Marketplace Health Insurance and Turning 65?

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Couple smilingBefore the Affordable Care Act, maturing adults who could not afford, or chose not, to purchase their own health insurance would count the days until their 65th birthday, when they became eligible for Medicare.

Now, 10,000 Americans hit that milestone every day, but for some who have coverage through the Affordable Care Act insurance marketplaces, Medicare may not be the obvious next step.

Consumers eligible for Medicare can keep or renew their marketplace plan as long as they don’t join Medicare.

However, only a minority of those who have qualified for the health law subsidies prior to 65 [that reduce their plans’ premium costs and cost-sharing] will be able to keep that financial subsidy assistance once they become eligible for Medicare. This option is available only for people who would have to pay for Medicare Part A [the hospitalization benefit], but have not enrolled. That generally happens when seniors didn’t pay into Medicare for at least 10 years, which is sometimes the case for recent immigrants and people who may have come into the workforce late in their lives.

The majority of older adults — those eligible for free Part A coverage — cannot keep their subsidies when they qualify for Medicare, usually at age 65, according to an Internal Revenue Service spokesman.

Although seniors can pay full price to stay in their marketplace plans as long as they don’t enroll in Medicare, postponing the switch is generally not a good idea. If they later decide to enroll, they will face Medicare Part A and Part B late fees that will raise their premium costs, sometimes substantially.

Yet there are few guideposts to keep most consumers with marketplace insurance from making what could be an expensive mistake.  Except for people receiving Social Security benefits before they turned 65, there’s no reminder from the federal government or most state exchanges when it’s time to enroll in Medicare. There’s no warning to individual consumers when they become eligible for Medicare about the financial risks they could face if they don’t notify the marketplace and insurers to stop their subsidies. And there’s little help from the maze of conflicting marketplace and Medicare rules.

But there is a way to minimize the chance of problems, said Joe Baker, president of the Medicare Rights Center.

“The federal government should send a notice to everyone 64 years old saying you’re going to become eligible for Medicare at age 65 and here are your options, and some information about how to enroll, why to enroll and when you should enroll,” he said.

Determining whether marketplace coverage is better than Medicare depends very much on the individual.

It boils down to a comparison of benefits and costs. And that’s a difficult task since marketplace plans have different deductibles, cost-sharing, covered drugs and provider networks. Some plans restrict members to a limited number of providers, while traditional Medicare does not. And the calculation is also going to depend on whether you have chronic health conditions or if you are someone who doesn’t frequently visit the doctor.

Plus how much health care someone needs can also change over the years. In the final analysis, if someone is eligible for Medicare, it’s recommended to enroll.

But whether they join Medicare or keep their marketplace policy, it is up to consumers to notify the marketplace and the insurer to stop the subsidies as soon as they qualify for Medicare. If they fail to do that and continue to receive subsidies after they became eligible for Medicare, they may have to repay that money when they file their taxes. If seniors with marketplace coverage also enroll in Medicare Part A, the government will eventually cancel their marketplace plan if they don’t cancel it themselves.

Medicare rules established well before the marketplaces were created to encourage people to enroll when they first become eligible — within the period from three months before and three months after their 65th birthday. People with job-based insurance or coverage through their spouse’s workplace, usually have until eight months after that insurance ends.

Enrolling later can result in penalties. People who would pay a monthly premium for Part A and enroll late may be charged an extra 10 percent in their premiums for twice the number of years they could have had Part A but did not enroll.

For Part B, beneficiaries may pay a 10 percent permanent penalty for every year they were late to enroll. Under some circumstances, there is also a fee for postponing enrollment in a Medicare prescription drug plan.

An area of great confusion is that people in marketplace plans are seeking help after their initial Medicare enrollment period has passed. They didn’t understand the consequences of not enrolling in Medicare.

Beneficiary Designations: They May Be Out of Date

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Young Couple ConcernedIt’s yet another necessary form in that seemingly endless pile of paperwork when completing a new insurance application. And, since the beneficiary designation can be changed at any time, does it really matter?

Of course it does — for two important reasons. First, as more and more assets pass by beneficiary designation, this form has become a person’s primary method of passing assets to their beneficiaries. Second, people rarely initiate changes in beneficiary designations, so a “temporary” solution may become permanent, perhaps with unintended results.

The increasing importance of beneficiary designations:

The scope of property passing by designation has increased significantly in recent years. Traditionally, this property was limited to life insurance, annuities, retirement accounts and bank accounts. More recent additions include all types of financial and securities accounts, and even real estate in some states.

Some of the accounts may be designated as “Transfer on Death” or “Payable on Death,” but the result is generally the same. It is the beneficiary designation and not the will that controls the disposition of this property at death. Consequently, people may find that few assets actually pass pursuant to traditional estate planning documents.

Since, as a matter of contract law, the property passes according to the designated beneficiary, the account agreement can impose restrictions and controls on the disposition of property. Acceptance of the beneficiary designation is at the discretion of the company; and designations that are long or complicated may be rejected or require additional documentation.

It is important to ensure that procedures are followed. In general, a beneficiary designation is not effective until it is received and accepted by the company. Simply mailing the form may not be sufficient; people should follow up with the insurance company to ensure that the beneficiary designation is properly recorded.

Circumstances change: 

An IRA payable to a former boyfriend? Life insurance payable to parents rather than the spouse and children? An annuity payable to a former spouse, a long dead relative or a former best friend who is now married to an ex-spouse?

The beneficiary designation may have been appropriate at the time — but times change. If you think an outdated beneficiary will “do the right thing” and hand over the money, think again. While it does happen, many cases prove otherwise.  The following are four common life changes to review:

1) Change in marital status

If a person is getting married for the first time, then he or she may want to change the beneficiary to the spouse; however, this change may be less likely if it is a second or later marriage. While naming the spouse as beneficiary is generally easy for accounts with current employers such as life insurance and retirement benefits, accounts at former employers or amounts that have been rolled over from former employers often get forgotten.

More frequently, problems usually arise when the person gets divorced. In some states, beneficiary designations cannot be changed until the divorce becomes final. In other states a divorce has the effect of cancelling all revocable designations for the former spouse. However, sometimes the former spouse has to be named as beneficiary while the children are minors. To avoid any uncertainty, people should update their beneficiary designations.

2) Birth or adoption of children or grandchildren

The birth or adoption of the first child usually prompts a major review of the estate plan and the need for new contingent beneficiaries. If a child is named individually (rather than as a member of a “my children” class), then the designation will need to be reviewed and possibly updated as additional children are born.

The same considerations apply to grandchildren. If children are adopted, it may be necessary to ensure they are included in the definition of children.

(3) Death of beneficiaries

The death of a spouse will likely prompt a major review of the beneficiary designations as property will now generally be passing to the next generation. Distribution options will have to be carefully considered as alternatives for children and/or trusts for their benefit may result in reduced or significantly different tax and payout consequences.

The death of one member in a group of beneficiaries may, depending on the account agreement, result in larger shares for the remaining beneficiaries. If this is not the intended result, then the designation needs to be updated.

The situation results in problems much more frequently than it should. A common situation is when “children” are designated as beneficiaries. Under some account agreements, the death of one child will result in the other living children receiving the share of the deceased child.

This excludes the descendants of the deceased child, a probably unintended consequence. To prevent this, the designation should be changed to include a share for the descendants of the deceased child or changed to “per stirpes.”

(4) Major life changes, change of plans and dislike of beneficiaries

A major life change, such as job change, relocation or retirement, is a good opportunity to review all details, including beneficiary designations, as part of the effort to consolidate and simplify planning.

As people age, their plans may change and their likes and dislikes may also change. The need for trusts for the children may either go away or become more important as they mature.

Concern about spouses of children may have diminished or become heightened. People may need more or less complicated planning because of the size of their estate, changes in tax laws or changes in states of residency.

Finally, beneficiaries may fall into and out of favor for all sorts of reasons. Changes for whatever reason need to be reflected in the beneficiary designations.


The tax information or estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.

Private Medicare Plans and 2016 Doctor Directories

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Smiling DoctorStarting this year, the federal government will require health insurers to give millions of Americans enrolled in Medicare Advantage plans or in policies sold in the federally run health exchange up-to-date details about which doctors are in their plans and accepting new patients.

Medicare Advantage plans and most exchange plans restrict coverage to a network of doctors, hospitals and other health care providers that can change during the year. Networks can also vary among plans offered by the same insurer. So it’s not always easy to figure out who’s in and who’s out, and many consumers have complained that their health coverage doesn’t amount to much if they can’t find doctors who accept their insurance.

Under a rule published in April, 2015 by the Centers for Medicare & Medicaid Services, Medicare Advantage plans must contact doctors and other providers every three months and update their online directories in “real time.” Online directories for policies sold through, the health law exchange run by the federal government in 37 states, must be updated monthly, CMS announced in a separate rule.

Inaccuracies in the Medicare Advantage directories may trigger penalties of up to $25,000 a day per beneficiary or bans on new enrollment and marketing. CMS will also use the directories to help determine whether insurers have enough doctors to meet beneficiaries’ needs.

The federal exchange insurer plans could face penalties of up to $100 per day per affected beneficiary for problems in their directories.

Studies have shown massive error rates in these directories, including states in the federal exchanges. If consumers select a health plan because they believe their hospital or physician is a participating provider and it later turns out that’s an error, they could be stuck with that plan for the year.

Regulators also rely on these provider directories to make assessments about network adequacy.  And when provider directories include physicians who have died, moved out of state, or aren’t accepting new patients, adequacy of the network is overstated.

The administration last year [2015] announced rules designed to make sure those networks have adequate numbers of providers. The newest rules will help guarantee that consumers get good information on those networks.

People in some states have had trouble finding doctors in their plans and others who were misled into thinking their providers were in network have been socked with huge out-of-network bills.

The new Medicare Advantage rules are a response to complaints from beneficiaries and doctors about “directories including providers who are no longer contracting with the [plan], have retired from practice, have moved locations, or are deceased,” CMS officials said in the notice to insurers. Some directories also list providers who are still in the plan’s network but not available to new patients.

About 16 million seniors have enrolled in the private Medicare Advantage [Part C] plans, which are an alternative to traditional Medicare.

Sometimes people start treatment with a doctor who doesn’t stay in the network for the  whole year or think they are they are picking a plan that covered a certain doctor and then discover it did not. Because most Medicare Advantage members are locked into their plans for the calendar year, they don’t often have good alternatives when their provider networks shrink.

It is critically important that people with Medicare have timely access to the information they need to make decisions about their care. Reflecting this priority, Medicare will be requiring health plans to ensure that their online directories are up-to-date and accurate as soon as their networks change.

Medicare Advantage insurers have mixed reactions to the new rules. Some are concerned about the increased cost of compliance. A spokesperson from one of the largest Medicare Advantage providers, said the company is still reviewing the rules.