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©2015, College for Financial Planning, all rights reserved. Session 7 Health Insurance Planning CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL.

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Presentation on theme: "©2015, College for Financial Planning, all rights reserved. Session 7 Health Insurance Planning CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL."— Presentation transcript:

1 ©2015, College for Financial Planning, all rights reserved. Session 7 Health Insurance Planning CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Financial Plan Development Course

2 Start Recording This class is being recorded so you may review it at a future time. 7-2

3 Health Insurance Health problems can break the bank! 7-3

4 Health Insurance Basics Planner’s role: Understand and assist clients with health care coverage issues or refer! Lack of planning and understanding can lead to catastrophic problems Coordination of plans and periods of transition are especially critical 7-4

5 A Changing Landscape Patient Protection and Affordable Care Act Made it easier to shop and price compare policies Eliminated need for employment to get coverage Lifted minimum coverage requirements Incorporated tax credits to help manage adverse selection Requires employers with more than 50 employees to participate or stiff penalties Parts may be repealed! 7-5

6 Transitions Event Time Frame COBRA LimitImpact if time frame is missed Marriage60 daysNAMiss pre-existing conditions waiver/can be denied/wait for open enrollment. Divorce60 days36 monthsOut of luck until open enrollment in exchanges or have pre-existing conditions apply. Death60 days36 monthsOut of luck until open enrollment in exchanges or have pre-existing conditions apply. Disability60 days29 monthsREALLY out of luck until open enrollment in exchanges because who wants to take on sure claims! Losing or Changing Jobs 60 days18 monthsMiss pre-existing conditions exclusion/ can be denied/wait for open enrollment. 7-6

7 More Transitions Event Time Frame COBRA LimitImpact if time frame is missed Reducing Hours Worked 30 daysNAMay have insurance voided if under 30 hours and not know it. Moving60 daysNAMedicare or HMOs may not work in area. Considered triggering event. Birth30 daysNAMiss pre-existing conditions exclusion. Age 2660 days36 monthsMay be denied coverage, have pre-existing conditions or wait until exchange open enrollment. Age 653 months before or after month turning 65 NA - Medicare Rules Can be denied supplemental coverage, have pre-existing conditions and face increased premiums for rest of life. No access to exchanges. 7-7

8 Transition Issues: Child to Adult Children can stay on parents’ plan up to age 26 Need to shop now rather than just assume COBRA best or only choice if health problems occur. Parents may want to pay for coverage to protect themselves when adult child can’t or won’t. Parent whose birthday comes first in a year (Jan. vs. Sept.) is primary provider for determining coverage, COBRA, and coordination of benefits. 7-8

9 Transition Issues: Change in Work Status Changing jobs/unemployment/part-time May be able to use COBRA or exchange policy until job benefits acquired. Qualifying event may allow sign-up under spouse’s plan if done within 60 days from event. Do not cancel any insurance plan until verified that new insurance is in effect (new lawsuit area). Based on status of deductible, anticipated medical expenses, and time of year, may choose to keep plan until year-end even if more expensive. Proof of continuous coverage still important. Exchanges have solved this major problem but timing still critical. Don’t let clients wait until last minute. May not be top of their list but make it top of yours for clients in transition! 7-9

10 Transition Issues Retirement Some companies offer subsidized retiree health but have requirements that must be covered in the year before retirement. Coordination with spouse’s plan important. People who were deferring retirement until qualifying for Medicare now have options! Affordable Care Act has a big impact here! Exchanges solve this issue. Critical to sign up for Medicare and Medigap policy within six-month window time frame or be penalized forever! 7-10

11 Exchanges Open enrollment ends March 31 Open enrollment for 2015 starts Nov. 15th Coverage begins Jan. 1 4 plan levels Premium tax credits Increasing tax penalty for no coverage Premium Out of Pocket Costs 7-11

12 Essential Health Benefits Ambulatory patient services: outpatient care you get without being admitted to a hospital Emergency services Hospitalization, such as surgery Maternity and newborn care: care before and after your baby is born Mental health and substance use disorder services, including behavioral health treatment (including counseling and psychotherapy) Prescription drugs Rehabilitative and habilitative services and devices: services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills Laboratory services Preventive and wellness services and chronic disease management Pediatric services 7-12

13 Four Levels Percentage plan pays of average overall costs of providing essential health benefits to members. Not the same as coinsurance. 60% Bronze 70% Silver 80% Gold 90% Platinum 7-13

14 Life Changes Require Reporting Married or divorced Have child, adopt, or place child up for adoption Change in income Get coverage through job or Medicare or Medicaid Change residence Disability status change Gain or lose dependent Pregnancy Other changes impacting income and household size Other: tax filing status, citizenship or immigration, incarceration or release, tribal status change, correction to name, birthdate, or Social Security number 7-14

15 Changes If change creates special enrollment period Online or call Have 60 days from qualifying event to enroll in new plan If no special enrollment period but tax credit qualification changes: Can choose to adjust amount of tax credit applied to premiums 7-15

16 What about the Dudella family? Health insurance has $600 individual, $1,200 family deductible, with out- of-pocket max of $2,000 for individual and $5,000 family out-of-pocket. They have a $25 co-pay for doctor visits including specialists, mental health, and chiropractic care. After deductible, the following are covered at 90%: outpatient physical, speech, and occupational therapy, prenatal and maternity, inpatient hospital services, outpatient hospital services, home health care, skilled nursing facility, inpatient behavioral health, ambulance services, and durable medical equipment and supplies. Emergency room visits have a $100 deductible. What they pay now: Flex plan contributions for year $2,500 Health insurance premiums $6,504 Dental & vision $1,208 $10,212 What percentage of their gross income does this represent? 7-16

17 What don’t we know? Dudellas’ options for coverage? How much do they use or exceed contributions to plan? Is part of their $2,000 per month going to medical care? Do different deductibles make any sense? Could Nancy choose to get coverage? Can she fund flex plan too? How is their daughter covered? 7-17

18 Dudella Recommendations We do not have a clear understanding of how much you really spend on health care, how your daughter is protected, and how you manage your health care costs between the two flexible benefit plans. Recommendation: Please send us information on Autumn’s coverage right away so we can evaluate whether there is a gap that needs to be addressed or whether the exchanges would be beneficial. Recommendation: At next open enrollment, we should meet to evaluate and explore your various health care options along with your entire benefit choices including contributions to your flex plan. At that time, we will also evaluate what is remaining in your flex plans and craft a plan to ensure that the money does not revert to your employer. 7-18

19 Plan Development — Dowlers Write a brief recommendation explaining why you are deferring reviewing health insurance to next year’s open enrollment and deferring addressing long-term care for five years unless new information surfaces about health or policy options. Be sure to include potential consequences for deferring either issue. 7-19

20 Behavioral Economic Concepts & Building Your Plans Planning Fallacy: tendency to underestimate task completion times. For example, the deadline to have your executive summary submitted so you can sit for the next exam is 3 weeks PRIOR to education notification date listed by CFP board. This gives us time to grade, and you time to make any changes and then complete oral. Are you on track? Information Bias: planner and clients tend to seek information even when it can’t change or affect action or outcome. Don’t overcomplicate or overanalyze. 7-20

21 More Biases Ambiguity Effect Tendency to avoid options for which information is missing. Telling client they have a problem isn’t enough; giving them the amount they need to cut monthly expenditures by in case of a disability or death tells them the extent of the problem. Giving advantages AND disadvantages helps them know what to consider when making a decision. Conjunction Fallacy Tendency to believe that specific conditions are more probable than general ones. Details make something more real. 7-21

22 Trust Diminishes When… Distrust Trigger for distrust is when no real disadvantages are provided, or information given is perceived to be from a biased source or large company. Reactance Urge to do opposite of what someone wants you to do out of the need to resist a perceived attempt to constrain freedom of choice. Occurs when only given one option. Always provide at least one alternative. 7-22

23 The Big Concept: Framing 1. How a question is framed can markedly change the results. 2. If a person does not have a “frame” for making a decision, they use one they have used in past for similar decisions, or one that is provided if it seems reasonable. 7-23

24 Provide the Decision Frame By providing: Issue summary Clear, actionable recommendation Advantages Disadvantages Alternative You are creating the frame. 7-24

25 Advantages & Disadvantages Tell me what characteristics are important Tax advantage? Penalties? Time frame? Cost – time and money? Complexity? Sharpe ratio? When you tell me what is important, I’m confident I can compare alternatives and make decisions. Otherwise, I feel I need to research to understand. 7-25

26 We are grading… Do you pick the important characteristics? Are your descriptions accurate? Always include tax rules in detail. Do you give clients enough specific and detailed information? Eliminate unnecessary words or general platitudes. Make recommendations specific to the client: “Can’t touch without penalty for 13 years when you turn 59½.” 7-26

27 Grading Matrix 7-27

28 Next Class Prior to next class Read Chapter 3 Review Dowler MoneyGuidePro report with attention to investment section. Complete Plan Development #13 Risk Tolerance Issues Analysis of Current Portfolio Calculating Sharpe Ratio 7-28

29 ©2015, College for Financial Planning, all rights reserved. Session 7 End of Slides CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Financial Plan Development Course

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