deductible, high benefit plans are experiencing rate increases that are in many cases forcing them to switch providers, increase employee contributions, and/or enroll in less comprehensive coverage.

Secondary Payer Insurance For Group Coverage

One simply way for employers to reduce their monthly outlays for group health insurance is to implement a secondary payer plan.  These plans can be combined with high(er) deductible health insurance coverage and then used to cover the larger deductible and coinsurance amounts.

In a nutshell, secondary payer insurance is coverage for out-of-pocket deductible and coinsurance costs.  A company with a low deductible, benefit-rich plan can move their employees to coverage with a  higher deductible in order to lower the monthly premium with their current (or new) carrier.  A secondary payer plan can then be combined with their new coverage in order to offset the potential for increased out of pocket expenses.

In most cases, the out of pocket exposure to the insured will be nearly the same (if not less) but the overall premiums for the two combined coverages will be much less for the employer and/or employees.  Secondary payer plans take the burden off the original carrier and shift it to the new insurance company.  The new provider is only responsible for covering the higher out-of-pocket amounts.

The exposure is limited and predictable for the secondary insurance carrier and that helps them extend lower premiums to the group.  Employees will be comfortable knowing their out-of-pocket expenses are not greater than they were before the change was made.

Health Savings Accounts And HRA Qualified Plans

A common practice for groups wanting  to lower their monthly premiums is to switch to a high deductible HSA or HRA qualified plan.  In order to account for the higher out of pocket exposure, the employer might agree to partially or totally fund the HSA or HRA.

Over a few years, this can be a significant outlay for the employer, especially with a health reimbursement account as these contributions are irretrievable when they are not used.  And employees with money left in a HRA toward the end of the year will oftentimes find ways to spend these funds so as not to lose them.

Unfortunately, a secondary insurance plan cannot be implemented with most qualified health HSA, HRA, or FSA plans.  However, employer groups who are not satisfied with their tax qualified plans could consider moving back to a high deductible plan (with a secondary payer) and then provide the usual benefits employees prefer – like a small copay for doctor’s office visits and immediate coverage for prescription drugs.

Filing Claims With A Secondary Payer

Filing claims is usually no more difficult than with any other traditional carrier.  The insured will carry their secondary insurance card and give it to the medical provider when benefits are received.  In most cases, the medical provider will then bill the secondary carrier as they would any other.

In other cases, the insured can file the claim if they wish.  The will only need an explanation of benefits (EOB) and the itemized bill from the medical provider.  Both can then be sent to the secondary payer administrator for reimbursement.

Networks And Underwriting Requirements

There are no network restrictions with these plans.  Employees can continue to use their regular doctors and hospitals as before.  In fact, the administrator will contact often used medical facilities beforehand in order to insure a smooth transition for the employer and employees.

There are no underwriting requirements needed to enroll in most secondary payer plans.  If some of the employees have significant preexisting health conditions, this will not increase the rates for any of the others.  Rates are based on demographics, gender and age, but not previous health issues.  In many cases, renewal premiums have been lower on a percentage basis when compared to major medical coverage.

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Hyers and Associates is full service, independent insurance agency representing several group health insurance providers.  We can help your business reduce its monthly premiums by shopping for coverage with several carriers, changing plans, and/or implementing a single payer plan.

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One significant component of the new law allows you to use what would normally be taxable annuity dollars to purchase a long term care insurance policy.  

This provision can be very useful if you have significant tax-deferred accumulation in a non-qualified annuity and wish to purchase long term care coverage.

Long Term Care And The Pension Protection Act

First, it is important to realize that Medicare and/or supplemental policies will not pay for extended custodial care for more than a maximum of 100 days.   And government run Medicaid will only cover these costs once you have spent down most of your estate.

The Pension Protection Act allows you to use annuity (and life insurance) polices as a tax efficient means to purchase LTC insurance.   There are a couple of ways to implement this strategy and it will mostly depend on whether you own an existing non-qualified annuity account.

Tax Advantages Of Periodic Annuity Payments

A non-qualified annuity is one where the invested principal has already been taxed.

The interest (or investment) gains within the annuity have grown on a tax-deferred basis and are only subject to income tax when they are withdrawn.

So long as the account has not been annuitized, then any money that is withdrawn from the annuity would be taxable until all of the growth has first been distributed.   Put another way, the gains come out first – not the principal.

However, the Pension Protect Act allows you to withdraw your investment gains tax free in order to purchase long term care insurance.   If you invested $100,000 in an annuity and the policy has grown to $120,000 –  then you could withdraw the $20,000 on a tax free basis to pay for a long term care insurance policy.

This is a valuable benefit for those who have invested in an annuity account  and wish to protect their estate by purchasing long term care insurance.   It is important to note however that  the new law does not allow for  tax free withdrawals from qualified (IRA, 401k) annuities to purchase LTC insurance.

Tax Free 1035 Exchange To A Hybrid Annuity

Hybrid annuity policies that include a provision for long term care also benefit from the new law.   If you own an existing non-qualified annuity with any tax deferred growth, then you can execute a 1035 tax-free exchange to a new hybrid annuity account.

This exchange will protect the gains in your old, surrendered  annuity from income taxes on any level.   Your invested dollars will be leveraged two to three times over in the hybrid annuity for long term care benefits.   Additionally, any tax-deferred dollars paid out for qualifying care will be tax free.

Hybrid annuity policies are quickly growing in popularity with those who want to maintain control of their assets, but who also want to leverage their invested dollars in the event that extended care is ever needed.   Mutual of Omaha and One America/State Life are two  companies that are competitive in the hybrid annuity market place.

These plans are also popular as they require less underwriting than traditional LTC coverage and they are easier to qualify for if you have any preexisting conditions or health concerns.

What If I Don’t Already Own An Annuity?

If you don’t already own a deferred non-qualified annuity, then you can still purchase one. You could invest  a lump sum in a deferred annuity and withdraw  only  the interest,  on a tax free basis,  to pay for a long term care policy.   Or you could pay for a long term care policy using an annuitized single premium policy.

If you wish to to have LTCi sooner than later and you don’t want to risk the insurance company declining your application because of health issues, then an immediate, annuitized  plan might work best.

Deferred annuities are favorable when the owner can wait several months to a year for their interest to accumulate before purchasing the LTC insurance plan.

Using An Immediate Annuity For Systematic Payments

An immediate annuity is exactly that; one that begins payouts  to the  owners almost immediately – usually after only one month, but no longer than one year after the deposit has been made.   Thus, an immediate annuity makes systematic payouts of principal and interest each payment cycle.

The principal would not be taxed under any circumstances, but the interest can be taken tax-free so long as it’s used to fund a long term care policy. The payouts can be setup for a set number of years or even a lifetime, but in all cases this method of systematic payments is known as an annuitization.

There are several ways to use an immediate annuity. One strategy is to invest in one  that will make systematic equal payments for 10 years and then use those dollars (tax free) to purchase a 10 year paid-up long term care policy.  

The annuity  payment stream could also be setup for a lifetime.   In most cases however,  there is no guarantee that  your LTC  insurance premiums will not increase sometime in the future.   This is why some consumers purchase a 10 year  paid-up policy.

At any rate, your insurance broker (us) can tell you exactly how much you need to invest in any type of annuity to cover the premiums for your chosen long term care coverage.

Qualified Long Term Care Partnership Plans

People are living longer and medical inflation is extremely high.   Governments on all levels are running huge deficits and Medicaid liabilities are a significant reason for their indebtedness.

In response, many states have  recently passed laws  establishing partnership qualified long term care plans that further add financial incentives to purchase extended care insurance.   In a nutshell,  many  state  governments will allow you to protect  your estate up to an equal amount of purchased long term care insurance.

That is to  say, if you purchase a policy that provides $250,000 in benefits and you end up using the entire amount, then  your state cannot  legally force you to spend down an additional $250,000 from your estate before Medicaid qualification would be available.

Regardless of the amount of money spent by your insurance policy, Medicaid, and/or your estate – you will have  protected at least $250,000 that can be passed on to your beneficiaries.

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In summary,  federal and state governments are providing much needed tax and planning incentives for those who wish to purchase long term care insurance.

Whether you are using  deferred or  immediate annuity policies, hybrid  accounts, or partnership plans – there are several tax advantaged strategies designed to protect your family and your estate from the exorbitant costs associated with extended care.

Hyers and Associates, Inc is  an independent insurance agency specializing in annuity accounts and long term care insurance plans.
 

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Annuities have grown in popularity based on their unmatched safety record and the guaranteed lifetime income they provide.   There are two classes of annuities  used for future income; immediate and deferred accounts.    This post  will mostly focus on deferred annuity accounts with a guaranteed income rider.   We offer both however.

Deferred Annuity Income Rider Examples

Income riders are gaining in popularity as investors are better understanding these products.   In a nutshell, a fixed amount (the principal) is deposited –  in either a lump sum or over time –  in a deferred annuity offering a guaranteed income rider.   At some point later in time, the income rider is activated at the owner’s request and guaranteed lifetime income payments begin.

Let’s take a look at a very basic example of a 60 year old male who is planning for future income 10 years from now. We will use an 8% income rider and place this on a $100,000 deposit with an annuity offering a first year 10% bonus. (These are real numbers using a real annuity as of the writing of this post; future numbers might be more or less.)

Single Annuity Income Rider Illustration

If this account owner defers his income rider until age 70, then he will receive approximately $14,250 a year or $1,190 a month  for his lifetime.   Assuming he lives to be 87 years old, then his $100,000 investment would have paid out $240,000 or more over his lifetime.   It is difficult to find a stock, bond or certificate of deposit portfolio that would provide such guarantees.

Spousal Annuity Income Rider – Joint and Survivorship

Now let’s take a look at a similar  scenario that provides income for a husband and wife – both age 60.   Just as before, a $100,000 initial investment is made and the income rider is deferred for 10 years.  

After ten years, the rider is activated and lifetime income begins for the couple.   Their  lifetime payments would be over $13,000 a year or nearly $1,100 a month.   Thus if only one spouse lives to be age 90, then their $100,000 investment would have paid out over $260,000.   Again, this  investment provides very appealing guarantees  for those who are planning on future income.

It is also important to note that these illustrations are linear in nature.   This means, all other  factors being equal, if  the $100,00  initial investment was doubled to  $200,000, then  all of the income numbers would also double.  

Income Withdrawal Percentages – Single And Joint

If you look at both charts carefully, you will notice that there is a significant jump in income from age 69 to age 70 with this particular product. Like all income riders, the amounts paid to the owners are based on predetermined percentages as guaranteed by the insurance company.

In the case of the single man age 60, his withdrawal percentage jumps from 5% to 6% at age 70. And with the couple, their income withdrawal percentage jumps from 4.5% to 5.5% at age 70. Thus, the income stream can vary somewhat significantly depending not only on the product and the insurance company, but also based on the withdrawal percentages allowed by the annuity rider.

Future Income Payments That Adjust For Inflation

The annuity income rider illustrated above  also offers an inflation rider that allows the future payments to increase by 3% each year.

The 3% inflation rider has no direct cost to the owner(s), but it will adjust the withdrawal percentages lower meaning the annuity owner(s) will see less systematic income at onset, but perhaps much more later in life.

Inflation riders can be a valuable asset when attached to  a guaranteed stream of income – especially if the annuity owners live well beyond their life expectancy.  Inflation protection is  also appropriate for those who might need less income in the near future, but larger sums later in life for health care or other unforseen expenses.

What Happens To  Any Unused Annuity Funds?

Inevitably, investors want to know what happens if income is never taken or if only a portion of the income is withdrawn. If the income rider is never activated, then the annuity would remain in deferral and the principal would grow over time based on current interest rates and/or the performance of a chosen indexed investment sub-account.

Thus, there are always two accounts at work; the first is the contract value and second is the income account value that is used to determine the future income stream. The owners can always walk away with their contract value and invest their principal elsewhere should their income needs change in the future.

It is important to know that most income riders have a yearly cost that is withdrawn from the annuity contract value each year. This cost does not affect the income account value, but should the income rider never be activated, then the owner(s) has paid for something that was never used. In this way it is somewhat like a future income insurance policy.

A key benefit to these riders is that they can be turned on and off.   Unlike most immediate annuities, where the payment stream is irrevocable, income riders allow the owners to stop the payments should their needs change.   This provides much more flexibility and makes any decision about when to activate the rider much easier for the owner.

Residual Annuity Account Value At Passing

If there is an untimely passing and money still remains in the contract value, then those funds would be paid to the named beneficiary.   They are not kept by the insurance company. However, if the contract value has been depleted, then the income payments would cease once the final owner of the account has passed away.

In some cases, any remaining amount in the income account can be taken by the annuity’s beneficiaries over a 5 year period. However, like all lifetime annuity accounts, these products are primarily designed with the owner’s income needs in mind and are not always appropriate vehicles to transfer wealth to any named beneficiary.

Request Illustrations And Information

Hyers and Associates is an independent insurance agency specializing in annuity accounts. We work with the leading carriers offering income riders including; Allianz, American Equity, Aviva, Equitrust, Jackson National Life, Midland, National Western Life, North American, Phoenix, Sagicor, and many others.

Using proprietary software, we can show investors how to maximize their income stream through early contract withdrawals that allow their income rider to remain in deferral for a longer period of time.  

Contact Us today to request more information.

There are certain advantages to each type of LTC policy and through the help of an agent, couples can usually decide which insurance best fits their present and future needs.

Linked Long Term Care Insurance Coverage

Linked policies simply allow the first  spouse to tap into the benefit pool of the second if all of the first spouse’s benefit dollars have already been spent on care.  Thus, two policies are purchased – one for each spouse – and they are joined by a rider that allows couples to share benefit pools.

Long term care insurance coverage allowing for a linked benefit was most common far many years.  Many consumers came to know these types of coverages as shared care.  Several insurance companies offered shared care riders at an additional cost to the insured.

Knowing there were two available benefit pools helped reassure a husband and wife that extra dollars would be available if only one spouse became ill or injured and was on claim for an extended period of time.

Advantages And Disadvantages Of Linked Care

The advantage is fairly straightforward in that there are two separate policies that can be shared in  succession thus doubling the amount of money and time available to one of the insureds.

However, it is important to know that both policies cannot be used at the same time by the same spouse.  The benefits can be drawn upon separately by each respective spouse, but the two policies will not payout simultaneously for one person who is on claim.  The first policy must be exhausted before the second policy will offer benefits to the same insured.

The primary disadvantage to a linked long term care policy is cost.  Two separate policies must be purchased (one for each spouse) and then a shared care rider must also be purchased allowing the coverages to be linked.

In some cases, less coverage can be purchased by each spouse and then linked, but that may not help if more dollars are needed over a shorter period of time from one of the policies.

All considered, linked policies can be very valuable to an insured couple.  While the coverage costs more overall, the benefits that can be paid out over time can more than make up for the price if only one spouse needs extended care and exhausts his or her own pool of money.

Joint Long Term Care Insurance Policies

Long term care insurance that is joint will be equally owned by a husband and wife or qualifying couple.  In this case, only one policy (or benefit pool) is purchased from the LTC provider and both couples can draw from the policy simultaneously or separately when care is needed.

Joint insurance policies offer the same types of riders that linked policies do; such as inflation protection, restoration of benefits, non forfeiture clauses and the like.  However, only one pool of money is available for both the husband and wife.

Typically, joint long term care is more flexible in that extra shared care riders are not needed.  Both spouses can make claim at the same time and draw benefits up to the daily or month maximums allowed for by the policy.

Additionally, insurance companies offering joint policies have also introduced hybrid life and annuity plans that can be owned and drawn from by both spouses.  Hybrid plans are popular as they offer present and future value to the insured in the event long term care is never needed by either spouse.

Advantages And Disadvantages Of Joint LTC

The primary advantage of a joint policy is lower yearly premiums.  It is unlikely, although not impossible, that both spouses will need extended long term care coverage.  By purchasing a joint policy, couples can reduce their overall premiums and share the same benefit pool unlike a linked plan.  And there would be no need to purchase a shared care rider.

The disadvantage is if more care is needed than was originally purchased.  In the event that both spouses become ill or injured at the same time, the insurance may simply not provide enough benefit to cover such significant expenses.  While it would provide some benefits, it can still leave the family without enough readily available resources at their disposal.

When considering a joint plan, it is wise to purchase a little more daily benefit and to also consider a stronger inflation rider (5% compounding for example) in order to account for LTC expenses for both spouses simultaneously.  A larger inflation rider will help the benefit pool grow and allow for more daily or monthly dollars payable for care.

LTC Information And Quote Request

Hyers and Associates is an independent insurance agency specializing in traditional and hybrid long term care insurance policies.  We offer, direct to consumer, coverage from several highly rated and well known LTC providers.

Contact us today to request quotes and/or to compare coverage options.

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The dividing line for most retirees is age 65.   If you are younger than age 65 and you cannot continue your group health insurance coverage for any reason, the next best option is to purchase an individual or family plan from a provider such as Aetna, Anthem Blue Cross, or United Healthcare among others.

If you are over age 65 and losing group coverage, then you will need to enroll in Medicare Part B (if you have not already done so) and purchase supplemental coverage.   The two options available for retirees over age 65 are traditional Medicare supplements and Medicare Advantage plans.

Retiree Health Insurance Over Age 65

Many retirees are  age 65 or older  when  they lose their  group health insurance coverage. In some cases, they can maintain their current group  coverage, but in many cases they are involuntarily dropped from the plan.  

In fact, many large companies are discontinuing health insurance benefits altogether for retired workers over age 65 whether they recently retired or were offered health benefits in the past.

The good news is that those who are both voluntarily and involuntarily losing group health insurance can almost always purchase a supplemental plan on a guaranteed issue basis. In this case, Medicare will be their primary coverage. Those over age 65 must first be enrolled in both Medicare Part A and Part B and then they can best decide how to supplement the gaps in Medicare.

Medicare Supplement Coverage for Retirees

Get a Quote »The first option is to purchase a traditional Medicare supplement. There are ten plans to choose from and each offer a varying degree of coverage.

There are no traditional Medigap or supplemental plans that cover prescription drug coverage, so it is wise to purchase a stand-along Part D drug plan unless credible rx coverage is available elsewhere.

Supplemental plans and Part D coverage can both be compared on price  and  purchased direct (at no additional cost) from independent agents  who represent a  wide array of insurance carriers.

Medicare supplements are popular because the potential out-of-pocket expenses associated with these plans is very limited  and predictable for  the insured.   Plan F is often purchased as it covers all of the gaps in Original Medicare Part A and Part B.

Additionally, almost all supplemental plans have no network restrictions to navigate. This means the insured can see any doctor or hospital that accepts Medicare patients. Those who purchase traditional Medigap plans can rest assured that they will not need referrals nor will they be turned away because of any network restrictions.

Medicare Advantage Coverage for Retired Seniors

Advantage plans are not quite as popular as traditional Medicare supplements based on enrollment figures. Typically, this coverage is less expensive on a monthly basis and aims to cover most of what Part A and Part B cover and some of what they do not.

Those who purchase an Advantage Plan  can have the potential for larger out-of-pocket expenses. It is wise to ask the insurance provider about the yearly maximum for out-of-pocket expenses both in and out of network.

It is also preferable to know about any network limitations that might exist with any Advantage Plan under consideration. In some cases, certain medical facilities and doctors will choose not to accept one or more Medicare Advantage Plan.   These limitations can  become an issue  for the insured if an out-of-network specialist or facility is recommended by their primary care physician.

Many Medicare Advantage Plans will include prescription drug coverage thus eliminating the expense of purchasing a stand-alone Part D plan. When deciding between the two options (Medigap and Advantage) it is wise for seniors to speak with an independent agent about both and consider their options both now and in the future.

Understanding Medicare Open Enrollment (AEP)

Typically, Advantage Plans can be changed each year during open enrollment, but the insured is only allowed a one year free-look period if they wish to return to Original Medicare and purchase a traditional supplement.

That is to say, if the insured was enrolled in  an Advantage Plan  longer than one year and then desired to purchase a traditional supplement, the Medicare supplement provider can  decline their application due  to ongoing or past health concerns.

Retired Under Age 65 Health Insurance Plans

Get a Quote »If you are under age 65 and losing your group health insurance due to retirement, then you will need to purchase coverage in the individual market. There are several well known and highly rated carriers providing both individual and family health insurance.

Health care reform has changed the landscape somewhat, but many plans are still available. Unfortunately, the cost of these same plans has increased with the implementation of the reform efforts, but no longer can children be turned down for coverage. However, health insurance providers  can still charge significantly higher premiums for those under age 26 who have preexisting conditions.

Conversely, retirees under age 65 can still be turned down for coverage and/or issued policies with exclusionary riders. It is wise for retirees to shop around with an independent agent and to disclose their health backgrounds.

An experienced agent can recommend more suitable options and the retiree will be much more likely to find coverage if they disclose their health history beforehand to their agent.   And remember, there is no additional cost whatsoever to use an agent to purchase health insurance coverage.

Should no provider be willing to offer health insurance coverage to the retiree, then the high risk pool in the state where the retiree resides can be investigated. The high risk health insurance pool can be the stopgap coverage that will bridge the time until Medicare eligibility at age  65 or until other reform laws allow for better access to health  insurance.

Information and Insurance Quote Request

Hyers and Associates, Inc. is a full service, independent agency offering Medicare supplement and individual and family health insurance policies direct to consumer.

We work with the leading insurance providers in several states in order to offer comprehensive and affordable coverage from several highly rated carriers.

Contact Us today for more information, quotes, or to compare and discuss your insurance needs.