Medicare can be an increasingly difficult subject to grasp. There are several legal and political forces that make Medicare a topic of controversy and confusion. In order to ensure that you are aware of how Medicare will affect you and your family, it is important to remember these considerations
1. Medicare Is Divided into Four Parts
Medicare coverage is divided into four parts labeled alphabetically as Medicare Part A, B, C, and D. Part A is considered hospital insurance because it covers visits to hospitals, typically for individuals who are over 65 and also eligible for Social Security benefits. Part B is considered medical insurance and anyone who qualifies for Part A is also eligible for Part B.
Coverage includes both necessary and preventative services. Part C is commonly known as Medicare Advantage and allows for supplemental insurance policies purchased through Medicare-approved private insurers. Medicare Part D includes prescription drug coverage. Anyone covered by Parts A, B, or C is eligible for Part D coverage
2. Medicare Does Not Cover All Expenses
Medicare is a supplemental policy to insure people of retirement age. However, it does not cover all services or procedures. Many procedures may need to be paid for out of pocket and even then, may not be fully reimbursed. Supplemental insurance plans such as Medicare Part C can help offset some of the costs. It is important to speak with your insurance agent regarding what is covered and how much you will owe for services and procedures
3. Open Enrollment Periods
Medicare can only be claimed during certain enrollment periods each year. Many people who are approaching 65 are encouraged to apply before they turn 65 in order to maximize their coverage. While everyone of retirement age is automatically enrolled in Medicare Part A, eligible persons seeking other coverage may only enroll during one time window each year. The Open Enrollment Period for Medicare Part B is 7 months after eligibility for Part A.
4. Special Enrollment Periods
Special Enrollment Periods also exist depending on the circumstances surrounding missing the Open Enrollment Period. Failure to enroll during the initial enrollment period may result in higher premiums.
Special enrollment eligibility criteria may include:
- Working for the government and being injured before retirement age
- Permanent kidney failure
- Had Medicare but dropped coverage
- Working for the railroad industry
- Disabled widows/widowers already receiving some sort of benefits
5. Coverage Does Not Begin Immediately
While Medicare Part A enrollment begins automatically, enrollment terms for Part B can be slightly confusing. If you enroll in Part B, coverage will begin depending upon the date that you enrolled. For example, if you enroll before you turn 65, your coverage will begin the month you turn 65.
If you enroll during the month you turn 65, coverage begins the month after you turn 65. If you wait until a month after you turn 65, the coverage will begin the next month. If you enroll 2-3 months after you turn 65, coverage will begin 2-3 months after you enroll.
In 2003, the United States Government instituted a program known as a Health Savings Account (HSA) as part of Medicare Prescription Drug, Improvement, and Modernization Act. HSAs allow citizens with a high-deductible insurance policy to pay into an account earmarked for medical expenses. The main selling point of these accounts is that they can be contributed to, up to a certain annual limit, without taxes. Withdrawals can be made tax-free as well, providing that the funds are used to cover medical expenses. In any other circumstances, there are typically penalties involved for withdrawals.
Eligibility for a Health Savings Account
In order to qualify for a HSA, an applicant must be currently enrolled in an HAS-eligible, high-deductible health plan (HDHP). This means that your plan must be based upon a high out-of-pocket deductible. Typically, high-deductible plans are purchased by those who rarely get sick or can easily afford high up-front payments. HSAs are not open to those listed as dependents on another person’s tax return. Additionally, persons covered by other non-HSA eligible plans or persons eligible for Medicare benefits are not eligible for a HSA.
Benefits of a Health Savings Account
Many HDHP policy holders view HSAs as a great way to save money, tax-free, for potential life emergencies. From a broader perspective, supporters of HSAs believe that HSAs incentivize a more prudent attitude towards the consumption of medical services.
The most commonly cited benefits of HSAs include:
- Provide an easy way to save for medical expenses
- Keep more money in the pocket of the consumer in the form of taxes
- Reduce the demand for non-critical medical procedures
- Potentially save money in the event of a serious accident
- Funds in an HSA may be invested into CDs, stocks, mutual funds, etc.
- Provide incentive to spend less money
Drawbacks of a Health Savings Account
While there are several benefits for HSAs, they are not necessarily for everyone. Many critics often point out that, due to the high-deductible plan requirement, HSAs only benefit the young and healthy while driving up prices of healthcare. Critics also say that poor, uninsured persons will not benefit from these incentives.
Other common criticisms of HSAs may include:
- Most HSAs are held by upper-middle class people and do not benefit the poor
- HDHPs can weaken or degrade the quality of health by disincentivizing routine healthcare
- There are tax penalties for withdrawing funds
- Potential to lose funds due to market fluctuations
With new laws and regulations concerning healthcare for Americans, it’s more important than ever to make sure you, your family, and your business are properly insured with a plan that works for you. Choosing a healthcare plan can be complex, and some individuals may find it daunting. As you go through the health insurance process, keep in mind some important tips that can help you find the plan that best suits your needs.
1. Understand What Each Plan Covers
As you look at your option, pay close attention to the benefits and coverage that each one offers. What’s right for you may not be right for others, so personalization is key. It’s important to make sure that you’ve given each option a thorough “exam” to make sure that all of your fundamental bases are covered.
In general, there are 10 main benefits that you should keep in mind when looking for a plan:
- Emergency services
- Laboratory tests
- Prescription drugs
- Newborn and maternity care
- Substance abuse and mental health treatment
- Outpatient care
- Pediatric services, including vision and dental
- Preventative services, such as mammograms and immunization
- Rehabilitation services
2. Consider All Associated Costs
Naturally, a main concern of finding a healthcare plan is making sure that it’s within your budget. Generally speaking, you can pay for your insurance plan in two primary ways: a monthly premium for purchasing the plan, and out-of-pocket expenses that are paid upon the receipt of medical care. The second option typically includes a combination of coinsurance, copays, and deductibles. In many cases, those who pay a higher premium up-front will pay less when they receive medical care. Likewise, those who pay a lower premium will typically face higher costs when receiving medical care.
3. Consult an Experienced Insurance Agent
There are a lot of considerations for a healthcare plan. This is where the help of an experienced insurance agent comes in. A health insurance agent can provide you with actionable and meaningful tips, as well as help you through the entire process. A common misconception is that you’ll always have to pay an agent – but this isn’t true. Many insurance agents will offer services for free, and receive compensation from the company through which their client signs up for a plan.
Call us today at 704-527-4220 to speak with a licensed insurance agent and find the best healthcare plan for you, your family, or your business.
A Look Inside Our 2015 Rates: What They Mean for Our Individual Customers Under Age 65
Every year, we inform our individual customers about their premium rates for the coming year with a letter. As our company’s managing actuary, I want to take a moment to explain what went into determining 2015 premiums so you have a better understanding when you receive that letter.
Now, before I dive into this post, I want to cover the difference between individual and group customers – two terms that are used a lot around BCBSNC but aren’t as common in everyday conversations about health insurance.
- Individual customers are those under age 65 who buy their own health insurance from an agent, directly from an insurance company or from HealthCare.Gov. People might buy their own health insurance because they work for a company that doesn’t offer health insurance or because they are self-employed.
- Group customers, on the other hand, are enrolled in a health insurance plan that is offered by the place they work.
A lot of number-crunching is involved in determining health insurance premiums and the implementation of the Affordable Care Act (ACA) has made it even more complicated. With multiple plans, changing regulations and ever-rising health care costs to consider, determining rates isn’t a simple process.
One reason that determining rates is more complicated this year is because the ACA created three categories for our individual customers who are under age 65. Each category was priced separately based on unique considerations and what we know about its customers. Here is a quick definition of each category:
- Grandfathered plans are plans that went into effect prior to March 23, 2010. If you bought an individual plan with us prior to then and still have that same plan, you are “grandfathered.”
- Transitional plans (sometimes called grandmothered plans) are non-grandfathered plans that the administration announced could be extended last November. If you were informed late last year that you could keep your planeven though it was not ACA-compliant or grandfathered, then you are on a transitional plan.
Here’s an overview of how individual rates will change for these plans in 2015. Please note that everyone will be impacted differently depending on each customer’s unique situation–age, plan, tobacco use and where customers live may be reasons a customer’s percentage rate increase is different from what I’ve outlined below:
ACA plans will see an average increase of 13.5 percent in 2015. Why?
Back in May, we talked about our new ACA customers after the first Annual Enrollment Period. We enrolled more than 232,000 customers in ACA plans on the Health Insurance Marketplace, and our new customers are older and less healthy than we anticipated. That means we have a large pool of older, less healthy customers, and rates will increase partly to help cover the high health care usage of these customers.
Grandfathered plans will see an average increase of 13.4 percent.
The grandfathered pool is closed to new customers, meaning new, younger customers can’t enroll to help offset the rising medical costs of existing customers. When we set prices for this group, we expected that many of the older and less healthy customers with these plans would move to ACA plans. Some did, but not as many as we expected. The result: Our customers with grandfathered plans are now older and less healthy than we anticipated. As existing grandfathered customers age, they face higher medical costs and use more health care services, all of which contributed to these rate increases.
The transitional plans will see an average increase of 19.2 percent.
Tansitional plans will see rate increases for a few reasons. As with grandfathered plans, the customer pool for transitional plans is also closed. Other contributing factors, including treatments for heart disease, cancer care and procedures for bone and joint issues, have also resulted in higher medical costs for this group. Further, we’ve seen many of the healthier customers leave this group at a rate higher than we expected.
The chart below shows how the percentages I just covered translate to premium prices.
Helping you make the best decisions about your health insurance
We’re committed to helping consumers have the best possible experience when buying health insurance on the Health Insurance Marketplace. Some of the issues related to the Health Insurance Marketplace are out of our hands, and a technical problem in one area can have a domino effect on other areas of the enrollment process. But no matter what, we’ll be here for consumers to provide information and assistance in any way we can.
Here at BCBSNC we have a variety of tools and resources to help you choose the right plan to meet your health and wellness needs. Check out some of the links throughout this post for more information, visit your neighborhood agent or use our online tools to guide you through the enrollment process. And don’t forget to enroll by Dec. 15 if you need coverage by Jan. 1, 2015!
Brian Tajlili is the Managing Actuary for Blue Cross Blue Shield of North Carolina leading rate development for the Individual Under 65 and Small Group market. Brian has been involved with various projects involving the Affordable Care Act since it was passed and is passionate about how his work as an actuary impacts North Carolinians. Brian is a Fellow of the Society of Actuaries and Member of the American Academy of Actuaries, and outside of work is actively involved in the Raleigh-Durham area’s running community.
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Eligibility for an APTC (advanced premium tax credit) is based on household size & household AGI (adjusted gross income) when filing your annual federal income tax. When filing your federal income tax, if your household income based on your household size falls above 100% but below 400%, you will most likely qualify for an APTC amount that will reduce your monthly health insurance premium.