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Welcome back again everyone to another edition of All Things Financial. I’m doing a series of shows on how to help make the most and stretch your dollars in the area of healthcare. Under the new healthcare act, under all the different provisions that you have in-network and out of network and how to make the most of your money—how to save money on your healthcare. So the last two shows I’ve been talking about health savings accounts, different opportunities that you have all the way around, but what I wanted to talk about today was a continuation of some of these ideas that I’ve come across to share with those of you watching and listening so that I can help, maybe, stretch your dollars.
So let’s get into the next area and it’s getting help paying your premiums. Now for those of you who have income less than a certain level, there are actually federal subsidies to help you make your premiums and here’s what they are. The modified adjusted gross income—and talk to your tax advisors for what that is—but there’s a modified adjusted gross income number that the government uses for seeing if you’re eligible for these subsidies. And what it is, is it’s 400% of the federal poverty level.
So if you’re four times higher than the poverty level you may still qualify for federal subsidy for your health premiums. So that’s pretty good. If the poverty level is actually four times the poverty level if you’re single and your modified adjusted gross income is $46, 680 or less, you may qualify for some subsidies. If you’re less than $62,920 as a couple in 2014, which is pretty good. You may qualify for a subsidy to help pay your medical premiums.
You can qualify if you buy health insurance coverage on your state health insurance exchange. Now you can look that up on www.healthcare.gov and that’ll tell you links for how to buy on the exchange and what the prices would be. But there are federal subsidies if you’re under those limits. Now again those limits are $46,680 if you’re single or up to $62,920 for a couple in 2014 of income that you can be making and still qualify for federal subsidies. What’s the website again? www.healthcare.gov and it’ll give you the links because you have to buy the health insurance coverage on the state health insurance exchange to qualify for the subsidies.
All right now let’s take advantage of some cost-sharing subsidies. If you’re—and this is different—if your income is below 250%, not 400% like I just mentioned, so it’s a lower test or a lower limit. But if your income is below 250% of the federal poverty level, which is now $29,175 if you’re single or $39,325 for a couple in 2014. You can also qualify for a cost-sharing subsidy that reduces copayments and other out of pocket expenses.
But this is only available if you buy a mid-level—what they call—silver insurance plan on your state exchange. The silver plan’s more expensive than a bronze but with this extra subsidy the silver plan may be a better deal and it may end up being less expensive than just buying the bronze.
So let me go over all that again. There are subsidies available if your income is below a certain amount. If you’re a family and your income’s below $62, 920, you need to check into this. If you’re single and your income’s below $46,680, you need to check into this. The first subsidy is to pay for your premiums that I mentioned. The second subsidy may be a cost-sharing subsidy to help reduce copayments and other out of pocket expenses in addition to helping you save on the premium on your first subsidy. So they are huge benefits.
All right let’s take a quick break because I know I overwhelmed you there. And we’ll be back in about a minute, I’ll let you get pen and paper if you need to take any notes I’m going through a lot. But wow look at all the dollars I just possibly saved you if your income’s are under those limits. Even if you don’t know how to do it folks, you now know there is something available. And that’s the key to financial planning, not knowing all the solutions but knowing all the potential sources of solutions.
Now that you know if your income’s near or under those limits, you know to pick up the phone, you know to call and go to a competent, qualified planner and ask, “There might be opportunities I’m missing out on, are you competent in the areas of financial planning with healthcare, taxes, and insurance? If you are, can you please help us navigate this quagmire of benefits we think we feel we might be missing out on. And how much do you charge for those services if so?” That’s the next phone call you need to make if your incomes are at or around those levels I’m talking about on the show. So again I’ll take a quick break, let you get pen and paper and we’ll be right back.
All right welcome back again everyone. Now with these subsidies that I’m talking about and they can be like gold for some of you if you get assistance on paying your premiums and assistance on paying your copays and some of your expenses out of pocket expenses. I want you to avoid—or I want you to be prepared to make sure you can avoid any surprise tax bill if you get a subsidy and here’s what I mean.
If your income changes throughout the year, you need to notify your state health insurance exchange. The reason is the subsidy was based on your income, so if your income changes and it goes down you may qualify for benefits that you didn’t qualify for with your higher income or more benefits than you did with your higher income. But, conversely if your income goes up during the year, you may lose that subsidy and therefore be taxed on that subsidy.
So you don’t want a big surprise tax bill because your income changed. So be careful there. And don’t forget marriage can increase your income and you don’t want a surprise bill at the end or be not a valid subsidy and invalidate the whole subsidy that you already got. So be very careful there if your income changes. Now if you’re close to the cut-off of whether you qualify for subsidy or not, it makes even more difference. If you’re close to a cut-off and you say, “I’m almost there.” Then here’s a strategy: you can maneuver your income slightly by making contributions to a 401(k) or raising contributions to a 401(k) because that reduces your income.
So if you do that, if you see you’re close to a cut-off, it may help you qualify for a subsidy you might not otherwise—not be available to you. So it might otherwise be unavailable, but if you make a contribution to the 401(k), drop yourself under the threshold. Now all of a sudden you qualify for a subsidy, that can be a bonanza for you.
Don’t unintentionally boost your income. What do I mean by that? Sometimes people will say, “I’m going to convert an IRA to a Roth IRA.” And what’ll happen is a tax advisor will do your tax return, they’ll say “That’s a marvelous idea. Let’s do it now.” Not realizing you qualified for a subsidy for these healthcare benefits, that’s an income-test based subsidy. And if you shift IRA money and convert to a Roth IRA, that immediately forces taxable income or raises your income for the year, may push you right through that bracket of no longer qualifying for a subsidy.
So you want to be very, very careful there. That’s why you want to have all your professional advisors working together as a team. You want a certified financial planner, certified public accountant, your attorney, your insurance professionals all working together. You want to try and bind your financial plan together so that it’s a cohesive unit rather than fragmented parties all working on single components of your plan and interfering with other components which could have worked much more smoothly. So you want to be very careful there to not unintentionally raise your income.
You could borrow money from a 401(k), let’s say at work, and that would be tax free. But if you withdraw money from a 401(k) that would be taxable. So you have to be careful of your otherwise tax strategies or income strategies when you’re applying for these subsidies.
Now you can apply for a subsidy when you retire early or lose your job and I want you to think about this. If you have income only for part of the year or every other year you had full income for that year pushing you past the limit of income that you could qualify for a subsidy, here comes the year you’re retiring and you retire in June. Well now if you worked the whole year, your income might have been too high to qualify for a subsidy. Well what if you only worked five months for the year and now the income for the remainder of the year added to those first five months is under the limit? Enabling you to qualify for the subsidy. Bingo.
You now might qualify for a subsidy in the year that you require because you retired mid-year. Maybe even lost your job mid-year. So I want you to think this through whenever you have an income change. Go to your state’s exchange, the subsidy’s based on your full year’s income, remember. Go to your state’s exchange, here’s how you can find them. You can find links for the state’s exchange at www.healthcare.gov and find out what you qualify for based on your full year’s income especially in those fragmented years.
Now you can also deduct—don’t forget—your health insurance premiums if you’re self-employed under certain circumstances. What are those circumstances? Well if you’re self-employed and not eligible for health coverage offered by employer or an employee’s spouse, or a spouse’s employer and you look at your premiums as being tax deductible on your own health insurance. So if you’re not covered under your own plan, an employer’s plan, or a spouse’s employer’s plan, you have the ability in most cases to deduct your own self-employed health insurance premiums. So that’s important to know.
The key is as long as it doesn’t exceed your self-employment income. So the premiums you cannot deduct that premiums for health insurance to the extent they exceed your self-employed income. All right I’m going to take a quick break, when I come back I’ll help you look at how to compare different types of policies to get the best deal. We’ll be right back.
Okay now let’s get into comparing policies and how to buy and purchase the right policy and how to shop. First thing I want you to do is compare overall costs, not just the premium. It sounds obvious but a lot of people don’t think to do that. When they’re shopping they’re just thinking premiums and maybe deductibles. But here’s what I want you to look at and not forget. If you buy health insurance on your own, you could switch policies when open enrollment season for 2015 coverage starts on November 15th of 2014. So this year starting November 15th, you could start shopping for next year’s coverages.
Now most employer plans also have open enrollment in the fall. So compare premiums but also remember compare out of pocket costs for the medicines that you take, for your typical healthcare services. Compare maximum out of pocket expenses, not just the typical, in case you have a major health issue. And also make sure your doctors are still in the network. They may have been in the network last year, you’re assuming nothing changed but things do change. So you need to make sure your doctors are still in the network also when you’re considering staying with the same plan or whether to shop or change plans.
Now you can change your health plan mid-year under certain circumstances. Open enrollment’s closed for 2014 right now beginning November 15th, like I said, you could start shopping for next year which is 2015. But you may qualify for a special enrollment period if you leave your job or retire and lose employer coverage. Even if you’re eligible for Cobra throughout the year or mid-year. Or if you experience, pay attention here, a life-changing event mid-year. Which includes getting married, getting divorced, even having a baby or moving to a new state.
So all of those circumstances might qualify you for being able to change coverage mid-year and not have to wait for open enrollment. And I know most people are unaware of that but those changes are common. So again those changes they consider a life changing event such as, but not limited to, getting married, getting divorced, having a baby, or moving to a new state. Now listen, go to a website www.healthcare.gov, and it’ll give you more information about eligibility on that.
Now here’s another one, the federal law, you know when plans terminate or when your employment terminates, is called Cobra that lets you keep your employer’s coverage for up to 18 months after you leave your job. You’ll usually pay much more for Cobra than you did though for coverage while you were an employee. And even employers typically pay about 70% of the cost of coverage for employees but contribute nothing towards Cobra.
So compare the cost of Cobra with the cost of buying a policy on your own. Because you’re on your own. If you buy a new policy on your state exchange and your income is low enough, like I brought up earlier in the show, you may qualify for a subsidy to help with premiums even further. Shop on and off the exchanges. If you don’t qualify for a subsidy, look for coverage on and off the exchanges for more options.
For example, United Healthcare sold policies in only 12 state exchanges this year but sold policies off the exchanges in 25 states. Policies sold off the exchanges must meet some of the same requirements as those sold on the exchanges including coverage for the 10 essential health benefits. But they may have different premiums and different provider networks. So you want to shop on and off the exchanges to be careful to make sure you’re getting the best plans for yourselves.
Now also remember, pick the best coverage for your kids. We don’t think about that enough. Adult children, because of the new healthcare changes over the last couple years, can stay on most parent’s policies until they turn age 26 now. Whether or not they still live at home and whether or not they are full-time students. So you may not have to pay extra for a policy that covers an adult kid even if you’re already insuring other siblings. Because you may get a family package type discount it may not cost extra.
But if you do have to pay more or if your child lives in another city that isn’t covered by your plan’s in-network providers, and that happens a lot. They’re somewhere else—they’re living somewhere else and they’re not in-network, their providers aren’t in-network. It may be less expensive for him or her to buy a separate policy. That’s especially true if you don’t claim your child as a dependent on your tax return and therefore he or she might qualify for a subsidy on their own.
All right if you pay cash, ask for a discount. If you have a high deductible plan or you go to a doctor that’s out of network, see whether you can get a discount for paying cash. If you can, you might discover that the insurer’s rate that they pay is a lot more than you would pay yourself. If that’s the case, you still may be able to file the claim yourself afterwards so that it can count towards your deductible. So you’re paying cash, getting the lower cost but using a higher amount towards your deductible because you paid for it yourself. So be very careful on asking, “Hey should I pay cash and what’s the difference?” and then still having it apply towards your deductible. Not only the amount you paid cash, but the amount that would have been contributed towards the deductible.
All right now, appeal denials. You may be able to get help from your state insurance department if coverage for a drug you need’s denied by your insurer or you want to go out of network for a special procedure. Find out about your insurer’s appeal process. You could get help from your state insurance department on this too. Go to www.naic.org and it’ll give you links for help there.
Now watch out for common errors on your bills. Another tip is ask for an itemized bill when you have a hospital stay or major procedure and question any unexpected charges. The other thing you need to do then is match your bill with your explanation of benefits coverages. Coverage may be denied if the procedure just wasn’t coded properly and yet it might be covered. So you want to find out if your bills are being billed for unnecessary, duplicate or maybe uncovered claims that really would have been covered and were just coded incorrectly.
All right, compare costs using your insurer’s web tools. So your insurer, themselves, have web tools and tools and apps. This is probably the best way to find the actual price. You’ll pay for procedures based on your insurer’s negotiated rate and your deductible and coinsurance level. Some companies have shown on their websites 10 estimates for your out of pocket costs for a procedure in your area. While other insurers have shown as many as 250 and even yet other insurers beyond that have shown over 500 different medical services and adding online scheduling services and out of pocket cost comparisons.
So you may have cost comparisons that are all across the board just by going on to your own insurer’s websites. So look into that, they’ll provide a lot of the comparisons for you to help you find the lowest cost providers. And finally today, use tools to comparison shop prescriptions not only services. Many of the insurers and employers have tools that help you compare prices for your medications also showing brand name versions, generics, and therapeutic alternatives. They offer smartphone apps in many cases to look up the lowest cost pharmacies before you even leave the doctor’s office.
So these are just a few of the many ways that you actually have control over how to reduce your medical expenses in all these different areas and how to make the most of your dollars that can be used in other areas in your budget. I wanted to share that in this series. I hope you found it helpful. Any questions that you have you can always feel free to call me, you can email us. But I wanted to share this because I’m trying to help you stretch your dollars, make the most in this show called All Things Financial. We’ll be back next week with more on different areas to help you make the most of your money. Thanks again for tuning in.