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Understanding healthcare costs: The employer-sponsored insurance system


Who is paying for your healthcare?

To understand how healthcare is financed in the United States, you must start with the flow of money into and out of the employer-sponsored insurance system, which covers almost 60 percent of the US population under age 65.

Of the remaining 40 percent, nearly half are uninsured, and the rest are covered by Medicaid, individual insurance policies or other public plans.

Our focus in this video is on the 60 percent of people covered in the employer-sponsored market, though some of these dynamics may also apply to the other 40 percent.

Here’s how the employer-sponsored system works: For each employee, employers contribute towards the group health insurance plan. The employer contribution has been growing each year.

Employers usually make payroll deductions from employee pay checks to cover the employee’s share of the cost of the group health insurance plan. The plan has certain co-pays, deductibles, co-insurance and out-of-pocket limits that determine how much plan members pay to receive care.

The combined share of payroll deductions and out-of-pocket costs that represent the employee cost of healthcare has been growing in recent years.

Together employer and employee contributions form the pool of funds that pays for the care provided to members of the group health plan. Funds may be used for trips to the doctor, in-patient and out-patient care, and for pharmaceuticals and other medical services.

The cost and volume of usage for each service vary geographically. The difference in cost from one city to another reflects differences in how care is delivered and differences in the amount that providers and payers negotiate as payment for healthcare services.

While there is a great deal of variety in how these cost dynamics behave, the common driver of increasing cost is the underlying cost of care—the cost of seeing the doctor, going to the hospital, buying prescription drugs—and the volume of each are what most determine healthcare costs.

And in 2012 that underlying cost for the typical family of four will exceed ,000.

Without significant changes to the healthcare system, such as improved efficiency or better coordination of care, this cost will continue to rise.

For more on the dynamics of healthcare spending, read the Milliman Medical Index, available at http://milliman.com/mmi, or follow us at healthcaretownhall.com.


Life Insurance – A Brief Overview

Life insurance is one of the best financial moves that you can make when it comes to the protection of your family. The range of protection that you can derive can run from the very small to the very large. There are some differences of the policies from which to choose. Here are two very common ways that you can obtain life insurance for your family.

Term life is the first kind, and it is the least expensive in the short run. It will cover you for a stated period of years, say 20 or 30 years, and then it will expire, and cover you no longer than that period of time.  You can get online life insurance quotes from sites like Root Financial who specializes in all sorts of different life insurance policies.

The benefits of a term life policy are that it is usually very inexpensive and you can obtain coverage in very large amounts for a small sum of money. The negative part is that they are not worth any money at the end of their term, as they simply cease to exist. You have paid money all of those years, and unless you die, you have nothing in the way of any money.

The second type of life insurance is called whole life, or straight life, but the difference is that a cash value builds up inside the policy, so that at the end of the 20 or 30 years there is money available in the policy if you don’t die. You will have access to that money then and along the way while you are paying your premiums.

The downside of the whole life policy is that it costs more than the term policy because of its permanency and the fact that it has the buildup of the cash in the policy. The coverage amount will not be as large for the same amount of premium going into the policy, but you do have the advantage of having cash at the other end of the policy that you can take out if you wish.

It is wise to speak with an insurance professional to discuss your needs and goals, and you can get into more details as to how these different types of polices actually work. You should run these ideas by an expert agent, and not attempt to do this on your own.


Life Insurance Should Be a Part of Every Financial Plan

Life insurance is an integral part of every good financial plan and it is an important part of planning for the unexpected. It is necessary in order to provide for dependents so that financial goals can be achieved for the whole family. Life insurance fulfills many different needs but one of the main things it does is make sure any survivors are protected financially. This way they do not have to drastically change the way they live.

How Life Insurance Works

Most life insurance companies offer plans offer lump sum of money that is a tax-free death benefit. This money can then be invested so that it delivers income for the children and spouse of the deceased person. Some of the money can go to pay off bills so that not as much money is needed every month. Life insurance has many financial benefits depending on the type of policy that is chosen. Some policies ensure that the beneficiary is not obligated to pay off any of the bills that the owner of the policy incurred.

The death benefit paid to the beneficiary from a life insurance policy is not considered part of the estate of the deceased. This means that the money from the policy cannot be assessed probate, executor or legal fees. Also, any life insurance money that is paid to the beneficiary goes straight to that person without any delay that is usually involved when an estate is settled.

Determining How Much Life Insurance to Get

A full analysis of one’s financial situation is necessary in order to understand how much life insurance is needed. This is best done by a professional because it can be very complicated. They will need to review all current income sources and living expenses to decide which income will be continued after the policy holder dies. This is important in deciding just how much income will need to be replaced for survivors to continue living at their current standards.

It is important to add in any final expenses in financial review because funeral costs and probate fees can really add up. Of course, these are just a few of the many reasons why life insurance needs to be a part of every financial plan.


6 worst myths about life insurance

By Jay MacDonald, Bankrate.com

Life insurance isn’t the most glamorous thing you can purchase, but it is one of the most important. Be sure you know fact from fiction.

Insurance © NULL-Corbis

Let’s talk about your death.

Not much of a sales pitch, is it? Yet that’s precisely the body under the sheet we’re delicately avoiding when we consider buying life insurance.

“They call it life insurance but it’s really death insurance. After all, you’ll never live to collect,” says Judith Hasenauer, a Chartered Life Underwriter, or CLU, and principal at Blazzard & Hasenauer, P.C., a Florida law firm that advises insurance companies. “That’s why it’s often said that life insurance is sold, not bought.”

Perhaps because we are so averse to contemplating our own mortality, certain myths have grown up around life insurance. Myths such as: Life insurance is a good investment. You can’t bargain for a better rate. You can always expect full disclosure of commissions. And a guaranteed-issue life policy will always come to the rescue if you wait too long to purchase coverage.

We invited life underwriter Tony Steuer, the director of financial preparedness for the insurance consumer group United Policyholders, along with a life insurance actuary, former Vermont insurance commissioner and Consumer Federation of America expert James Hunt, to join Hasenauer in playing pinata with these overstuffed life insurance myths.

Myth No. 1: I don’t need to worry about my health

You’ve seen those low-cost, no medical exam, guaranteed-issue life policies advertised. The ads promise that you won’t be turned down, regardless of your health.

But if you’re looking for a quick net-worth boost at death’s door or a last-minute cash windfall for your heirs, don’t count on a guaranteed-issue product.

“For the first two years, the death benefits are minimal,” Hasenauer says. “That two-year window is the suicide period, the contestability window where the company would contest that the information you provided was not correct.”

The benefits may step up after the contestability period, but not by much. “They’re not very big policies; you could never go and get a good estate planning-type policy,” she says. “They’re pretty close to burial-type policies — just enough to get you in the ground and pay the minister.”

The cost of these policies reflects their increased risk to the insurer. “They’re crazy expensive,” says Steuer. “And statistically, less than 10 percent of people will qualify for the best available rates that are offered by insurance companies.”

If you’re considering a guaranteed-issue product, Hasenauer recommends shopping around.

“There is a (price and benefit) difference between the three-question and the 10-question policy applications,” she says.

Myth No. 2: Agents always disclose their commission

Want to know exactly how much commission your agent is making on your life insurance policy?

Good luck finding out.

“It’s a real quagmire,” says Steuer. “Life insurance is the last financial industry where compensation is not fully disclosed.” Instead, it’s buried so deep in the contract that it would take a forensic dentist to extract it.

That’s by design. The insurance industry has long maintained that divulging the commission on whole life, which Hunt says can typically run 85 percent of first-year premiums with annual renewal commissions of 7 percent for the next decade, could kill the sale.

Despite this dated defense, disclosure is already required overseas.

“It’s something that is going to catch on more and more in the (U.S.) life insurance industry,” Steuer says.

Until it does, Hunt suggests two workarounds:

  • Compare the first-year surrender value to the first-year premium. The closer the surrender value is to zero dollars, the more money is going into the agent’s pocket. There’s just one catch: You would have to have purchased the policy to get this information.
  • Get a competing quote from TIAA-CREF, which sells direct policies without commissions. This will give you a rough idea of how much commission your policy contains.

Myth No. 3: Life insurance is a good investment

Life insurance, a good investment? Total fantasy, says Steuer.

“I liken life insurance to the casino industry,” he says. “How do you think they get these big, flashy buildings and these solid financials? Not by giving you this really great deal.”

Each decade, the industry seems to dream up another sound financial reason for you to “invest” in life insurance. In the 1980s, it was the tax advantage of single-premium life policies, which quickly evaporated when the wealthy started flocking to them as tax havens. Recently, corporate-owned life insurance suffered a similar flash and regulatory crash.

Hunt predicts the current sales pitch touting the tax deferral on the cash value buildup within permanent life policies will turn out to be just wishful thinking for many.

“The problem is, 40 (percent) or 50 percent of the buyers drop out within 10 years and never get a good return on their money,” says Hunt. His recommendation? Buy term life insurance and stick the savings in your 401k instead.

Next time you hear the siren song of life insurance “investing,” Steuer says turn up your iPod to drown it out.

“Insurance is insurance; it’s not an investment vehicle,” he says.

Myth No. 4: Medical underwriting is just a formality

Yes, life insurers like to downplay the medical exam, and for good reason: They don’t want you to know how seriously they take your health. After all, you’d want to make sure a horse can run before you bet on it, wouldn’t you?

Hasenauer says it stands to reason that the larger the policy amount (think: bet), the more thoroughly your health will be scrutinized.

“If you’re buying a million-dollar policy, you’re going to go through a full medical exam by a doctor of the insurer’s choice,” she says.

This information is collected by MIB Group, an insurance industry trade group, and insurers use it to assess your risk. “As we go down the scale to smaller and smaller policies, we get policies that are written with questionnaires only and then they go to the MIB and get additional information there,” Hasenauer says.

If you’ve ever applied for any insurance as a smoker, or if you use any nicotine products including a patch, you’ll likely wind up in the smoker pool, even when you qualify for Medicare. Heck, some cancer survivors have a better chance of favorable rates than smokers do.

“There’s a reason for it: It’s costly!” Hasenauer says.

Don’t try to hide it. “That’s a misrepresentation that could put your insurance policy in jeopardy,” she says.

Myth No. 5: Working with many agents saves you money

Should you shop for your life insurance through one agent or several? Can a one-company “captive” agent get you the best rates? How about your multiline home-auto insurer?

While situations vary, Steuer recommends working with one agent or broker who writes for a dozen or more companies, especially if you have health issues.

“Some companies just won’t touch cancer patients; other companies will consider them on a case-by-case basis or they’ll consider cancer survivors,” he says. “Then sometimes there’s a competitive advantage where your agent will say, ‘Company A is willing to go standard (rates) on this. Will you consider going standard on it as well?’ and set up a negotiation.”

What about using several agents? “It doesn’t work out well because then you have to interpret all the stuff that you’re getting from the agents rather than hiring an expert to sort through it,” he says.

How about using a captive agent? “That would be a major disadvantage because they don’t have multiple underwriters,” Steuer says.

That said, your home-auto insurer may not be a bad choice for those who want to keep all their policies under one roof.

“You’ll probably pay 5% to 10% more in premiums,” he says. But for some, that might be worth it.”

Myth No. 6: It’s life insurance — you can’t negotiate

Some life insurance agents cast themselves in the role of passive messenger, handing down the best offers from on high. Why? Because it works out to their financial advantage 99 percent of the time.

A dedicated pro knows how to use those best offers as a first offer and dig for even better terms on your behalf, just as they do when they negotiate with those same carriers for their own commission split.

For example, Hunt cites a technique called “blending” in which an agent will mix in some no-load or low-commission term life coverage that eventually converts to permanent insurance in order to increase the first-year surrender value of a whole life policy.

“If someone tries to sell you a full-commission $1 million policy with (zero dollars) surrender value in the first year, tell them you want at least 50 percent in the surrender column,” Hunt suggests.

But Hasenauer cautions against letting negotiation turn into procrastination.

“Life insurance never gets cheaper; it’s not like buying last year’s iPhone. Life insurance will continually get more expensive as one ages. That’s why it’s important to insure now rather than later.”



How does medicare and medicare supplemental insurace work together

It can be complicated to understand how Medicare and Medicare supplements work. Both have benefits that can be beneficial to members, and it is vital to understand the differences in coverage and use each plan to maximize coverage.

Traditional Medicare
Recipients of Medicare qualify at age 65 or after having received Social Security benefits for a period of 24 months. Medicare is federal health care insurance that provides coverage for hospital stays, doctor’s visits, and prescription drugs. Due to the fact that Medicare is a federal program, it’s coverage and benefits are generally broad and referred to ask “blanket coverage.” It is for this reason that many Medicare beneficiaries use Medicare for base coverage then purchase a Medicare supplemental plan to fill in the gaps of their initial Medicare coverage.

Medicare Supplemental Plans

Medicare supplemental plans, or Medigap policies, as they are often called serve to fill the gaps in coverage that traditional Medicare doesn’t cover. These benefits include doctor visits to a wider network of providers, access to cheaper prescription drugs, and durable medical equipment. Medigap policies are also advantageous for people with special health conditions that would otherwise call for costly procedures and specialist visits. In fact, many Medicare supplement plans offer specialized plans for members with conditions like diabetes, high blood pressure, and cancer.

Advantages To Supplemental Coverage

Supplemental coverage has many advantages and the best Medigap plans will fill all of the gaps the traditional Medicare leaves. Medicare will usually only pay a small percentage of visits to a specialists, so having a Medigap plan will usually pay the rest. In terms of cost, Medicare insurance only costs if recipients opt for part B and D coverage. Knowing this, many recipients choose a Medigap plan with a lower monthly premium and have access to a wider choice of medications and providers.

Things To Consider

Medicare supplement plans are standardized across 47 of the 50 states. The most important thing to consider is personal health and healthcare needs. If you don’t need many prescription medications but need to see a specialist, then it’d be best to look for a plan with the largest provider network.

Complete Coverage

By using careful research and planning, it can be possible to select the most affordable and useful Medicare supplement plan. Plans vary, but the goal is the same; complete healthcare coverage.


Three tips for saving money on auto insurance

With the cost of living on the rise, people are trying to find ways to save money. While it may seem that auto insurance is one of those expenses that are difficult to reduce, this is not the case. With a little effort, you can easily lower your monthly insurance costs. Here are three ways to reduce the cost of auto insurance.

Plan Ahead

Insurance premium rates are affected by the type of car or truck you purchase. A vehicle’s performance record, the odds of it being stolen and the cost of repairs are some of the criteria that determine the cost of insurance premiums. Inquire into the costs of different insurance rates for different vehicles before purchasing your next car. Other ways to save money is to get insurance before purchasing a car, or get a new policy before your old one expires. Some insurers issue discounts to customers that shop early for their next policy.

Comparison Shop

Different insurance companies offer different rates. Take a moment to call insurance companies and get quotes. Call three or four companies to get a general idea of what it will cost you to insure your vehicle. Make it a point to ask if these companies offer friends and family rates or safe driver discounts. You can also look online for websites that specialize in auto insurance in your area. Search for things like Florida auto insurance, assuming that you reside in the Sunshine State.

Combine Insurance

If you have more than one type of insurance, consider combining them. Some insurance companies give discounts to customers that have more than one policy with them. You can also save money by placing all of the household vehicles on one plan. While this method does help most people save money, you should still weigh the benefits and disadvantages of making these changes.

There are a lot of costs associated with car ownership; auto insurance is one of these costs. Insurance rates rise annually, but that does not mean you need to spend a lot of money on your car insurance. With careful research and diligence, you can reduce the costs of your auto insurance premiums.