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iTech Dunya is a technology blog that specializes in tech-related topics.Our GOAL is to produce high-quality content for our millions of readers.
Don't "Miss The Boat" when it comes to Life and Disability Insurance
While the above image is quite hilarious, I’m quite serious when I’m talking about getting your life and disability insurance while you still can before it is too late, and want to share a recent story with you, that is unfortunately way too common with the consistency of the beat to a Salvation Army drum. I’ve seen it happen time and again, despite my best efforts to tell this story or one like it, and educate the public. Don’t let yourself be another example and testimony for me to share. Your ability to get insurance while you are still healthy is no laughing matter.
I must say as a life and disability insurance professional with 20 years experience, I am beyond exasperated at times with the human psyche when it comes to the management of risk and procrastination. Why is it that some people who are relatively younger, with perfect health in every category, who would qualify for superman rates if they applied for insurance, won’t take a policy even if I’m practically giving it away for free, and think they have all the time in the world to get around to it? And conversely, why do I run into other people with horrible, absolutely terrible health who are grasping for straws at the 11th hour, demanding and insisting that we write them a policy? Oh and by the way, it better be the best one with all the latest features, bells and whistles with a very competitive price. Oh and did I mention, they want it issued yesterday? Really? LOL. Wow. I just had a case like this that has provided me the inspriation to write this particular issue of my “financial e-TIP$.”
First let these words resonate:
  • You do NOT have all day when it comes around to buying your life and disability insurance.
  • You cannot get it only when you NEED IT, or when it’s convenient, or you feel like eventually getting around to it.
  • Life and disability insurance are like a parachute, or a life jacket, or religion, or a firearm, or a first aid kit, or a Swiss Army knife or a seat belt… you need to GET IT – BEFORE you need it!!!!!!
  • You are not holding the all the cards. Life, fate, and the insurance companies are holding all the cards and you are at their mercy. You are not holding anything, and your insurability, i.e. your ability to get an offer can evaporate just like that, with the snap of a finger.
  • Whether you decide to buy or not to buy, your one or two policies will not make one iota of difference on the financial security of the insurance company, or me as an insurance professional.
  • However you do need to realize your entire financial security, the difference between poverty and total destitution Vs a paid for home, peace of mind, zero debt, a paid for college tuition, and the ability of you and your spouse ever being able to retire can be entirely dependent upon whether or not you have the right amount of life and disability insurance in force on the day it is needed - PERIOD.
And now, back to my story. Very recently, a very nice lady I know, a CPA referred me to someone she knew who was “in the market” for some disability insurance. The person she referred is a highly paid business consultant making about $500,000 per year. However, as it turns out, this individual, about age 44 is extremely overweight, obese really, and has been a type II diabetic since 2004 and is taking 3 shots per day. I already know for a fact the majority of the top insurance companies will flat out decline him. Those that offer anything, if at all will only allow a very basic, stripped down policy at a hugely increased cost. Ironically, he is being quite insistent and even a little arrogant, demanding to only be given quotes with the highest rated quality companies, with all the best definitions, and contract language and bells and whistles that would best protect him. Really??? Here’s the thing. He wasn’t always diabetic, we know that. And, maybe he wasn’t always so obese. The truth of the matter is he MISSED THE BOAT and he either doesn’t realize it, or he is in la la land and in total denial. He should have bought some disability insurance years ago when he was healthy and had the opportunity – but he didn’t and now he is paying the price of having to go through the rest of his life without it. Let’s do a little math and figure out what’s REALLY at stake here and what he gave up through his blunder by procrastinating, assuming he became totally disabled starting today. $500,000 per year x 21 years to age 65 = $10,500,000. Yes you read that correctly, that is TEN MILLION, FIVE HUNDRED THOUSAND DOLLARS! And that does not even include inflation or his anticipated growth rate of his business. Were he healthy, we could have insured all of this, and even added a “Future Insurability Option” rider (FIO for short) to protect his future health to grandfather it so he would be able to buy additional disability insurance in the future without having to re-prove his medical insurability.
The bottom line is, you cannot procrastinate at getting life or disability insurance, and wait till the 11th hour when your health is terrible, and then make demands of an insurance company to offer the best possible insurance policy, with the best possible price, language, bells, whistles, and features, without any true/real underwriting. This is just not how it works. This individual needs a reality check.
This story reminds me of one other and it’s hard for me to not just start laughing when I think of it. A man found my website and called me about wanting to get some disability insurance. He had a number of questions, and about every 10th word, he had to stop and adjust himself as though he were uncomfortable. Also, I kept hearing this clanging sound now and then, like metal on metal. I asked him what the sound was, and he said, “Oh…. You mean this?” as he clanged it again. “Yeah that… what is that?” He replied, oh it’s this triangle thing.” I said “what triangle thing?” “You know… one of those triangles. It’s hanging above my hospital bed. I’m trying to get comfortable but I just can’t seem to find a position that works. I went over the handlebars of my motorcycle and my pelvis and legs are all broke to crap with pins and stuff and strung up by these damn wires.” It was all I could do to maintain my professionalism and not start laughing. He went on to tell me he was really hoping I had some sort of “Hail Mary,” silver bullet disability insurance, and that he realized he was grasping for straws. He told me he was worried he was going to lose more than his house, probably his marriage too. His wife had been nagging him for over a year to get some disability insurance and he obviously didn’t do it and now she is just beside herself and won’t speak to him.
Let this be a lesson to everyone. You do NOT have all day! The best time to buy life and disability insurance is TODAY, before you need it.
If you are healthy and a realist and serious about your financial security, and you can think of nothing more important than your loved ones who depend on you and your income, I welcome your phone call and the opportunity to help you.
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iTech Dunya is a technology blog that specializes in tech-related topics.Our GOAL is to produce high-quality content for our millions of readers.
Life Insurance for us
In a properly designed financial plan, one of the most important areas of discussion is that of “Protection”, by way of Insurance. However, for one reason or another (usually because people don’t like to talk about it or feel they don’t need it), that area of the financial plan often gets overlooked or isn’t designed properly. Protecting your and your family’s lifestyle and standard of living is a very critical component in planning both while you’re alive, and when you’ve passed on. The importance of insurance needs to be addressed and its components need to be understood. What people often think is that there’s just one type of insurance, but that’s not the case. There are generally 3 main components of Insurance Planning, which are Life Insurance, Critical Illness protection, and Disability Insurance. This post is going to discuss Life Insurance in detail, with the other 2 being discussed in later posts.

If I were to ask you, 'what is your biggest asset?' most people would answer "my house" or "my car" or some other form of tangible object. But, the reality is, the most valuable asset you have is your ability to earn an income. YOU are your most valuable asset. If you lost your ability to earn an income through death, illness or injury, what would your and your family’s life look like? This is a question that many people don’t think hard enough on, but it’s time to start paying attention.

There are many reasons why people get insurance. Replacing your income, education funding, home/property protection, estate planning, funeral expenses, debt protection, tax planning etc... The list goes on and on, and not every family gets insurance for the same reasons. Insurance is something that is very crucial in providing a sound financial foundation for you and your family, as well as providing peace of mind that you’re protected in case something happens to you. We protect our homes and our cars because we're legally obligated to, but it seems that many people don’t see the true value in protecting themselves and their families.

Remember, Insurance is a privilege, not a right, so every person must qualify for it as well.

Essentially there are 2 main types of Life Insurance you can get: Term or Permanent. Their names pretty much say a lot about them, but let us go into a little bit more detail.

Term

Term insurance is considered as ‘temporary coverage’. Most companies will provide coverage for a certain ‘term’, such as 10/20/30 years, but there are also other variations. Basically, we can imagine term insurance to be like 'renting' a house. Every month you're paying a premium (rent) and if you’re still alive at the end term your term, you walk away with nothing. The only time a payment would be made to your beneficiaries is if you were to pass away during the term of your coverage – the payment is made as a lump-sum.
Say for example you buy a 10 year term policy. You pay your premium for 10 years, and at the end of that term, the coverage is expired. If you die after 10 years and 1 day, and you did NOT renew or replace the policy, then there is NO payout to your beneficiary, as the policy is no longer in force.

Term insurance is the cheaper of the two at the beginning, but over time it can be very costly. For example, if you're 35 today, and you buy a 20 year policy, it can be pretty affordable (based on your health). However, if we fast track now 20 years later, that policy is now at the end of its term, and you are now 55 years old. The reality is, someone at that age will likely still need a good amount of coverage. Most companies have what's called a 'renewable' feature where you can renew your policy after the term has been completed (without medical). What you will notice is that the premium will drastically increase, maybe even 5 or 10 (or more) times what you were initially paying.
The reason that it is so expensive upon renewal is that there is no need for medical underwriting upon renewing the policy. So this means, if within the first 20 years you get some sort of medical sickness or disease, you can still 'keep' the insurance upon it renewing -- the insurance company cannot decline you based on your health situation. Once you are approved the first time, there is no need to re-qualify again if you are renewing. That being said, if you are healthy and your insurance comes for renewal, it’s actually a lot cheaper just to do a new insurance application and go through the medical underwriting again - the rates are much cheaper!

People often ask, "What happens when the term is up?", and that's a great question to ask. At the end of a term, you essentially have 4 options:
  1. Renew the Policy
  2. Cancel the Policy
  3. Convert the Policy into permanent (you do not have to wait until the end of the term to do this, often this can be done any time along the way)
  4. Apply for a new policy - this is cheaper than renewing IF you are in good health and can qualify for standard (or preferred) rates.
Now, term is not a bad product, IF it’s used for the right purpose. For example, if you know you will have a liability for a fixed period of time only (i.e. a mortgage or loan), then this type of coverage might fit your situation. Every situation must be assessed individually.
Permanent

Now let’s swing over to Permanent coverage - there are 2 main types of plans out there: Whole Life & Universal Life; generally designed to do the same thing (cover you for your entire life) but they each have different features and benefits. There is a 3rd type of ‘Permanent’ called T100 (coverage until age 100), but that is not very common these days. For the purposes of simplicity, we won’t go through the details of each of the types of permanent – that will be for another post. 

Once again, the type of insurance, essentially tells you how it covers you. This type of policy will cover you 'permanently' until you die - it doesn't matter if you die at 35 or 52 or 93, your beneficiaries will still get compensated. Just as we used the example of term insurance being like 'renting' a house, permanent insurance can be thought of as 'owning' a house. Every month you're paying into the policy, but you're also building a kind of 'equity' within the policy, which is known as the 'cash value' or the 'savings component'. The equity in the policy can be accessed later in life, left for beneficiaries, or used to reduce the overall cost of the insurance policy.
Just how term insurance is cheaper in earlier years, but can get very expensive in later years, the opposite can be said for permanent insurance. Initially, a permanent policy will require a larger investment, for 2 main reasons: because it is covering you for your entire life and there is also an investment component built into it. I say "initially" because over time, a permanent policy can cost less overall then a term policy. You can structure so that you're paying the same dollar amount over a certain period of time and 'pay up' the policy -- similar to how you have an amortization on a mortgage where you will pay off your house in 25 or 30 years. There’s also a ‘life pay’ option, where the premiums are essentially made until the insured passes away. This option is generally for those who want the permanent protection, but want to keep the costs down, and are not worried about having to pay until they pass away.

One of the main questions that come up in the Life Insurance discussion is “what type of coverage should I get?”. The reality is that the vast majority of most people’s responsibilities are temporary (i.e. raising kids, kids’ education expenses, mortgage etc…), so in most family’s situation, the majority of the insurance protection should be temporary as well. Although there is no one size fits all solution, one strategy that I find works well is doing something like a 80/20 split - Where 80% of the coverage is Term and 20% is Permanent. This will keep the overall cost of the policy low, get you the amount of coverage you need and will still allow for having a portion of your policy to cover off long-term/permanent needs. So, for example, if it’s calculated that you need $500,000 of coverage, something like $100,000 Permanent and $400,000 as term Coverage might work out nicely for you, both for cost effectiveness and for your overall insurance needs. This doesn’t mean that everybody should have an 80/20 split, but at least this is a good starting point for the discussion and calculations.
Each type of coverage has their pros and cons, and there is no one size fits all when it comes to insurance planning. The best thing for you is to have an Elite level Financial Advisor working with you to put together a proper plan that addresses all your needs, as well as to provide you with all the options. Insurance planning is an integral part of the overall financial planning process, and can help protect you and your family against unforeseen circumstances, but also can be a great tool to use in the estate planning process and leaving a Legacy.
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iTech Dunya is a technology blog that specializes in tech-related topics.Our GOAL is to produce high-quality content for our millions of readers.

Lost Your Job? 

How To Save Your Life Insurance Policy From Dying.

In this current economic climate job security is a thing of the past.  The private sector has done its best to "hold strain", but there comes a time when employees have to be made redundant or their hours cut to keep a business viable.

I remember when I was growing up people around me would relish the idea of becoming a civil servant. Once you became one you remained one for the rest of your life and that idea was so attractive that it became a full time ambition.  If anyone was given the opportunity to be employed temporarily by the government, the whole neighborhood would be happy and encourage you to hold on as long as possible until you got a permanent placement. Gone are those days.  The government recently sent home the untouchables and that was ominous, even if warnings were issued, many still hoped for the best.  I do agree that they were temporary employees, but the sheer numbers are a sign of where the coveted title of civil servant is headed.

In all of this the bills still have to be paid and at some point unemployment benefits run out. What do you do as a life insurance policy holder who knows the importance of the product, but has no money to stay protected (covered)?  I will do my best to offer some solutions which will help you to save your policy.

Options Available:


1.  APL - Automatic premium loan 


APL or Automatic Premium Loan is built into a policy to protect you and delay your life insurance policy from lapsing. Imagine if you lost your job and could not continue to pay your policy premium at the schedule times even though you had made a commitment to do so.  The policy would not be able to remain on the books and provide for you and your family in the event that death, dismemberment or disability occurred.  In order to keep your policy going until you find yourself in a better financial position and return to paying the policy as you should, the APL borrows from the  cash that would have accumulated on your policy.

Keep in mind that there is a limit to how long the policy will remain in force with the automatic premium loan.  The cash will run out at some time, and the policy will lapse.  It is best that you return to paying your policy as soon as possible.  The APL (automatic premium loan) is a loan, and as with all loans you are expected to pay it back.  The interest charged is very low, but it is in your best interest to pay back the loan.  If you do not pay it then the balance is tied to the amount of life insurance coverage you would have purchased, and  when your beneficiary comes to claim, the outstanding loan amount plus interest will be deducted from the death benefit.  This defeats the purpose of purchasing the policy in the first place to protect those you care about from financial hardship should you no longer be able to provide for them due to your death.

2.  Reduction 


If you lose your job or end up having to work less hours, then all hope is not lost.  You can choose to reduce your policy coverage so that the premium payable will decrease and become more manageable.  Example- your initial purchase of a $500,000 life insurance policy cost you $100 per month, unfortunately you lose your job or is forced to work less hours, resulting in less pay.  You can elect to have your policy reduced to half the amount of coverage than you have- $250,000 and pay $50 each month.  This would give you a chance to save your life insurance policy from dying and as soon as you recover financially, then you can opt to increase your coverage back to the original amount or even more.

3.Paid Up


The real reason behind the purchase of your life insurance policy is to : Take care of you final expenses without putting that burden on others; Leave money for your family to pay any creditors who will come knocking when you die; Ensure that your family or loved ones will be able to maintain the same standard of life and pursue their dreams even in your absence as a result of death; Supplement your retirement income; Use as security against loans/mortgage etc.

When you lose your job or get your hours reduced, the money that you have (if any) becomes stretched and it is understandable that you would want to cut back on some things - even things that are way too important - such as your life insurance policy. To stop paying your policy and leaving yourself exposed to the the risks for which you purchased your policy should never be considered, if you truly understand the reason for purchasing it in the first place.  Remember that a decision to stop your policy doesn't only affect you, but it also affects those you love.  If it's hard for them now with you having no job or less money, imagine if your weren't around due to your death, and no insurance to provide for them.

You can come into your life insurance provider (company) and ask if your policy can be made Paid Up.  Paid Up means that the cash values that would have accumulated over the years can be used to purchase a reduced amount of coverage and you will remain covered for life.

I hope that you have found my post informative.  Feel free to message me anytime should you have any questions.

Dale M. LUTCF, FSS
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LIFE INSURANCE – Insure your business’s most valuable asset

LIFE INSURANCE – Insure your business’s most valuable asset

If you are a business owner or self-employed professional, your business is likely to represent a good portion of your personal net worth. Without you at the helm, however, chances are that your business would be worth far less. If the worst should occur, your loved ones may not be able to benefit from the value you worked so hard to build.

The value of insurance


To protect your family and your business, you may want to consider life insurance. The tax-free benefits can:


  1. Replace your income so that your family can maintain their accustomed lifestyle.
  2. Hire a temporary replacement to keep the business running until a permanent successor can be found.
  3. Pay off personal and business debts. Including those that are likely to arise at death.
  4. Fund a buy-sell agreement with your business partner or co-owner so that he or she can purchase the business from your family.

A custom-tailored approach


There are many different types of insurance (term 10, 20, 30, permanent life) and a number of ways to set up the policy.

Every situation is unique, which is why it’s a good idea to get professional advice. We’d be happy to take a look at your insurance needs and help you structure coverage to protect both your love ones and your business.

Message me, Stephen J. Hall via LinkedIn

Stephen Hall
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When Do I Need Life Insurance?

When Do I Need Life Insurance?

There are three common misconceptions about when you need to purchase life insurance:

  1. You only need life insurance if you are married with children
  2. You don’t need life insurance when you are young
  3. You don’t need life insurance if you have mortgage insurance
Each of these beliefs is likely driven by one thing:  mortality is not a common discussion topic.  Everyone wants to believe an unexpected death won’t happen to them, or their loved ones.  However, part of your Financial Advisor’s job is to make sure you have considered the worst-case scenario, to ensure your loved ones are protected.

First, let’s consider how life insurance plans are a key part of your comprehensive Financial Plan.  Payable when you die, life insurance provides your spouse, children, or those who depend on you the funds that are necessary to help with a multitude of financial commitments that will still exist if you pass away.  These responsibilities include (but are not limited to) repayment of debt, education costs, maintaining a standard of living, and funeral expenses. 

Now, let’s take a look at each misconception:

Often you need life insurance, even if you aren’t married with kids! Life insurance is protecting those in your life who would be affected, financially and emotionally, by your death.  Let’s consider Sandy Sample as an example:  

  • Sandy is a single 42 year old female who owns her own home worth $450,000.  She earns a strong income of $85,000 per year, and has modest savings of $25,000.  However, Sandy has $400,000 in mortgage debt, and has her mother living in her home.  If Sandy passes away, her savings and the sale of her home would cover the debt.  However, her mother will have nothing to supplement the loss of Sandy’s live-in support and income.  Sandy will purchase life insurance to ensure all final expenses are covered, as well as to ensure her mother can continue to live comfortably if she passes away. 
 

Even if you are young, life insurance is an asset worth paying for. It is part of your financial plan that should be purchased well before it is needed.  Premiums on life insurance policies are often based on age, physical condition, personal medical history, and occupation.  Generally speaking, purchasing certain types of life insurance when you are younger allows you to take advantage of significantly lower premiums, as these factors are more favorable at a younger age.  Furthermore, when you are young you often have people who would require assistance if you were to pass away:

  • Lion King is a 22 year old who just finished school.  He landed a sweet job that pays him $42,000 per year.  Because he was working as a bartender while he went to school, he has only $5,000 in student debt.  Lion has very little debt, and very few expenses.  However, because he wants to save an extra $25 per month instead of purchasing life insurance, his parents would suffer after his death.  They would be grieving the loss of their son, and would miss days at work.  They would have to find the money to cover his funeral expenses.  A small life insurance policy would provide peace of mind for Lion King and his parents.  It would ensure all final expenses are taken care of, as well as replace lost income for his parents. 
 

Mortgage insurance is not the same as life insurance! There are a few key differences between the two should you pass away:

  • Life insurance policies, whether it be one plan or a mix, provide constant premium levels and benefit amounts for the length of each policy.  The payouts can be used for a multitude of items:  to pay off the mortgage, cover final expenses, and help ensure loved ones are protected financially.  However, mortgage insurance only covers the amount owing on your loan.  Furthermore, your mortgage insurance payments will always remain the same, even though your coverage declines as your mortgage declines.  Make sure to check with your advisor to determine what insurance mix is best for you!
 

Mortality is not a comfortable subject.  This being said, it will comfort you knowing your loved ones are protected if the unexpected occurs. 
Madison Low
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Getting Healthy vs Staying Healthy

My wife and I started a new workout regimen. We recently decided to begin working out daily for 30 minutes. A few weeks in, and we are sticking to our goal and noticing some changes. We have more energy, we feel better, and we know in our heads that we are doing the best thing for our bodies.

My chiropractor once told me that it is much easier to stay healthy than to get healthy. Once you figure out what’s wrong with you, and you fix that problem, then you have to maintain the wellness. It’s easier on your body if you take care of yourself and stay well because you don’t experience those hills and valleys of sick, then well, sick, then well. It’s just good business, you could say.

Physical health is similar to business health. We began working with a client a few years ago, purely for tax advisory/planning and QuickBooks file review each quarter. We did our job, notified them when profits were high and we had tax planning opportunities, and carried on.

Then one day we noticed that they were getting really busy, and the bookkeeping was beginning to suffer. They used to close each month no later than the 6th of the following month; then one month it was the 10th; and the next month it was the 20th. Before we knew it, they were an entire quarter behind in updating their accounting records and tax planning was nearly impossible.

So, we set about helping them “get healthy.” We cleaned everything up, made sure that all the activity was entered and reconciled, and then we proposed a plan to help them “stay healthy.”

To this day, nearly two years later, we handle most of their accounting work, their payroll, the business and personal taxes, and we do everything from assist in forecasting the acquisition of a new client to the purchase of new real estate. Staying healthy (accounting-wise) is a heck of a lot easier than getting healthy.

Today, I emailed that client to let them know that I had prepared a tax projection for 2015 and we needed to get ahead of a serious liability before we moved too much further into 2015. I got the greatest thank-you email and we scheduled a time to meet. No shots, no fasting, no prodding…just staying healthy and making entrepreneurs better.
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What is public liability insurance

WHAT IS PUBLIC LIABILITY INSURANCE AND WHY DO AUSTRALIAN BUSINESSES NEED THE COVER?




If clients visit your business or your employees visit client sites you are at risk of a third party claim, that claim  may be for personal injury or property damage.

WHAT IF YOU ARE A HOME BASED BUSINESS?


Most home policies will include a liability component, however this would be void if the third party was visiting your home for your businesses activities.



IS PUBLIC LIABILITY INSURANCE A LEGAL REQUIREMENT?


Not for all businesses in Australia, but unless you can afford to pay for a multi million dollar claim, liability cover may be considered an essential item on your business budget. Even the Australian government Liability insurance urge businesses to seek the cover.

Read more about product liability on the Australian Competition and Consumer Commission website.


  • See information about insurance in your state or territory.
  • Compare Public Liability Insurance Quotes from leading Australian Insurers

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Aetna Buys Humana for $37 Billion

The history of managed care really starts when the troops came back from World War II.  Up to this point virtually all medical care was paid for by the patient.

In 1948, there was virtually no insurance for physician care and very limited insurance available for hospital care.  There was no Medicare or Medicaid, so if you got sick and you could not pay for medical care, your family's next call was for the undertaker. The first real real managed care plans (i am using health care insurance company and managed care interchangeably) were provided by the Blue Cross plans for hospital care and  Blue Shield plans for physician care.

Medicare and Medicaid were formed on July 30th of 1965.  The federal government needed someone to administer claims and payments for these programs and they signed contracts with the Blue Cross and Blue Shield Associations.  The "Blues," as they came to be called, were  a natural fit. As non profit companies, they were seen as an extension of federal government.

Medicare and Medicaid started out as a much smaller part of a hospital's or physician's business than they are today.  This is in part because Medicare coverage starts at 65 years of age and the average life expectancy was around 66 when Medicare and Medicaid were created (wow times have changed). It was also much more difficult to qualify for Medicaid. Each state had to agree to create a Medicaid plan and many did not, Arizona was the last state to enter Medicaid in 1982.  Also, it was much harder to qualify for Medicaid as the initial the view of who should be covered by Medicaid was much narrower than it is today.

In 1994,  the Blues decide to allow for profit companies to license the Blue Cross and Blue Shield name. The market power and market share for the Blues and companies licensing the name have continued to shrink over the years.

In the early 1980's, when I started in healthcare, hospitals and physicians had four basic buckets in their patient mix. They had Medicare, Medicaid, Blue Cross and private pay.  Private pay included most of the other health insurance payers as "indemnity" providers that paid 80 percent of charges, leaving the patient to pay the remaining 20 percent.

Now enters Humana.  Humana was at it's inception in 1960 a healthcare chain of hospitals and nursing homes.  They owned and operated one of the largest  chains of hospitals and nursing homes in the country.  In 1984 they started selling health insurance.  In 1993 they sold 73 of their hospitals to the Hospital Corporation of America.  Humana wanted to focus on the insurance business.

In 2003 the Medicare Modernization Act overhauled a failing program to create a behemoth and Humana's largest group of enrolled beneficiaries now.  In 1997 Medicare had created the Medicare + Choice program as a voluntary replacement to standard Medicare.  It failed, mainly because of low rates paid by Medicare to managed care  companies.  In 2003 this program was renamed Medicare Advantage and it took off.  Close to 30 percent of all Medicare members in the country are now enrolled in in Medicare Advantage.

Aetna is an old company that got its start as Aetna Fire Insurance.  They have been involved in healthcare for a long time.  They were functioning as a Medicare fiscal intermediary when I got into healthcare in 1981 for a small number of providers.  In the late 1990s, Aetna bought heavily in the healthcare market, acquiring US Healthcare and number of smaller plans.  In an effort to increase profits, they dramatically raised rates on members and ended up losing over 8 million covered lives.

Aetna still wanted to get larger traction in the healthcare market and appears to be doing it the way they always have,  they bought big.  They are hoping that economies of scale will work in their favor.  They certainly hope history does not repeat itself.

If you ask most hospitals or physician groups what their current mix of patients looks like,  it will most likely be around 30 percent standard Medicare, 15 percent Medicaid, 20 percent Medicare Advantage 25 percent other contracted managed care plans and 10 percent self pay.  Of the Medicare Advantage, the lion share is usually split between Humana and United Healthcare.  With the survival of Obamacare,  it appears that Medicaid will pick up some of the self pay, but also pull some from the other managed care category.   The winners in the managed care arena will be able to profitably service Medicare Advantage, profitably offer insurance in the Obamacare arena  and hold onto a portion of the potentially shrinking pie of people insured outside of Obamacare, Medicare and Medicaid.

This is the first, but definitely not the last, of these mergers and acquisitions.  I am reminded of the story of Alexander the Great on his deathbed.  The story went that when asked who would lead after him, he simply said the strongest.

Timothy Powell, CPA

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Timothy Powell

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Should Unhealthy Behavior Result in More Expensive Health Insurance?

Should Unhealthy Behavior Result in More Expensive Health Insurance?

It's difficult to have a discussion about health care and avoid touching on the rising costs of such. More and more frequently, that discussion is turning toward the role that patients have in the cost of their care.

Recently, Medscape put the question to physicians: Should patients who engage in unhealthy behavior pay more for health insurance? Based on the findings of the Medscape survey, the physician community has spoken with a resounding “Yes!”

The Medscape survey queried more than 21,000 physicians from 25 different specialties on a number of different issues, including whether insurance costs should be tied to patients’ health. Based on the results, the majority of physicians believe that patients who engage in unhealthy behavior, or who don’t follow a doctor’s recommendations such as quitting smoking or losing weight, should pay more for their health insurance.

Of the responding physicians, 69 percent said that patients who practice unhealthy behavior and ignore treatment recommendations should pay more for insurance. Physicians note that such patients pose a higher health risk, and are therefore more expensive to insure.

Others say that a higher insurance premium could be a motivating factor that motivates patients to change their behavior.  For others, it’s a matter of fairness. Patients who do follow doctor orders in an effort to maintain their health should not be paying the same rates as those who do not make similar efforts.

Just 15 percent of doctors responding to the survey oppose using patient behavior to calculate health insurance costs. Some said such an approach would punish patients without resulting in any behavioral change. Others did not want to cast judgement on their patients.

The fact of the matter is that health care costs are rising, and health insurance premiums are increasing to reflect those costs. Part of the increase comes from the health condition of patients, particularly those suffering from chronic conditions, such as heart disease and diabetes. Such diseases are often a consequence of unhealthy behavior. Chronic illness causes about 70 percent of deaths in the United States, and these conditions are among the most expensive, explains Beckers Hospital Review.

The American Medical Association argues for patients to share responsibility for their health care, as well as the costs of that care. In addition to meeting the financial obligations of their care, patients should also be aware of the costs that come from using limited health care resources and should “try to use medical resources judiciously,” the AMA said in its code of ethics.

The AMA’s code goes further, explaining that patients have a responsibility to maintain their health. In some cases, disease and illness can be prevented by a healthy lifestyle and patients “should take personal responsibility when they are able to avert the development of disease,” the AMA said.

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Honor Schoech MD

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Stick People & Life Insurance... It's a fun Friday in the Office :)
This is #1 of a series of illustrations explaining life insurance. This first series shows a Family of 4 that has the Main Income Earner, Stay at home parent, 5 year old & 3 year old. Lets start....

#1 -  Main Income Earner Details
Lets start with Debt... this example shows $5,000 in credit card debt, $15,000 in car loan debt, and $40,000 in student loan debt. The total debt that would need to be paid off in case of a loss of life for this person would be $60,000.
Next is the income replacement. In this case the main income earner in this family brings home $100,000 per year of salary + bonuses. We know the children are 3 & 5 years old. To allow the stay at home parent to continue to be a stay at home parent we would want at least 15 years of income replacement to allow their lifestyle to stay the same until the children are at age 20 & 18 years old and off to college. This takes care of food, utilities, travel expenses, extra curricular activities, entertainment, groceries, taxes, retirement savings/investment savings... etc. The total income replacement would add up to $1,500,000. 
The next need is to take care of the Mortgage. We want to be sure that they will be able to continue to stay in the home that they built their life in. The total needed for this is $500,000.
We now come to the part of Life Insurance that takes care of Final Expense. This takes care of Funeral Costs, Travel expenses for out-of-towners, and memorial expenses. The total average expense is $15,000. 
Another coverage to consider is an Education Fund for the children. We have a 3 & 5 year old, we can assume a small fund has been started, but to fully fund the account if a loss of the main income earner occurs, we will provide an extra $20,000 per child. The total benefit would be $40,000. 
Charitable Donations can be a death benefit as well. If you have an organization that you volunteer for, donate to or are passionate about, you can have a policy that has the beneficiary as that foundation or organization. The total amount they wanted to leave is $50,000. 
When you add up the all of the needs for life insurance we come to quite a large number $2,165,000. Now here is why this number is so very important. Most employers offer a life insurance policy (while you are still employed with them) of 1x-3x your annual income. Lets be generous and say that their employer gives them a 3x their annual income. That adds up to be $300,000. Fantastic! That now tells us that this Main Income Earner now only needs $1,865,000 as a total death benefit. Before you ask... Yes, investments could be added into the amount of benefit used at death... but would you really want to do that? or would you want to continue to add to those and build them? Your call. 
Are you curious to see what see what your number would be? I'd love to help you out! We will go over these areas that are specific to you. 
"A man who dies without adequate life insurance should have to come back and see the mess he created." 
- Will Rogers
Written by
Becca Kerkow

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