Have you considered a High-Deductible Medicare Supplement Plan F?

Presented by Tim Dreher

Do your healthy senior clients ever express to you their frustration about paying high monthly premiums for their Medicare Supplement policies and then rarely using them? Are they tired of getting “the letter” every year from their insurance company announcing yet another round of rate increases?

There is an alternative that you and your clients might want to consider. Maybe you should be talking to those clients about switching to a High-Deductible Medicare Supplement Plan F.

If your clients are willing to pay out of pocket for certain health care costs then maybe a high-deductible plan is the answer for them. A high-deductible Medigap plan can help your clients save on premium costs while still getting dependable coverage for their healthcare needs. Premiums for a high-deductible Medicare Supplement Plan F typically run about one third to one fourth of what you would normally pay for a regular Medicare Supplement Plan F. Like any other Medicare Supplement policy, high-deductible plans still have the largest nationwide network of doctors and hospitals because they have the same network as original Medicare.

Let’s take a look at how these plans work. A high-deductible Medicare Supplement Plan F pays the same benefits as a regular Medicare Supplement Plan F but only after the policyholder has satisfied a calendar year deductible. For 2016 that deductible amount is $2,180. In other words, the deductible amount represents the annual out-of-pocket expenses that the policyholder must pay before the plan starts paying benefits.

Out-of-pocket expenses attributed to this deductible are those Medicare approved expenses that would ordinarily be paid by the policy. It is important to remember that the deductible is only applied to the Medicare Supplement portion. Medicare will still pay approximately 80% of any approved service and the Medicare beneficiary is responsible for the remaining 20%, which is then picked up by the Medicare Supplement policy.

For example, one of your Medicare eligible clients has a medical procedure that costs $5,000. Typically, Medicare would cover $4,000 of the bill and the individual’s Medicare Supplement policy would pick up the remaining $1,000. If your client owned a high-deductible plan then he or she would pay the $1,000 out of pocket that would be applied toward the deductible. Once the deductible is met the Plan would pay the same as a regular Plan F.

I would imagine that many of your senior clients would be open to the ideas of a high-deductible plan since most are used to paying higher deductibles with their pre-age 65 health plans.

A high-deductible Plan F is certainly not for everyone. But for those healthy clients of yours that like the idea of paying a much lower premium and are comfortable knowing that the trade-off would be paying some expenses out-of pocket before the plan begins paying, the High-Deductible Medicare Supplement Plan F might be a great fit.

The Greatest Threat to Retirement Assets

Presented by Brian Leising

(HINT: It’s not the stock market!)

How many of your clients have protected their assets from the greatest threat they face in retirement, the high costs of extended care? What happens to clients and their families with no protection from this risk? What excuses do clients give for not taking action and protecting their assets?

What do consumers have now?

Right now most people don’t have a plan at all. Some have traditional long term care insurance (LTC) policies, and others have personal funds set aside for LTC expenses.

What’s wrong with that?

Whether clients think they have a plan or not, they have a plan. No plan is a plan. That means they will use their own money until it runs out and they go on welfare (known by the fancy name Medicaid), leaving nothing for their spouse and children.

Consumers state one of two objections to purchasing traditional LTC policies: 1) “The rates may go up”; or 2) “What if I die and never need to use my policy? I don’t want to waste my money. “

Even those with money set aside are not leveraging their funds as much as possible.

What’s a possible solution?

Linked-benefit life insurance policies allow clients to use their death benefit to pay for LTC expenses. The rates are guaranteed and premiums are never wasted as the full benefit is always paid to someone, themselves if they require care or their heirs if they don’t. In lump sum situations, you can double the money to heirs and triple that sum for LTC, with a return of premium option.

Now you can protect your clients’ assets from the greatest threat they face in retirement; by showing them how their life insurance policy can be used for extended care expenses; so they don’t have to worry about rate increases or “wasting” premium dollars.

Is an Inflation Rider Critical to a Long Term Care Plan?

Presented by Leonard Berthelsen

I read with a smile on my face the news release by AALTCi regarding buyers purchasing less inflation protection on long term care plans in 2014.  The article stated that in 2014, the selection of the 5% inflation option on LTCi plans dropped from 51% to 14.5% in comparison to 2012 reported sales.

The 5% inflation option has steadily increased in price to the point of making LTCi unaffordable for many consumers.  As a fall back, many agents just started quoting the 3% option that most carriers offered.  It certainly was less expensive but still high enough to dissuade many consumers from purchasing LTCi.

Now I am not one to downplay the importance of benefit growth in a long term care plan, but there is another viable option that agents can consider.  It is simply called a “bulk benefit”.  We did an analysis of carrier rate increases about 3 years ago and looked at the plans that were subjected to rate increases and what benefits were included in those plans.  The commonality was long duration of benefit periods and the compounded inflation rider.  From that we looked to see what could be designed  into a long term care plan, have adequate benefits and still be affordable.  Hence, the “bulk benefit”.

For example, take a couple aged 57 and 60 buying a $5,000 a month benefit with 5% compound inflation for a 5 year benefit duration. The cost from one of the top three carriers would be approximately $8,800 in annual premium.  Yes, unaffordable for most or they just aren’t interested in paying that kind of annual premium.  If you went with the 3% option, that premium would be approximately $4,850.

Now look at the alternative foregoing inflation protection altogether.  Use a four year duration of benefits but design the plan at $10,000 per month.  You have doubled the benefit from the beginning and this is where your inflation protection is.  What’s the cost, approximately $4,900 annually.

The crossover where the two designed plans will be equal to one another would be ages 72 and 75 for 5% compounded inflation and 78 and 81 with 3% compounded.  If the claim happened in the early ownership of the LTCi plan, certainly bulk benefit would be more desirable.

Looking at life expectancy and the reality that most consumers don’t buy LTCi to cover 100% of the risk, this method starts to look attractive.

We have to be aware that using this method of plan design takes the LTCi  Partnership out of the equation.  That has to be part of the conversation with the client.  Significant assets many times make the Partnership a non-issue but the conversation needs to be conducted with the client.  The purpose of DRA Partnership was to get more consumers to purchase private LTCi coverage and this model makes it a bit more affordable.

When fully explained and a review of all the options and a premium comparison is completed, we see clients opt for the bulk benefit more often than not.   Having immediate large benefits versus the traditional and now more expensive long term care plan with that slow growth makes sense to a lot of consumers.  These are reimbursement policies, so if the entire benefit isn’t used in a given month, the remaining pool is available for future delivery.  It just makes sense to a lot of potential clients.

Retirement Plan Review

Presented by Gary Peterson

 

Would you like to add an additional revenue stream with little effort?  Would you like backroom support that will assist you from presentation to closing the sale?  Do you know or work with small business owners?

Let Financial Brokerage help you team up with American National and their pension team.  View the webinar presentation below and give me a call at 800-397-9999.

Retirement Plan Review

Non-hardship Withdrawals

Presented by David Corwin

If you’re like most of the agents I work with, you’re running out of ideas to share with your clients or wondering what you can do to improve your client’s retirement accumulation planning.

Under qualified retirement plan regulations, generally speaking, you can’t make a withdrawal from your plan unless you terminate your employment or your plan is terminated. You can access your plan money before retirement if you qualify for hardship withdrawals – which is usually a result of death or disability. However, you can take money out of your retirement plan while still gainfully employed by way of a Non-hardship (sometimes called in-service) withdrawals. These withdrawals are only allowed for people who are participants in 401(k), 403(b) and profit-sharing plans, and only to the extent of an individual’s vested balance in the plan. If allowed by your employer, in-service withdrawals can give you access to your retirement assets, thus giving you more control over them. It’s important to note that not all company-sponsored retirement plans offer these in-service withdrawals.

Why would your client want to make this type of withdrawal prior to retirement?

• More flexible in the investment choices that may not be offered in their current plan.

• To simplify estate planning.

• Professional Guidance: You may choose to have your retirement plan assets managed by a professional and may need to make a plan withdrawal to make that possible.

• Income planning – your client may want to plan for retirement so that they know exactly how much they will have to live on (Roth IRA).

The Tax Increase Prevention Reconciliation Act (TIPRA) tax laws now permit in-service, non-hardship withdrawals before age 59½. If the employer plan permits, the employee must also be eligible to take a distribution from the plan, and the funds have to be eligible for a direct IRA rollover. Your clients should request a copy of the Summary Plan Description (SPD). If you ask and no one seems to know where it is, then call the toll-free number on your plan statement and ask a person if in-service, non-hardship withdrawal distributions are an option. If permitted, also inquire if withdrawals will prevent you from further participation in your employer-sponsored plan (be sure to check on this). If it is permissible and you want to make the move, you better make an IRA rollover with the assets withdrawn. If you don’t, that distribution out of your qualified retirement plan will be slapped with a 20% federal withholding tax and federal and state income taxes. Yes, you will also incur the 10% early withdrawal penalty if you are younger than age 59½. Additionally, if you have taken a loan from your 401(k), any in-service withdrawal might cause it to be characterized as a taxable distribution in the eyes of the IRS. Obviously, this IRA rollover possibility isn’t exactly making your plan provider all that happy, but many employees would like broader range retirement options and some would like vehicles designed to produce future income streams.