What is A.M. Best Ratings and Why Should You Care?

When you are selecting an insurance company, it is important that you are aware of the insurer’s financial strength. Luckily, there are financial rating companies that do the hard work for you. One of these companies is A.M.  Depending on the rating, you’ll be able to determine which insurance company is best for you. It […]

The post What is A.M. Best Ratings and Why Should You Care? appeared first on Good Financial Cents®.

6 Tips to Find Affordable Health Insurance When You Become Self-Employed

If you're dreaming about leaving a corporate job to work for yourself, getting affordable health insurance is probably one of your top concerns. Fortunately, there are more protections now than ever for those who leave the safety of a group health plan.

This post will cover six tips to find affordable health insurance when you become self-employed or leave a job for any reason, so you and your family get the coverage you need.

Major benefits of the Affordable Care Act (ACA)

The Affordable Care Act (ACA), known as Obamacare, became law in 2010, with significant provisions taking effect in 2014. One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition. However, insurers can charge different rates based on where you live, your age, tobacco use, and family size.

One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition.

The ACA also removes annual and lifetime caps on your health coverage. And no matter how much care you receive, the law caps how much you have to pay for it.

Out-of-pocket annual maximums vary depending on your health plan, but if you get in-network care, you'll never have to pay more than $8,150 as an individual, or $16,300 as a family, for the 2020 plan year. For 2021, these amounts increase to $8,550 and $17,100. Note that these limits don't include your monthly premiums.

What is the Affordable Care Act (ACA) Subsidy?

The ACA also offers many low- and middle-income Americans a health subsidy, which cuts the cost of premiums depending on your income and family size. It's a tax credit paid to your health insurance provider every month, which allows you to pay a lower premium.

For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy.

The ACA subsidy applies when your household income is between 100% and 400% of your state's federal poverty level. For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy. 

One challenge to using a subsidy is that it's based on your estimated earnings in the year when you'll get coverage, not on your last year's income. Since self-employment incomes can vary dramatically from month to month, the chances of knowing exactly how much you'll earn in the current or future year may be difficult. 

If you underestimate your income for a health subsidy, you may have to return a portion of the tax credit already spent on your insurance during the previous year. In other words, you may owe additional taxes that you weren't expecting.

When you enroll in an ACA plan, you'll have access to a marketplace account. That's where you can update changes to your expected income or family size that affect your tax credit so you can correct it as quickly as possible.

What is the Affordable Care Act (ACA) Mandate?

The ACA mandated that individuals be covered by a qualified health plan or pay a tax penalty if you're uninsured for more than two consecutive months. The mandate applies no matter if you're employed, self-employed, unemployed, a child, an adult, or where you live. 

Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it.

However, starting in 2019, due to the Tax Cuts and Jobs Act, the mandate penalty for not having health insurance no longer applies. Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it. 

But several states have their own insurance mandates, requiring you to have a qualifying health plan. You may have to pay the penalty for being uninsured if you live in:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

For example, California residents without ACA coverage in 2020 face a penalty up to 2.5% of household income, or $696 per adult, and $375.50 per child, whichever is greater. So, even if the federal government won't penalize you for being uninsured, you could have to pay a hefty state penalty, depending on where you live. More states will likely adopt penalties to keep the cost of coverage for residents as low as possible.

The ACA established health insurance exchanges, primarily as online marketplaces, administered by either federal or state governments. That's where individuals, the self-employed, and small businesses can shop and purchase qualified insurance plans and find other options, depending on your income.

How to get affordable health insurance

When you go out on your own, the cost of a health plan can be shocking—especially if you just left a company that paid a big chunk of the insurance bill on your behalf.

Remember that the high cost of health insurance pales when compared to the alternative. Having a medical emergency or being diagnosed with a severe illness that you can't afford to treat could be devastating. 

Remember that the high cost of health insurance pales when compared to the alternative.

Here are six tips for finding affordable health insurance when you become self-employed or no longer have job-based coverage for any reason:

1. Join a spouse or partner's plan

If your spouse or partner has employer-sponsored health insurance, joining their plan could be your most affordable option. Group insurance generally costs much less than individual coverage. Plus, some employers subsidize a portion of your premium as a benefit. 

However, some employer plans may not offer domestic partner benefits to unmarried couples. So, find out from the benefits administrator what's allowed. 

If you're under age 26, another option is to join or remain on a parent's health plan if they're willing to have you. Even if you're married, not living with your parents, and not financially dependent on them, the ACA allows you to get health insurance using a parent's plan. However, once you're over age 26, you'll have to use another option covered here.

2. Enroll in a federal or state marketplace plan

As I mentioned, the ACA established federal and state marketplaces for consumers who don't have access to employer-sponsored health insurance. The following states have health insurance exchanges:

  • California
  • Colorado 
  • Connecticut 
  • District of Columbia
  • Idaho 
  • Maryland 
  • Massachusetts
  • Minnesota
  • Nevada
  • New York 
  • Rhode Island
  • Vermont
  • Washington

No matter where you live, you can begin shopping for an ACA-qualified health plan at healthcare.gov. However, you can only apply for a policy during the annual open enrollment period—November 1 to December 15, for coverage that will begin on January 1 of the following year. Some states with healthcare exchanges have an extended enrollment period

In general, if you miss the enrollment window, you can't get an ACA health plan until the following year unless you qualify for a special enrollment. That allows you to purchase or change coverage any time of the year if you have a major qualifying life event, such as losing insurance at work, getting married or divorced, having a child, or relocating. However, you typically only have 60 days after the event occurs to enroll.

If your income is too high to qualify for a healthcare subsidy, you can still buy health insurance through the federal or your state's exchange. You can also get an ACA-qualified health plan directly from an insurance company, a health insurance agent or broker, or an online insurance aggregator.

3. Consider a high-deductible health plan (HDHP)

One way to reduce the cost of health insurance premiums is to choose a high-deductible health plan (HDHP). You enjoy lower monthly premiums but have higher out-of-pocket costs. If you're in relatively good health, an HDHP can make sense; however, if you get sick, it can end up costing you more. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

Another benefit of having an HDHP is that you qualify for a health savings account (HSA). Contributions to an HSA are tax-deductible and can be withdrawn at any time to pay for qualified medical expenses, such as doctor co-pays, prescription drugs, dental care, chiropractic, prescription eyeglasses, and mental health care. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

4. Get a short-term plan

If you miss the deadline to enroll in an ACA health plan and don't qualify for special enrollment, are you simply out of luck? Fortunately, no. You can purchase a short-term health plan until the next enrollment period comes around.

The problem is, short-term plans don't have to meet ACA standards and only offer temporary coverage, such as for a few months or up to a year. You may be eligible to renew a plan for up to three years in some states, depending on the insurer. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan.

Short-term plans can charge more if you have preexisting conditions, put caps on benefits, or not cover essential services like prescriptions and preventive care. Because they fall short of ACA requirements, you can have one and still be subject to a state-mandated health penalty. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan. 

Having short-term coverage is certainly better than being uninsured, but I recommend replacing it with qualified health coverage as soon as possible. That's the best way to have the protection you need against the enormous financial risk of medical costs. 

5. Enroll in Medicaid and CHIP (Children's Health Insurance Program)

If you can't afford health insurance, you may be eligible for free or low-cost coverage through Medicaid or CHIP at any time of year, depending on your income, family size, and the state where you live. In general, if you earn less than the poverty level, which is currently $12,760 for an individual or $26,200 for a family of four, you may qualify for these programs. They may have different names depending on where you live. 

Unlike ACA health plans, state-run health programs don't have set open enrollment periods, so if you qualify, coverage can begin any time of year. 

When you complete an application at the federal or state health insurance exchange, you can also determine if you qualify for coverage through Medicaid and CHIP programs. You can learn more about both programs at medicaid.gov

6. Get COBRA coverage

If you leave a job with group health insurance, you can enroll in COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage. It isn't an insurance company or a health plan, but a regulation that gives you the option to continue your employer-sponsored health insurance after you're no longer employed. 

Instead of having your plan canceled the month you leave a job, you can use COBRA to continue getting the same benefits and choices you had before you left the company. In most cases, you can get COBRA benefits for up to 18 months.

The problem with COBRA coverage is that it's temporary and can be expensive. Unlike other federal benefits, such as the Family and Medical Leave Act (FMLA), employers don't have to pay for COBRA. You typically have to pay the full cost of premiums, plus a 2 percent administrative charge, to the insurer. 

If you're not eligible for regular, federal COBRA, many states offer similar programs, called Mini COBRA. To learn more, check with your state's department of insurance.

Health insurance shopping tips

After you become self-employed and purchase health insurance, it's crucial to shop for plans every open enrollment period. Your or your family's medical needs or income may change.

Additionally, new health insurers come in and go out of the health insurance marketplace. Carriers that offered plans in your ZIP code last year may not be the same set of players this year. In other words, a competitor could offer a similar or better plan than yours, for a lower price. So, if you don't shop annually, you could leave money on the table.

Top 10 Health Insurance Considerations

Quality health insurance consistently ranks as the most desired employee benefit. According to the Harvard Business Review, 88 percent of employees ranked employee health insurance as a the top employee benefit consideration. Which makes sense considering that you can’t put a price on a clean bill of health. Whether covered by an employer, or shopping… Read More

The post Top 10 Health Insurance Considerations appeared first on Credit.com.

What Are the Consequences of Not Having Life Insurance?

Before I started writing in the personal finance space, I spent nearly 8 years working alongside my husband in a funeral home. My husband Greg worked as a mortician, and I was the Director of Family Services. I learned so much about living and dying during my years in the mortuary business, but there’s one […]

The post What Are the Consequences of Not Having Life Insurance? appeared first on Good Financial Cents®.

Guide to Managing Medical Benefits When You Leave or Start a Job

Leaving a job typically means saying goodbye to workplace benefits such as health insurance and medical spending accounts. No matter if you quit, get fired, or get furloughed, it's essential to know your options so you can make the most of those perks.

If you're starting a new job with benefits or becoming self-employed, you'll have critical decisions to make about what's best for you and your family. I recently received a couple of questions about how to handle benefits during work transitions, and I'll answer them throughout this post. We'll review the best options for managing medical benefits when you leave or start a new job.

What happens to health insurance when you leave a job?

When it's time to leave a job with benefits, it's essential to let your employer know so you can evaluate your options for managing or replacing them right away. The sooner you understand your choices, the more time you'll have to do your homework and consider what's best. 

Any insurance perks you have typically end on the last day of the month you get terminated. So, be strategic about choosing your last day, when possible.

If you leave an employer on good terms or get a severance package, ask for an extra month or two of medical coverage if you need it.

For instance, if you work through November 30, your health insurance may end on that day. But if you work through December 1, your insurance may last until December 31. Also, remember that most things in business are negotiable. If you leave an employer on good terms or get a severance package, ask for an extra month or two of medical coverage if you need it.

Here are four work transitions you may need to manage:

1. You leave a job for a new employer with benefits

Congrats! Benefits at your new job may start on your first day, or you may be subject to a waiting period, such as 30 or 90 days. Don't roll the dice with a gap in critical coverages such as health and life insurance. Something unexpected—a car accident, illness, or death—could be financially devastating for you or your surviving family.

If you have a spouse or partner who also has workplace insurance benefits, you may be wondering which plan to choose or whether you can double up on benefits. Keep reading for tips to handle this situation wisely. 

2. You leave a job for a new employer with no benefits

If your new job is with a small company, it may not offer expensive perks such as health insurance. But that doesn't mean you can't get affordable coverage on your own, which we'll cover in a moment.

3. You leave a job and become unemployed

No matter if your workplace doesn't offer benefits or you're unemployed, there are ways to get low- or no-cost health insurance.

4. You leave a job and become self-employed

When you work for yourself, you need to provide your own medical benefits package, and the same advice will apply, so keep reading.

What is COBRA continuation coverage?

A critical right you should be familiar with is COBRA continuation coverage. COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, is a law that requires an insurer to continue your employer-sponsored medical insurance, including health, dental, and vision policies after you're no longer employed.

Anytime you leave a job with group health benefits, you can purchase COBRA coverage for a period. Your benefits administrator should give you information about your right to apply for COBRA coverage and the cost.

Anytime you leave a job with group health benefits, you can purchase COBRA coverage for a period.

You can purchase the same or fewer medical benefits than you had before you quit, got laid-off, or fired from your job. But the price won't be the same—COBRA coverage can be expensive because your previous employer does not subsidize it.

You must pay the full COBRA premiums, plus a 2% administrative charge, to the insurer. While it will cost more than you're used to, the upside is that your coverage will be seamless, and you'll be familiar with it.

COBRA protects everyone affected by the loss of group health insurance, including the former employee, his or her spouse, former spouses, and dependent children—when certain qualifying events occur, such as termination or reduction of work hours. It typically lasts for up to 18 months. However, if you're a surviving spouse or divorced from a covered employee, COBRA may continue for up to 36 months.

Don't make the mistake of thinking that you'll just wait and get health insurance when you get a new job or when you become eligible after a new employer's waiting period. If you get sick or need a trip to the emergency room, you could end up with a massive bill.

If you're not eligible for regular, federal COBRA, many states offer similar programs called Mini COBRA. To learn more, check with your state's department of insurance.

How do you get individual health insurance?

If you don't have the option to get COBRA medical benefits or can't afford it, your next best option is to shop for ACA-qualified health insurance. ACA stands for the Affordable Care Act, which set standards, known as essential health benefits, and provides subsidies that make qualified plans more affordable.

If you qualify for an ACA subsidy based on your income and family size, it can make a health plan much less expensive than COBRA continuation.

If you qualify for an ACA subsidy based on your income and family size, it can make a health plan much less expensive than COBRA continuation. But if you have high income and don't qualify for reduced premiums, COBRA may cost about the same or even give you better benefits.

So, shop and compare the cost of COBRA to a private policy when possible. Open enrollment for ACA-qualified health plans is limited to the last few weeks of the year. However, losing your group coverage at work is one of several life events that qualify you for a special enrollment period or SEP to get coverage. But you only have 60 days to sign up for an ACA plan after losing your insurance at work, so don't put it off.

If you miss the special enrollment deadline, you generally won't be able to get a marketplace plan unless you have another qualifying life event. These include getting married, having a child, or exhausting your maximum period of COBRA coverage.

You can get quotes for an ACA-qualified health plan from the following:

  • Healthcare.gov (the federal healthcare marketplace)
  • Your state's online healthcare marketplace (if you live in California, Colorado, Connecticut, District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, or Washington)
  • Insurance aggregator sites, such as Bankrate.com and eHealth.com
  • Insurance brokers

Depending on your income, family size, and the state where you live, you may qualify for free or low-cost coverage from Medicaid or the Children's Health Insurance Program (CHIP). Also, note that if you're younger than 26, you can enroll in a parent's health plan even if you don't live at home or are married.

Can you have more than one health insurance plan?

Jamie left a voicemail and asks:

I'm starting a new job soon and am wondering if I should enroll in the dental and vision benefits because I already have them under my husband's insurance. How should I compare insurance policies if I need to choose between different plans?

It's not against the law to have more than one medical insurance policy, but it may be a waste of money. Having more than one medical plan doesn't mean that you get reimbursed twice for covered benefits.

Having more than one medical plan doesn't mean that you get reimbursed twice for covered benefits.

The plan you get through your employer becomes primary, and the one through a spouse or partner's employer is secondary. After the primary policy covers you, the secondary would pick up any remaining covered cost. But the combined coverage can't exceed 100% of the cost.

When you have dual health or dental plans, you must pay deductibles for both of them. In other words, you may still have out-of-pocket costs even when you have more than one plan.

Whether you could save money by enrolling in more than one medical insurance plan depends on several factors, such as the monthly premium, annual deductible, and how high your healthcare expenses could be in the future.

You'll need to make these same comparisons when you're choosing between different plans. Evaluate monthly premiums, annual deductibles, co-payments, co-insurance, and the doctor networks to estimate which one is best for your situation. 

To get some help, speak to an insurance representative from each plan you're considering. Ask them about the types of healthcare services you and your family typically need or have needed in the past. You can't predict how healthy you'll be going forward. But to evaluate different plans, or know if having more than one plan is worthwhile, you must consider your previous expenses for health, dental, and vision care. So gathering that information should be part of your research.

What happens to an HSA when you leave a job?

Adam asks, "My employer makes contributions to my HSA every payday. Do I have to repay them if I leave my job to start my own business?"

Another insurance-related benefit that you may have at work is a tax-advantaged health savings account or HSA. You're eligible for an HSA when you're enrolled in a high-deductible health plan (HDHP). Having an HDHP may be a good option when you want lower premiums, are in relatively good health, and are likely to take advantage of an HSA.

An HSA is portable, so you can take it with you if you leave an employer.

The good news is that an HSA is portable, so you can take it with you if you leave an employer. Your account balance, including amounts contributed by your old employer, are yours to spend tax-free on eligible medical expenses with no spending deadline.

You can spend an HSA on qualified expenses for you or your family members, even if you don't have a high-deductible plan or you're uninsured. However, you can't make any new HSA contributions when you're not covered by HDHP. 

If you become unemployed, you can use an HSA for COBRA premiums, or for other health insurance while you're receiving unemployment compensation. But if you spend HSA money on non-qualified medical expenses, the amounts will be taxed as income, plus you must pay an additional 20% penalty.

What happens to an FSA when you leave a job?

Another medical spending account you may need to manage when you leave a job is an FSA or flexible spending arrangement. These accounts can only be offered by employers and get funded by pre-tax payroll deductions that you can use for childcare and medical expenses.

Make sure you empty the account by spending the funds on qualified purchases before your last day of work or by the end of the month.

FSAs have a use-it-or-lose-it policy, which means the amounts you've contributed will be forfeited if you don't spend them before leaving a job. Make sure you empty the account by spending the funds on qualified purchases before your last day of work or by the end of the month.

Whether leaving a job is cause for tears or celebration, you can make smart decisions about your medical benefits and save money with some strategic planning. Be sure to ask your benefits administrator or your plan providers for help when you need it.

The 5 Things Single Parents Need to Consider about Life Insurance

As a parent, one of the scariest things to think about is what your children will do if something happens to you someday. This can be even scarier if you’re a single parent without a partner to fall back on. But here’s the thing: you are the sole provider for your children. It’s even more… Read More

The post The 5 Things Single Parents Need to Consider about Life Insurance appeared first on Credit.com.

The Basics of Medicare Eligibility

Medicare is a federal health insurance program widely used by U.S. citizens and permanent residents age 65 and older. The program also applies to those younger than age 65 who have disabilities, end-stage renal disease (ESRD) or other diseases. But … Continue reading →

The post The Basics of Medicare Eligibility appeared first on SmartAsset Blog.