Finance Matters

Ok, let’s face it. Long term care insurance is here to stay. But it’s not the best choice for everyone.

What is long term care insurance? It is a mechanism that will help fund long term care (nursing home) expenses. The theory works like this: you purchase an LTC policy when you are healthy and young. The premium is paid over a number of years and creates a pool of money that you can tap if you need long term care that is over and above what Medicare would pay.

To qualify for care in a skilled nursing facility, your doctor must certify that you need daily skilled care like intravenous injections or physical therapy. Medicare doesn’t cover long-term care or custodial care in this setting. This accounts for 95% of the care provided in a nursing home.

Now I bet you’re saying, Mike, what about Medicaid. Medicaid will pay for custodial care. That they will. There are some things you need to consider:

1) You can only have limited assets (may vary by state so check your local Medicaid requirements.)
2) Any assets transferred to family members must have been 10 years before entering the Medicaid program.
3) If you have a spouse and/or children living in a house that is owned by you and your spouse, your spouse will be allowed to live in the house, but 1/2 of the home will have a lien by the Medicaid program to offset what they’ve paid for your care.

Any of those sound like a good deal? Let’s face it, there is no way around paying for long term care. It’s basically pay now or pay later. With states acknowledging the increasing problem with Medicaid being put on the hook for LTC costs, a product was created to help fill the gap: Partnership Long Term Care coverage.

PLTC allows you to purchase insurance to offset a part of the assets that Medicaid will have to liquidate when and if you need to go on the program. Benefit to you is that you can choose how many assets you want to retain by purchasing insurance, which can keep the total value of your home in your estate and not in the state’s coffers.

The problem is that not all states have implemented programs yet for Partnership policies. Check with your insurance agent to see if your state has implemented the program. It is hoped that with changes in health care in Washington, all states will find ways, like PLTC products, to preserve the capital they will receive for their Medicaid programs.

Whether your state is a partnership state or not, long term care insurance can be a good investment. Contact your agent today to find out more.

One of the newest insurance products is something known as an HRA or Health Reimbursement Arrangement. If you haven’t heard about this latest innovation in health insurance, you might want to take a moment and learn more.

On the surface, an HRA looks like an HSA or Health Savings Account. The both are tied to a savings account and a high deductible health insurance product. Contributions and withdrawals for approved health related expenses are tax deductible. Some key differences will immediately identify where the two plans diverge:

1) The HRA plan is not available as an individual insurance product.
2) The employee may not contribute into the savings account. All contributions are done by the employer.
3) The amounts in the savings account will be forfeited if you lose your job. You may request reimbursement for any expenses that were incurred but not tendered during the term that coverage was in place.
4) Your HRA account is not eligible to receive interest.

For more information, check out IRS HRA Information.

If health insurance costs are getting you down, a health savings account may be a more attractive option.

What’s a health savings account? A health savings account or HSA is a high deductible plan tied to a medical spending account.

Those familiar with cafeteria plans from group insurance may be thinking this is similar to a flexible spending account. To some extent, it is. Where an FSA and an HSA are similar is that you allocate money beforehand to pay medical expenses that are subject to coinsurance, deductible or copays. There are tax advantages as well that are applicable for both.

What’s different? Well, for one, the money you put in an FSA must be used by a given date or Uncle Sam gets whatever you didn’t use. The money placed in an HSA does not have an expiration date. What that means is that you can fund your account and, if you have a good health year, the money stays in your account ready to be used when you need it. Also, many insurers place your funds in interest bearing accounts. Great news is that the money you put in is tax deductible and the interest is tax deferred! Contact a tax professional to discuss the federal HSA limits on what is tax deductible.

Some of the most notable features of an HSA are:

- Money placed in the HSA account are tax exempt.
- Interest earned on the money is tax deferred.
- You are protected for large catastrophic events.
- You decide the deductible and coinsurance options that work for you.
- You control your health care expenses.
- You don’t pay for premium for coverage that you may not use in a year. That’s a savings each and every month!

If you would like to take a look at how much you can save with an HSA option, contact us at
vonfabian.com.

If you would like to see more information about HSA’s in general, go to U.S. Treasury HSA Information

Have questions about Medicare? Supplements? Advantage plans? Click this link to help answer all your questions.

CMS Medicare Site

The best resource to answer specific questions about Medicare programs available is your independent insurance agent. Give us a call today for a free and confidential analysis of your Medicare situation. Click the Contact Us tab on our website at vonfabian.com