Open Enrollment for Medicare Part C & D

For those eligible for Medicare it’s time to shop around as the open enrollment period for Medicare Advantage (Part C) and Medicare Prescription Drug Coverage (Part D) started October 15th and runs through December 7th.

Why shop around? Like any other insurance policy that renews annually, it’s important to see if your current options still best fit your needs. For example, what may have been the most efficiently priced policy last year could be significantly higher this year. Pricing for most Medicare Advantage Plans are expected to increase moderately this coming this year. However many Medicare Part D Plans are expecting double digit increases in premiums. Second, your current plans provisions and benefits may have changed and may not best fit your needs anymore. Finally, you may have had a change in your personal circumstances where another option may be more efficient. When shopping around for Medicare Advantage, just make sure that any new plan that you are considering has your primary care physician, specialists and care facilities that you are likely to use are on the plans network of providers.

The best place to start shopping is the Medicare Plan Finder on the Medicare website. Before shopping, it is recommended that you have your list of prescription drugs you take and the dosage. Plug in Medicare number and drugs and it will produce a list of available options and detail so you can determine what plan is the best fit for you. One on one advice, the State Health Insurance Assistance Program offers Medicare counseling services.

In the end, it pays to be proactive as it could prevent disappointment in the quality of coverage you receive and it may save you hundreds of dollars each year.

Earthquakes and Insurance

Last week Northern New England experienced an earthquake that reached 4.0 on the Richter Scale. The earthquake was deemed to be light with fortunately no serious damage reported and no people were injured from the event.

This serves as a good opportunity to remind people that protection against earthquakes is not a covered peril under common homeowner’s and business insurance policies. Flood insurance is commonly known as something that needs to be bought separately, but most people who don’t live in an area with high seismic activity often forget that earthquake damage is not covered either.

An earthquake in New England is a rare event, but they do occur. In the 1700’s, an earthquake struck the North Shore of Massachusetts with an estimated reading of 6.1 on the Richter Scale while the largest earthquake in Maine was in Eastport with an estimated reading of 5.8. Many people remember the earthquake centered in Plattsburg New York in 2002 that had a magnitude of 5.1. Compounding the risk is the fact that the geology of Northern New England typically doesn’t respond to seismic activity very well and most of our buildings are not built to the same standards as Japan or California.

Now this blog isn’t meant to alarm anyone. But I do think it is healthy to periodically review the risks that confront us, determine if the risk is insurable and if so, determining if it economically makes sense to insure against the risk. It also never hurts to review your homeowner or business insurance periodically to become fully aware of what risks aren’t covered under your policy.

Time to Check Your Credit Report: Experian

Four months ago, I suggested you request a free credit report from Equifax. In order to take full advantage of your free credit reports, I suggest that you request a free report every 4 months from the different credit agencies. This time I’m detailing the process to request a free credit report from Experian

Here are the steps necessary:

1. go to https://www.annualcreditreport.com/cra/index.jsp
2. select your state and click “request report”
3. fill in your personal information, security characters from picture, and click “continue”
4. select Experian and click “next”
5. click “next” again
6. enter last four digits of your social security number and click “submit”
7. choose extras if you want to pay, I never do, click “annual credit report” at the bottom in gray.
8. check “I have read and agree to Experian’s Terms & Conditions, etc” if you accept them, click “Submit”
9. answer the “identity verification” questions and click continue.
10. click “print report” in upper right section of page.
11. print report

If you find there is something amiss, contact that agency immediately. You can contact Experian at 866-397-3742. In 4 months I will remind you to get another report from TransUnion.

Long Term Care Insurance Market in Flux

Recently John Hancock raised premiums on many of its existing long term care insurance (LTCI) policies in force with increases ranging from approximately 20% to 90%. These were primarily focused on policies written over five years ago. This comes on the heels of Prudential and Berkshire both exiting the LTCI market over the past year. Insurance companies making less on their reserves in this low interest rate environment, fewer policy owners letting their policies lapse than expected and inadequate premium pricing in the past have all contributed to the flux in this marketplace.

All of this has made it even more difficult for people to protect the financial risk of needing long term care. What can you do to protect yourself? Here are some tips:

• For financial planning projections, you should make the assumption that LTCI premiums will go up with inflation over time if you currently hold or are purchasing a LTCI policy. Given the flux of the long term care insurance market and the fact that premiums will be variable over time, I suspect it will be a while before the insurance companies become effective of adequately pricing out the risk and underlying premiums needed to support this type of insurance.

• If you are one of those individuals who have insurance and received a significant price hike, I would caution you against dropping the policy altogether without thorough consideration. If you can’t afford the increase in premiums, the insurance company may allow you to reduce your benefits to keep premiums at affordable levels. It may not be ideal, but you still have some level of protection. Even with the premium hikes, many currently held policies still look attractive compared to what you can purchase new on the open market today.

• There are many riders and options available in the insurance marketplace to address long term care needs. There are a new slew of hybrid life insurance products which provide long term care benefits if needed. Traditional LTCI can have riders that protect against inflation and pays back the premium if no claims are ever made. There are options where the LTCI buyer can fully pay off their premiums in several payments in the early stages of owning the policy. These provisions all protect against the current flux of the LTCI market and are very attractive to someone shopping for LTCI. However I would be careful as everything that reduces risk comes with a cost. Insurance companies do a very good job of profiting on areas where the consumer has a heighted level of fear so I would weigh out if the benefit is worth the cost.

• Many people are resistant to buying long term care insurance because they may never use it. For those who fall in this camp, just keep in mind that most of us go for years without ever having a claim on their homeowners insurance. Somehow we continue to pay premiums on this type of insurance.

• In the end, I still continue to think shopping for this insurance in your early 50’s is the ideal time to consider this, buying a policy that covers the average daily cost in a nursing home care in the area you intend to live with a 5% compound inflation rider with a three to five year period is the best baseline place to start as far as shopping for a LTCI policy. From there you can adjust this accordingly to meet your personal circumstances.

• Finally, determine if LTCI is right for you. This type of insurance tends to be a perfect fit for those who have the financial means to pay the premiums over the long haul, but not enough in financial resources to absorb a long term care need. In some cases, people who can both afford the premiums and a long term care need buy it to increase their chances of leaving a legacy to their heirs. But LTCI is not universally the best fit for everyone.

When addressing my client’s retirement planning needs, the financial risk of needing long term care is always a built in assumption within my planning work. The state of the LTCI marketplace certainly isn’t making things any easier. But I urge that everyone should consider this risk and if LTCI fits you’re your needs regardless if you do this yourself or have professional guidance with your financial affairs.