Health Insurance Premiums May Push Past $10K Mark in 2012

An aging workforce, poor employee health, and costly chronic medical conditions are predicted to push health insurance premiums to more than $10,000/employee/year for large employers in 2012. Effective employee benefits communication pieces are definitely necessary in this economic environment when raises and bonuses may not be possible but health insurance premiums continue to soar.

Subsequently, the average amount of employee contributions toward their health insurance will be about $2,306.

The American work force is increasingly in poor health, with pricey chronic health conditions like diabetes, obesity, and heart conditions. Employers have been utilizing a combination of increased out of pocket costs and payroll contributions and will, undoubtedly, continue to shift the cost to employees to keep their costs to a manageable level.

Many employers are adopting incentives for employees to participate in prevention and wellness plans to better manage chronic conditions. Although healthcare reform addressed many of the ills with plan designs and access to care, no provisions addressed the need to curtail the spiraling premiums.

WHERE DOES HEALTHCARE REFORM GO FROM HERE?

It looks like Healthcare Reform is heading for the Supreme Court as the most controversial component of the law, the individual mandate, has been deemed unconstitutional by the lower courts. From the moment the law was enacted I've wondered how an individual can be forced to buy health insurance. However, this mandate is absolutely necessary in order for reform to work to prevent adverse selection. Without the inclusion of healthy people in the pool of insureds the insurers will assuredly get an influx of unhealthy people and will, therefore, be in a tenuous financial situation. Now that insurers cannot deny people health insurance because of pre-existing medical conditions (for children since 10/1/10 and for all others beginning 1/1/14), sick people have access to coverage and will take the opportunity at any cost. But insurance companies must get an equal number of healthy people to balance out the number of sick people or they will be out of business, and no one wins! But can the government force an individual to buy something they do not want?

Without healthcare reform the most advantageous prohibitions will be lost such as the prohibition of pre-existing conditions exclusion; the prohibition of lifetime maximums; the elimination of annual limits for essential health benefits; the continued eligibility of children to age 26; the requirement to cover preventive services with no co-payments or co-insurance; and the requirement to treat birth control for women as preventive care with no co-payments. But, since there was no discussion about controlling the premiums the question remains--How can you force someone to buy a very expensive commodity that they do not want?

Paying it forward

If I died today my daughter would be a millionaire! Not because I have amassed this giant empire, but simply because I have purchased that much life insurance. We cannot continue to allow our children, nieces and nephews, and grandchildren to start out with nothing. The American economy is no longer the behemoth vehicle that can provide unlimited opportunities to anyone who gets a good education and is willing to work hard. Now, more than ever, we must learn to pass on wealth.

There are two ways even those with modest incomes can pass on wealth to the next generation: real estate and life insurance. Buying a house may still be the best way to build wealth in America in the long term. If we have, indeed, paid off the mortgage in thirty years (or by the time we die, whichever comes first) the next generation will inherit a valuable asset. No matter where you live, real estate is an asset that your children can utilize to get started in life. They will then have a down payment on their own home or the seed money to start a business or to start investing. Real estate that is encumbered is not as attractive an inheritance so it is necessary to have enough life insurance to pay off the mortgage in the event of your death if your home is not paid off. So, besides having the obvious life insurance policy to bury yourself, you definitely need enough life insurance to pay off the mortgage.

So after purchasing these two basic policies we all need at least one permanent life insurance policy which never expires and pays us by building cash value. The cash value is an asset which you can withdraw or borrow against or use as collateral for a loan or even use for your own retirement while not affecting the death benefit which is there to leave for the beneficiaries to pass on wealth. The beauty of life insurance is that it is the most cost effective way to fund an inheritance for the next generation for people of modest means since you never actually invest the amount of money that you are able to pass on.

We cannot continue to live by that old mantra of "I got mine now you get yours". The amount of money needed for a minimum 20% down payment of a median priced house today is out of the reach of most young people. And if they are also repaying college loans, which may be as much as the price of a house, home ownership, and, consequently wealth building will be almost impossible for them to attain.

The color of one's skin is less of a discriminating factor than the size of one's bank account in America today. So, whereas we cannot change the color of our skin, we can impact the size of our children's bank account by committing to passing on wealth to the next generation.

April is National Autism Awareness Month

April is National Autism Awareness Month. Since my daughter is a Speech Pathologist, I am acutely aware of this condition and its ramifications. The numbers are alarming! This condition occurred in 1/10,000 births but now occurs in 1/110 births! As I watch the care and dedication of these parents of autistic children I am struck by another alarming question--what will happen to their children when they die? Who will care for 30 and 40 year old autistic adults who cannot take care of themselves? As an insurance broker and advocate of utilizing life insurance to create an inheritance for your children, I can't imagine a group where this need is more prevalent. Large amounts of funds will be needed to provide ongoing food, shelter, and custodial care for the autistic adults. And since the numbers are so pervasive, this will be a public health issue that may place a crushing burden on our federal and state governments. So, although ultimately this care will fall on the shoulders of the government, my life experiences tell me that the quality of care will be better for those that have their own money. Since autistic people are able to live to normal life expectancy that may mean that funding will be needed to care for them for 30-40 years. Only the very wealthy will be able to leave their children enough money to satisfy this need. And how will the diminished quality of care in institutions affect their life expectancy? If extended family is willing and able to care for them this would place an incredible financial burden on those family members if there is not enough money left for their care. So how can a parent bequeath a million dollars to take care of their autistic child after their death if they're not a millionaire? Life insurance provides a unique solution to this problem. Because these are large policies, the premiums will be higher, depending on the age and health of the parents when the policy is issued. But I can't think of another way to be assured that your autistic child will receive the same level of care and love after your death than to invest in a large life insurance policy now. In the end, there are two kinds of pain--the pain of sacrifice or the pain of regret.

Health Insurance Reform Update

Besides the benefits that debuted in 2010, such as allowing parents to keep their adult children on their health insurance until age 26, and requiring insurers to accept children under the age of 19 with all of their pre-existing conditions, and prohibiting insurers from cancelling coverage when people get sick (except in cases of fraud), there are nine ways the healthcare reform law may affect you in 2011.

1. Starting this year, health insurers are required to spend at least 80% of their premium dollars on medical care or give rebates to consumers. The goal is to restrain executive salaries, administrative and marketing costs, and overall profits of insurers. Also, regulators have proposed that beginning July 1 premium increases of 10% or more be subject to review by state and federal government. Although the Insurance Commissioner in California has the authority to question rate increases, this additional oversight would be helpful in states where there is no such authority.
2. In 2011 the law begins to close the notorious doughnut hole gap in prescription drug coverage for Medicare recipients. Starting in January, drug companies will give seniors 50% off brand drugs while in the doughnut hole.
3. Chain restaurants and vending machine operators will now have to display calorie content on menus and drive-thru signs, as well as provide diners with a brochure detailing nutritional information and fat content of their dishes.
4. Wealthier Medicare beneficiaries will pay higher Part B premiums in 2011 but the income threshold was adjusted to prevent more people from inclusion into this affected group. The law freezes the threshold at the current level of incomes of $85,000 or above for individuals or $170,000 for couples.
5. Over the counter drugs can no longer qualify for Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA), Health Savings Accounts (HSA), or Medical Savings Accounts (MSA) unless there is a doctor's prescription.
6. Medicare is increasing payments by 10% to primary care physicians as an incentive to address the shortage of primary care providers. The bonus will run from January 1 until the end of 2015.
7. Medicare beneficiaries will be able to get free preventive services, eliminating any cost sharing such as copays or deductibles, beginning in January. They can also get a free annual wellness exam from their doctor who will give them a personalized prevention screening schedule for the next decade. The law also eliminates any cost sharing for the Welcome to Medicare physical exam that previously was subject to a 20% copay. For small employers with fewer than 100 employees the law authorizes the federal government to issue grants to companies that establish wellness programs focused on nutrition, smoking cessation, physical fitness, and stress management.
8. Payments for Medicare Advantage Plans (HMOs) are being restructured. Rates will be frozen at 2010 levels with lower rates phased in beginning in 2012. Some plans may respond by eliminating ancillary benefits like dental and vision.
9. Starting in July, Medicaid will stop paying claims for treatment of some hospital acquired infections, following the ban of payments by Medicare and private insurers. It is estimated that about 1.7 million patients pick up life threatening but preventable infections while hospitalized.