Medigap Vs. Medicare Advantage: Which Is Better?

Like any massive insurance enterprise, Medicare is confusing. will give you hundreds of pages of explanation, but luckily, the basics of the program aren’t difficult to grasp. As the cliché goes, however, the devil is in the details. Medicare has four basic parts – A, B, C and D. If you’re unfamiliar with how they work, read Medicare 101: Do You Need All 4 Parts? Taken together, Parts A (hospital care), B (doctors, medical procedures, equipment) and D (prescription drugs) provide basic coverage for Americans 65 and older. What’s relevant for this article is what these parts don’t cover – deductibles, co-pays and other medical expenses that could wipe out your savings should you become seriously ill. That’s where Part C comes in. Also known as Medicare Advantage, it’s one of two ways to protect against the potential high cost of an accident or illness. Here’s what could happen.

You Have to Plug the Holes

Let’s say you have only Parts A, B and D. Here’s what the holes or “gaps” in coverage could do to your budget if you were admitted to the hospital for, say, heart surgery, and complications required you to have a long hospital stay followed by needing regular medication after it: At the hospital: Because of the Part A deductible, you’d pay the first $1,216. After 60 days, you will start paying a portion of each day’s cost. For doctors and medical procedures (Part B) at the hospital and at home: You would pay 20% of all costs after meeting your $147 deductible. Unlike many other health insurance policies, there is no cap or maximum out-of-pocket amount on what you could owe. The American Heart Association says that the average cost of heart surgery is $62,509 – in that case, your Part B copay would be over $12,000. Because of how Part D works, you could pay as much as 72% of the cost of some of your prescription drugs if you need enough medication to push you into the notorious doughnut hole: when Part D’s full prescription-drug coverage runs out after you’ve spent $2,850, until your medication costs exceed $4,550 per year. In 2015, coverage will end at $2,960 and begin again at $4,700. During the coverage gap, you’ll be responsible for 47.5% of covered, brand-named prescription drugs. In 2015, that will change to 45%. These coverage gaps mean that a particularly bad health year could leave you with tens of thousands of dollars in hospital bills. That’s why most people purchase Medicare supplement insurance – also called Medigap – or enroll in Part C, a Medicare Advantage Health Plan. Both options are offered by private insurance companies. They do, however, have to follow Medicare guidelines in what they are allowed to sell.

Option 1: Medigap

Medicare Supplement Insurance, also called Medigap coverage, will protect people who buy traditional Medicare against many of the costs described above. In return, Medigap charges a premium that is in addition to what you already pay for Medicare Parts A (many people get this free), B and D. Just to make life truly confusing, the various options offered by Medigap are also sorted by letter. Your choices are Plans A, B, C, D, F, G, K, L, M and N. What these plans include is standardized by Medicare. What you pay for them can vary, however, so it’s worth shopping around. Joseph Graves, insurance agent and Founder of “I Hate Buying Insurance,” says many people enroll in Plan F, the most expensive choice, because it covers nearly all the gaps. A person with Plan F coverage will have few or no out-of-pocket expenses. A healthy person living in Florida would pay about $289 per month for Plan F coverage as of 2014, according to Graves. Medigap policies will cover you whenever you see any doctor or facility that takes Medicare. If the doctor or facility does not accept Medicare patients, Medigap won’t cover any of those costs, even though it is a private insurance policy. You can find a Medigap policy here.

Option 2: Medicare Advantage

A Medicare Advantage Health Plan (Medicare Part C) may provide more help at a lower cost than traditional Medicare plus Medigap. Instead of paying for Parts A, B and D, you enroll through a private insurance company that, in many cases, covers everything provided by Parts A, B and D and may offer additional services. You pay the Medicare Advantage premium along with your Part B premium in most cases. Medicare Advantage Health Plans are similar to private health insurance plans. With most plans, services such as office visits, lab work, surgery and many others are covered after a small co-pay. Depending on what’s available in your area, plans could offer HMO or PPO network plans and place a yearly limit on your total out-of-pocket expenses. Also like private plans, each has different benefits and rules. Most provide prescription drug coverage; some may require a referral to see a specialist while others won’t. Some may pay some portion of out-of-network care, while others will only cover you for doctors and facilities that are in the HMO or PPO network. Compare plans by going to’s plan finder.

Which is Better for You?

It is illegal for an insurance company to sell you both a Medicare Advantage and a Medigap policy. Three things to consider before choosing which one to get:

  1. Cost: Medigap coverage usually has a higher monthly premium, but could result in lower out-of-pocket expenses than some Medicare Advantage plans. Medicare Advantage plans, on the other hand, generally cost less and cover more services, which can be the better option for your budget.
  2. Choice: Medicare Advantage plans generally limit you to the doctors and facilities within the HMO or PPO, and may or may not cover any out-of-network care. Traditional Medicare and Medigap policies cover you if you go to any doctor or facility that accepts Medicare. If you require particular specialists or hospitals, check whether they are covered by the plan you select.
  3. Lifestyle: Medicare Advantage plans often only operate with a certain region. If you’re a snowbird living in more than one state throughout the year, traditional Medicare plus Medigap is probably a better choice than an Advantage plan. This may also be true if you travel frequently: Some Medigap plans provide coverage when traveling outside of the United States and cover you in all 50 states; Advantage plans generally do not.

The Bottom Line

Figuring out the Medicare plan that’s most appropriate for your needs is probably not a do-it-yourself activity. Once you understand the basics of Medicare, get some help. provides tools that will allow you to compare plans, but the decision is complicated. Insurance agent Graves recommends that you “work with a licensed insurance agent who can show you both Medicare Supplement Plans and Advantage Plans from multiple companies. Each type has its positives.” The questions to cover, he says: “You need to understand the costs, doctor networks, coverage levels and maximum out-of-pocket for each. Enroll in what suits your situation best.” Organizations such as Consumer Reports and the Medicare Rights Center can also help you research your decision.

Posted in Medicare |

Defense of a (Health Insurance) Salesman

“State of CA spends $75M for a health exchange marketing commercial featuring Richard Simmons in a red tutu”


“Nationwide concern about Exchange Navigators having criminal backgrounds”


One of the many casualties of the new healthcare affordability act is the independent salesman.  The middle man the unnecessary cog in the machine that worked for the horrible word called COMMISSSIONS. They increased the cost of insurance, they sold inferior products.  And now they are no more! Oh don’t worry nobody really cares, the politicians didn’t, the insurance companies didn’t, the consumer didn’t, AARP didn’t.  I am a voice crying in the night, during one of your worst nightmares America. Beware “they gore my ox today, yours will be tomorrow”!

So per usual politicians think they can do it better, after all that’s what government is isn’t? Either way the government thinks they can do it better. How does the saying go? Those that can’t do govern? Or was that “those that can’t do teach” either way here we are. For 12 years I drove 50K miles a year, running 20 or more appointments with small business owners, self employed and those without work coverage.  I wrote thousands of individual contracts by hand over that time period. I marketed by hanging signs on telephone poles, by sending out mailers, and running smalls ads in the local rag. I and my family survived on the horrible word “commissions” somebody had to do it, health insurance will not sell itself.  Over 30% of those contracts where for people uninsured prior to meeting me. Yes, you’re correct; I am blowing my horn because no one else will. The private sector fills needs; if they can make an income filling those needs then they will continue.  I can remember sitting in family homes after the wife called on one of my ads. Her eyes would be begging me to convince her husband to buy; many times they would have children and would be uninsured.  It was a burden and I am proud to say I always left people better off than before they met me. And I never wore a red tutu.  But of course the government can do it better.

It’s never been about affordability, it’s been about want-ability or priority. Granted affordability was an issue for people with pre-existing conditions, but that certainly was not the majority.  On many of my appointments I would pull into the driveway of uninsured families.  Two new car payments in the driveway, swimming pool in the back yard, pool table in the den, but no health insurance.  And regardless of the price or what I said they weren’t going to buy….why… because, it wasn’t a priority So don’t be surprised federal government many people don’t give a darn, and those are the millions that you were supposedly concerned about.  Sounds like the government needs a good sales force instead investing my commission dollars into red tutus and navigators with criminal backgrounds. People need education and they need convenience both items the sales person provided.  Sales people create pain by opening prospects eyes to reality and risk. They then logically explain or educate how the policy will protect them and cure the pain. The more pain the more the policy becomes and priority and price becomes less the issue.

Navigators with criminal records? So this is what insurance agents have been replaced with? Seriously?  Health and life insurance agents across the country had to pass background checks, taking schooling and passing a rigid exam to sell health insurance.  Not only that, annually most had to complete continuing education in order to continue to represent health insurance companies.   Many of those insurance companies provided additional training of their own.  A  good sales person would also hone their craft, practice pitches and of course listen to hundreds of “no’s”.  Oh but of course the government can do it better, salesman are not needed.  Let’s take the example of the online exchange.  One of the big thorns in my side over my years of health sales was a website call EHealth.  A family could go online run several quotes get advice and apply.  I hated to admit it was very slick. And could be hard for me to overcome. Well of course we all know that government can do it better.   I am sure EHealth spent millions of dollars and years developing their website.  The federal government of course over about 2 year’s development thought they could do it better.  I guess we all know how that turned out. 

Posted in Health Care Reform, Health Insurance |

Retirees Worry They May Run Out of Money

Senior Couple At Home With Many BillsRetirees face several real risks with regards to their fears about running out of money:  longevity is the biggest risk (living too long).  Other risks are:  market volatility and inflation, to name a few.

Longevity:  This is probably our biggest risk.  We are living longer.  Many boomers are going to see their 90s, and more than a few, their 100s!  Every other risk that I will be discussing gets compounded by living long.  If you died tomorrow, no risks matter.  But if you do see your 90s or 100s, then market volatility and inflation become more and more problematic.

Market volatility:  Simply put, market volatility means, the ups and downs of the markets; and thus the ups and downs of your portfolio.  In the past 15 years, we have seen more volatility than the previous generations (except for the Great Depression generation).  One of the financial principles that I teach my clients is, don’t spend money from a declining asset.  In other words, don’t use money from your portfolio in a bear market.  It will deplete the asset very quickly.Fast Food

Inflation:  This is a no brainer.  Since the 2008 market crash, the Feds have held interest rates at record lows, but this is beginning to change.  I believe that interest rates will begin to climb soon, and when they do, the costs of just about everything will go up.  We sometimes use the price of a McDonald’s hamburger as our guide.  How much does a double cheese burger cost?  Not long ago it was a buck.  Now it is $1.29.  What will it be in 10 years?  INFLATION can really drain a portfolio that can’t keep pace with rising costs.

Posted in Retirement Planning |

Client Event at The Pinnacle on January 23rd, 2014

Posted in Uncategorized |

Congress Poised to pass 3 year Aid and Attendance Lookback

Much to the dismay of the hundreds of veterans we have helped and the veteran community in general the congress is poised to cut availability of the aid and attendance pension. How will they do this? By creating a 3 year look back! This will prevent veterans who are seemingly over qualified for the pension from being able to position themselves to avail pension. Unlike Medicaid which after a 5 year look back covers the entire expense the VA will then only give the standard $13K to $24K annual. Sorry veterans who worked hard your entire life, saved, made hard decisions who probably won’t qualify. OH….but the guy who was in the same foxhole the same battle, the same snow storm, dodged the same bullets. But……came home didn’t save, didn’t make hard decisions will walk right in!!!!! Why am I not surprised????

Posted in Veterans Benefits |

Summary of Benefits and Coverage

The Patient Protection and Affordable Care Act (PPACA) requires health plans and health insurance issuers to provide a summary of benefits and coverage (SBC) to applicants and enrollees. Both non-grandfathered and grandfathered plans will need to provide the SBC.

The SBC is a concise document providing simple and consistent information about health plan benefits and coverage. It must be provided free of charge. Its purpose is to help health plan consumers better understand the coverage they have and to help them make easy comparisons of different options when shopping for new coverage.

On Aug. 22, 2011, the Departments of Health and Human Services (HHS), Labor and Treasury (Departments) issued proposed regulations for the SBC. On Feb. 9, 2012, the Departments announced the release of final SBC regulations.

The final regulations include guidance on:

  • The compliance deadline for plans and issuers to begin providing the SBC;
  • The requirements for providing the SBC, including who must provide it and when it must be delivered; and
  • The requirements for preparing the SBC, including its content, appearance and language.

The Departments also announced the availability of a template for the SBC and additional instructional guidance and sample language for completing the template, as well as the uniform glossary for the disclosure.

This Beacon Associates Legislative Brief summarizes PPACA’s standards for the SBC, including the final guidance provided by the Departments.


The health care reform law originally required plans and issuers to start providing the SBC by March 23, 2012. However, in November 2011, the SBC compliance deadline was delayed pending the release of final SBC guidance.

The final SBC regulations provide that the SBC requirement becomes effective as follows:

  • Issuers must provide the SBC to health plans effective Sept. 23, 2012.
  • Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first open enrollment period that begins on or after Sept. 23, 2012.
  • For participants who enroll in coverage other than through an open enrollment period (for example, newly eligible individuals and special enrollees), plans and issuers must provide the SBC beginning with the first plan year that begins on or after Sept. 23, 2012.

More specific timing requirements for providing the SBC are described below.


Timing Requirements

For group health plans, the final regulations outline two different scenarios under which the SBC must be provided: (1) by a group health insurance issuer to a group health plan; and (2) by the issuer or plan to participants and beneficiaries.

A health insurance issuer must provide an SBC to a group health plan (or the plan’s sponsor):

  • Upon application for health coverage;
  • By the first day of coverage, if there was any change in the information required to be in the SBC that was provided upon application and before the first day of coverage;
  • When the issuer renews or reissues the policy; and
  • Upon request.

A health insurance issuer or health plan must provide an SBC to participants and beneficiaries with respect to each benefit package for which the participant or beneficiary is eligible. The SBC must be provided:

  • As part of any written application materials that are distributed by the plan or issuer for enrollment;
  • If the plan or issuer does not distribute written application materials for enrollment, no later than the first date  that the participant is eligible to enroll in coverage;
  • By the first day of coverage, if there was any change to the information required to be in the SBC that was provided upon application and before the first day of coverage;
  • To special enrollees, no later than the deadline for providing the summary plan description (SPD) (that is, within 90 days of enrollment);
  • Upon renewal, if participants and beneficiaries must renew in order to maintain coverage; and
  • Upon request (the uniform glossary must also be provided upon request).

SBCs that are provided upon application (by issuers) or upon request (by either plans or issuers) must be provided as soon as practicable, but no later than seven days after receipt of the application or request.

For providing the SBC at renewal time, if a written application is required for renewal, the SBC must be provided no later than when the application materials are distributed. If renewal is automatic, the SBC must be provided no later than 30 days before the beginning of the new plan year.

However, an exception applies if an insured plan’s policy, certificate or contract of insurance has not been issued or renewed before this 30-day period. In this case, the SBC must be provided as soon as practicable, but not later than seven days after the issuance of the new policy, certificate or contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier.

Special Rules to Avoid Duplication

The final regulations contain three special rules to streamline the provision of the SBC and avoid unnecessary duplication.

First, if either the plan or issuer provides the SBC to a participant or beneficiary in accordance with the timing and content requirements, both will have satisfied their SBC obligations. Thus, a fully-insured plan will satisfy the requirement to provide an SBC to an individual if the issuer provides a timely and complete SBC to the individual.

Second, a single SBC may be provided to a family, unless any beneficiaries are known to reside at a different address. Due to this rule, plans and issuers will be required to provide separate SBCs to beneficiaries only in limited circumstances.

Third, for group health plans with multiple benefit packages, the plan or issuer is required to automatically provide a new SBC at renewal only with respect to the benefit package in which a participant or beneficiary is enrolled. SBCs for other benefit package options do not have to be provided automatically at renewal, but must be provided upon request.

Exceptions for Certain Types of Plans, Policies or Benefits

The SBC requirement applies to both group health plans and health insurance issuers. In the preamble to the final regulations, the Departments state that an SBC does not need to be provided for plans, policies or benefit packages that constitute “excepted benefits” under HIPAA. Thus, for example, the SBC requirement does not apply to stand-alone dental or vision plans or health flexible spending accounts (FSAs) that qualify as excepted benefits.

If a health FSA does not meet the criteria for an excepted benefit, and it is integrated with other major medical coverage, the SBC should be prepared for the other major medical coverage and the effects of the health FSA can be included in the appropriate spaces on the SBC for deductibles, copayments, coinsurance and benefits otherwise not covered by the major medical coverage. A stand-alone FSA that is not an excepted benefit must satisfy the SBC requirements independently. A similar rule applies for health reimbursement arrangements (HRAs).

Health savings accounts (HSAs) are not group health plans and, thus, are not subject to the SBC requirement. However, the SBC for a high deductible health plan (HDHP) associated with the HSA can mention the effects of employer contributions to HSAs in the appropriate spaces on the SBC for deductibles, copayments, coinsurance and benefits not otherwise covered by the HDHP.

Effect on Other Documents

The SBC does not replace any required disclosure documents for group health plan coverage, such as the summary plan description (SPD). Rather, it adds to the list of required disclosures. However, the SBC can be provided as either a stand-alone document, or it can be provided with other summary materials (for example, the SPD). To be provided with other summary materials, the SBC information must be intact and prominently displayed at the beginning of the materials (for example, immediately after the SPD’s table of contents) and provided in accordance with the SBC timing requirements.

Method of Delivery

The SBC may be provided in either paper or electronic form (such as by e-mail or an Internet posting). However, the final regulations place restrictions on the electronic delivery of the SBC.

For SBCs provided by an issuer to a health plan, the SBC may be provided electronically if:

  • The format is readily accessible by the plan or its sponsor;
  • The SBC is provided in paper form free of charge upon request; and
  • If the electronic form is an Internet posting, the issuer timely advises the plan in paper form or e-mail that the documents are available on the Internet and provides the Internet address.

For SBCs provided to participants and beneficiaries, the SBC may be delivered electronically to participants and beneficiaries who are already covered under the group health plan if the Department of Labor’s (DOL) regulations on electronic disclosure are satisfied.

For participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically if:

  • The format is readily accessible;
  • The SBC is provided in paper form free of charge upon request; and
  • If the electronic form is an Internet posting, the plan or issuer timely notifies the individual in paper form (such as a postcard) or e-mail that the documents are available on the Internet, provides the Internet address and notifies the individual that the documents are available in paper form upon request.


The SBC is to be provided in a standardized format to help provide clear, consistent and comparable information about health plan coverage and benefits. As mentioned above, the Departments have provided a template and a uniform glossary for this purpose. The Departments intend to update the template and uniform glossary in future years to incorporate health care reform changes that become effective in later years.

Group health plans and issuers are required to use the full template to satisfy the SBC requirement. To the extent a plan’s terms cannot reasonably be described in a manner consistent with the template and its instructions, the plan or issuer must make its best effort to accurately describe the relevant plan terms in a way that is as consistent with the instructions and template format as is reasonably possible.

On June 26, 2012, HHS issued a memorandum with a list of information links to help with completing the SBC. The memorandum is available at:


The SBC must be presented in a uniform format and must use terminology understandable by the average plan enrollee. The SBC must be relatively short; it cannot be longer than four pages. The Departments interpreted the four-page limitation as four double-sided pages. The SBC cannot include print smaller than 12-point font. The SBC template may be provided in color or black and white.

Required Content

PPACA provides that SBCs must contain the following provisions:

  • Uniform definitions of standard insurance and medical terms;
  • A description of coverage, including cost-sharing for specified categories benefits;
  • Exceptions, reductions and limitations on coverage;
  • Cost-sharing provisions, including deductible, coinsurance and copayment obligations;
  • Renewability and continuation of coverage provisions;
  • Specified coverage examples that illustrate benefits provided under the plan or coverage for common benefits scenarios (including pregnancy and serious or chronic medical conditions);
  • A statement that the outline is a summary of the policy and that the coverage document itself should be consulted for contractual provisions;
  • A contact number for consumers and a web address where a copy of the actual coverage policy or certificate of coverage can be reviewed and obtained;
  • For plans and issuers with one or more provider networks, an Internet address (or similar contact information) for obtaining a list of the network providers;
  • For plans and issuers with a prescription drug formulary, an Internet address (or similar contact information) for obtaining information about the prescription drug coverage; and
  • An Internet address for obtaining the uniform glossary, a contact phone number to obtain a paper copy of the uniform glossary and a disclosure that paper copies are available.

The SBC is not required to include premium or cost of coverage information.

Instead of summarizing coverage for items and services provided outside the United States, a plan or issuer may provide an Internet address (or similar contact information) for obtaining information about benefits and coverage provided outside the United States.

Beginning in 2014, the SBC must include a statement of whether the plan provides minimum essential coverage and ensures that the plan’s share of total allowed costs meets applicable requirements.


PPACA requires the SBC to be presented in a culturally and linguistically appropriate manner, and use terminology that average enrollees can understand. The final regulations require plans and issuers to provide the SBC in a culturally and linguistically appropriate manner when 10 percent or more of the population residing in the individual’s county are literate only in the same non-English language.

To help plans and issuers meet this requirement, HHS intends to provide written translations of the SBC template, sample language and uniform glossary in Spanish, Tagalog, Chinese and Navajo. This information should be available in the future through


Plans and issuers must also provide participants and beneficiaries a uniform glossary of health-coverage-related terms and medical terms. The terms included in the uniform glossary are specified by the Departments and are intended to allow individuals and employers to compare and understand the terms of coverage and medical benefits, including any exceptions to those benefits.

The uniform glossary must be provided in the format specified by the Departments. It must be presented in a uniform format and use terminology understandable by the average plan enrollee. Plans and issuers must make the uniform glossary available upon request, within seven business days after receipt of the request. The uniform glossary may be provided in either paper or electronic form, as requested.

The glossary also will be publicly available at, and


Plans and issuers are required to give at least 60 days advance notice of any material modification in plan terms or coverage that are not reflected in the most recent SBC. This notice requirement is limited to material modifications that do not occur in connection with a renewal or reissuance of coverage.

According to the regulations, a “material modification” includes: (1) an enhancement of covered benefits or services, such as coverage of previously excluded benefits or reduced cost-sharing; (2) a material reduction in covered services or benefits, such as through increased premiums or cost-sharing; or (3) more stringent requirements for receipt of benefits, such as a new referral requirement.

The material modification notice can be provided in a separate document describing the material modification or through an updated SBC.


PPACA establishes a penalty of up to $1,000 for each willful failure to provide the SBC. Failing to provide the SBC may also trigger an excise tax of $100 per day per individual for each day of noncompliance.


More information on the SBC, including the final template (with instructions, sample language and a guide for coverage examples calculations) and the uniform glossary, is available at:

The final SBC regulations are available at:!documentDetail;D=HHS_FRDOC_0001-0442.

FAQs on the SBC are available at: (Part XIII, IX and X).

Posted in Health Care Reform, Health Insurance, Medicare |

Healthcare Reform Timeline

Source material provided by Anthem Blue Cross Blue Shield


March 23

Small group tax credit, effective for tax years beginning after December 31, 2009

Effective for calendar year 2010, this tax credit is designed to encourage small businesses to offer health care coverage for the first time or to help them maintain the coverage they already have. In 2010, the maximum credit is 35% of employer-paid premiums. For tax-exempt organizations, the maximum is 25% of employer-paid premiums. In 2014, the maximum increases to 50% of employer-paid premiums. For tax-exempt organizations, it increases to 35% of employer-paid premiums. To qualify for the credit, a group must employ not more than 25 employees, and the average annual compensation of those employees cannot exceed $50,000.


Grandfathered plans

If an employer keeps the same coverage it had on March 23, 2010 — the date the law took effect — the plan may be considered a “grandfathered” plan. This means the plan may be exempt from some of the requirements of the health care reform law. However, certain changes must be made to all plans, whether they’re grandfathered or not.


June 29

Early retiree reinsurance program

Early retiree reinsurance program: $5 billion has been set aside to help employers continue to provide coverage to certain retirees. The employer can be reimbursed up to 80% for an early retiree claim, between $15,000 and $90,000. The proceeds will help lower health care costs (such as premium contributions, copays and deductibles) for enrollees. Self-funded and fully insured groups are eligible. This is a temporary program, ending in 2014 or when the funds are exhausted — whichever comes first.


July 1

Temporary high-risk pool for individuals with pre-existing conditions


September 23

Dependent coverage for adult children up to age 26


No lifetime coverage limits

100% coverage for preventive services in network


No annual limits on certain types of benefits


No prior authorization for emergency services or higher cost-sharing for out-of-network emergency services

No pre-existing condition exclusions for children


October 1

Small employer grants for wellness programs for Fiscal Year 2011

Small group employers that establish wellness programs can receive grants for up to five years. This is effective for Fiscal Years 2011 to 2015, so it technically starts in 2010.


January 1

No pre-tax reimbursements from health account for non-prescribed, over-the-counter medications

Account holders will stop receiving pre-tax reimbursements from their FSA, HRA or HSA for non-prescribed, over-the-counter medications.

20% tax for nonqualified HSA withdrawals

The excise tax for nonqualified HSA withdrawals will increase from 10% to 20%.

Reporting the value of employer-sponsored coverage on W-2s

Employers must start reporting the value of the employer-sponsored coverage on their employees’ W-2s. However, employees are not taxed on this amount. This reporting requirement is voluntary in 2011, and becomes mandatory in 2012.

Automatic enrollment in new long-term care program. with ability for employees to opt out

Employers will automatically enroll employees into the Community Living Assistance Services and Supports long-term care program. Employees may opt out. More guidance to come.


January 1

Summary of benefits and coverage (formerly uniform explanation of coverage)

Requires health insurers, self-funded health plan sponsors and plan administrators to follow uniform standards when providing group and individual plan applicants, enrollees and policy/certificate holders with a summary of benefits and coverage. Also requires a uniform glossary of common health care and insurance terms be provided.

Pre-enrollment document sent explaining benefits and exclusions

Part of the Summary of Benefits and Coverage provision, pre-enrollment materials must be provided to Individual applicants shopping for coverage on the benefits and exclusions of various plan offerings.

60-day notice for material modifications, if not provided in uniform explanation of coverage

Requires plan sponsors or issuers to provide 60 days advance notice to enrollees when making material modifications to the plan outside of the regular renewal process.


January 1

Employee notification of exchanges and premium subsidies

Employers will need to start telling employees about exchanges and premium subsidies.

FSA contributions limited to $2,500 per year

Employee contributions for FSAs will be capped at $2,500 annually, with the cap adjusted annually to the Consumer Price Index.

October 1

Fee for comparative effectiveness research agency for Fiscal Year 2013

Employers with self-funded health care plans will start paying a fee to fund a comparative effectiveness research agency. If the health care plan is fully insured, the health insurer will be assessed this fee. This charge will be $1 times the average number of covered lives. In 2014, it will be $2 times the average number of covered lives. The fee ends on September 30, 2019. This is based on Fiscal Year 2013, which starts in 2012.


January 1

Individual mandate

State-based exchanges for individuals and small groups

There will be separate state-based exchanges for individuals (American Health Benefit Exchanges) and for small groups (Small Business Health Options Program or SHOP). At this time, small group employer tax credits will only be available through the exchange.

Small employer tax credits available only in exchange

Elimination of health status rating and other rating factors if used by an insurer

Small group redefined as 1-100 (in most states)

Small group will be redefined from 2-50 to 1-100. (States may defer the implementation of the increase to 100 until 2016.)

Employer requirement to offer minimum essential coverage (50 employees)

Employers with 50 or more full-time employees will be required to offer minimum essential coverage. This coverage must have a 60% actuarial value minimum. (Basically, this means the plan covers at least 60% of covered health care costs.) Employers will be subject to penalties if they provide no health coverage to full-time employees or provide coverage that is not “affordable.” These penalties will range from $2,000 to $3,000 per employee.


HIPAA nondiscrimination rules on wellness programs


30% incentive cap for wellness programs

The law codifies the HIPAA nondiscrimination rules on wellness programs and increases the incentive cap to 30% of the premium. The cap can increase to 50% at the discretion of the HHS secretary.

New fee on fully insured coverage

A new fee will be built into the cost of fully insured coverage.

90-day limit on waiting periods for coverage

Group health plans cannot require waiting periods for coverage of more than 90 days.

Treasury reporting

Effective for tax years beginning after December 31, 2013, employers will be required to annually report information, such as:

*Whether minimum essential coverage is offered to full time employees

*Any waiting periods for health coverage

*The monthly premium for the lowest cost option in each enrollment category under the plan

*The employer’s share of the total allowed cots of benefits provided under the plan

*Number of full-time employees during each month

*Name address and taxpayer identification number (or Social Security number) of each full-time employee, and the months each employee was covered under the employer’s plan

*Other information that HHS may require (which will likely be refined in later regulations)


January 1

40% excise tax on high-cost “Cadillac” plans

There will be a 40% excise tax on high-cost plans — also known as “Cadillac” plans — that cost more than $10,200 for single coverage or $27,500 for family coverage. The insurer or employer will be responsible for the tax.

Posted in Health Care Reform |

Health Care Reform – Legislative Brief

2013 Compliance Checklist

In light of the Supreme Court’s June 28, 2012, decision to uphold the health care reform law, or Affordable Care Act (ACA), employers must continue to comply with ACA mandates that are currently in effect. Employers must also prepare to comply with ACA changes that will go into effect in the future. To prepare for upcoming changes, employers need to be aware of the ACA mandates that will go into effect in 2013.

The Beacon Associates Legislative Brief provides a compliance checklist for employers for 2013. Please contact your Beacon Associates representative for assistance or if you have questions about changes that were required in previous years.


A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact your Beacon Associates representative if you have questions about changes you have made, or are considering making, to your plan.

  • If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2013 plan year. Grandfathered plans are exempt from some of the health care reform requirements. A grandfathered plan’s status will affect its compliance obligations from year-to-year.
  • If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.


Effective for plan years beginning on or after Jan. 1, 2014, health plans will be prohibited from placing annual limits on essential health benefits. Until then, however, restricted annual limits are permitted.

  • Unless a health plan received an annual limit waiver, its annual limit on essential health benefits for the 2013 plan year cannot be less than $2 million. (This limit applies to plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014.)


Health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a relatively short document that provides simple and consistent information about health plan benefits and coverage in plain language. A template for the SBC is available, along with instructions and examples, and a uniform glossary of terms.

Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.

  • If your plan has an open enrollment period beginning on or after Sept. 23, 2012, confirm that the SBC is included with the open enrollment package. For participants and beneficiaries who enroll outside of the open enrollment period, confirm that the SBC will be provided to these individuals beginning with the plan year starting on or after Sept. 23, 2012.
    • If you have a self-funded plan, the plan administrator is responsible for providing the SBC.
    • If you have an insured plan, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBC. Please contact your Beacon Associates representative for assistance.


  • A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.


  • Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements.

The covered preventive care services for women include: well-woman visits; gestational diabetes screening; human papillomavirus (HPV) testing; sexually transmitted infection (STI) counseling; human immunodeficiency virus (HIV) screening and counseling; FDA-approved contraception methods and contraceptive counseling; breastfeeding support, supplies and counseling;  and domestic violence screening and counseling. Exceptions to the contraception coverage requirement apply to certain religious employers. The preventive care guidelines for women are available at:


  • Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500. (The $2,500 limit will be indexed for cost-of-living adjustments for 2014 and later years.)

Health FSA plan sponsors are free to impose an annual limit that is lower than the ACA limit for employees’ health FSA contributions. Also, the $2,500 limit does not apply to employer contributions to the health FSA and it does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the $2,500 health FSA limit.


  • Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.

ACA’s W-2 reporting requirement is optional for smaller employers until further guidance is issued. Also, the reporting is for informational purposes only; it does not affect the taxability of benefits.


The Medicare Part D program includes a Retiree Drug Subsidy (RDS) to encourage employers to continue providing prescription drug coverage to Medicare-eligible retirees. The RDS is available to certain employers that sponsor group health plans covering retirees who are entitled to enroll in Medicare Part D but elect not to do so. Employers receive RDS payments tax-free. In addition, before 2013, employers receiving the RDS could take a tax deduction for their retiree prescription drug costs, unreduced for the subsidy amount.

  • Beginning in 2013, employers receiving the RDS will no longer be permitted to take a tax deduction for the subsidy amount.


  • Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate increases by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for an individual taxpayers and $250,000 for married couples filing jointly. (The tax is also expanded to include a 3.8 percent tax on unearned income in the case of individual taxpayers earning over $200,000 and $250,000 for married couples filing jointly).

An employer must withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the additional Medicare tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld additional Medicare tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).


  • Effective March 1, 2013, employers must provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges). In general, the notice must:
    • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
    • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
    • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes; and
    • Include contact information for the Exchange and an explanation of appeal rights.

Federal agencies are expected to issue more specific guidance on this notice requirement and provide a model notice for employers to use. On Jan. 24, 2013, the Department of Labor (DOL) announced that employers will not be held to the March 1, 2013, deadline. They will not have to comply until final regulations are issued and a final effective date is specified. The DOL expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.


ACA created the Patient-Centered Outcomes Research Institute (Institute) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is to be funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These fees are called comparative effectiveness research fees or CER fees.

  • Self-funded plans and health insurance issuers must pay a $1 per covered life fee for comparative effectiveness research. Fees are effective for plan years ending on or after Oct. 1, 2012. Fees increase to $2 the next year and will be indexed for inflation after that. Full payment of the research fees will be due by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the first possible deadline for paying the CER fees is July 31, 2013.


  • Health plans must file a statement with the Department of Health and Human Services (HHS), certifying their compliance with HIPAA’s electronic transaction standards and operating rules. Under ACA, the first deadline for certifying compliance with certain HIPAA standards and rules is Dec. 31, 2013. HHS has indicated that it intends on issuing more guidance on this requirement in the future.
Posted in Health Care Reform, Health Insurance, Medicare |

AEP and Making Changes to Your Medicare Coverage

In approximately two weeks ANNUAL ELECTION PERIOD OR AEP will begin. The event will run for fifty-three days, from October 15th to December 7th. Of course, not all need be concerned with this annual occurrence, but if you or a loved one are on Medicare you should take some time for reflection. Is the plan that you or your loved one is under still adequate? Is there an important factor missing from your coverage? Has your health changed in the past year, or are all of your needs being met? These are the questions one must ask themselves in preparation for Medicare Open Enrollment. In twelve days, you’ll be able to make truly significant changes to your Medicare Advantage plan or, if you so choose, you can make no changes at all. The choice is yours. However, if you or someone you care about is on Medicare, you should not allow this period to pass without careful consideration. I am finding that there is a common misconception out there in regards to the Medicare supplement. If you have a Medicare supplement you can change your plan at ANY time as long as you can pass the medical underwriting.

Of course, before you can decide whether or not you want to change your plan to another you’ll need to know your options. There are four Parts of Medicare available:

MEDICARE PART A (hospital services) You are entitled to this because you were/are employed and paid into the Social Security and Medicare Continue reading

Posted in Medicare |

Federal Ruling on Health Insurance

A federal appeals court recently ruled that Congress does not have the authority to require individuals to purchase health insurance, which essentially throws out a key provision of the health care reform law.

The three-judge panel of the 11th Circuit Court of Appeals in Atlanta ruled 2-1 that the individual mandate is unconstitutional.

“The individual mandate exceeds Congress’ enumerated commerce power and is unconstitutional,” wrote Judge Joel Dubina. “This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives.”

Judge Frank Hull, an appointee of former Democratic President Bill Clinton, backed Judge Dubina, an appointee of former Republican President George W.H. Bush. Judge Stanley Marcus, also a Clinton appointee, said Congress does have the authority to require individuals to obtain insurance.

“Congress rationally found that the individual mandate would address the powerful economic problems associated with cost shifting from the uninsured to the insured and to health care providers, and with the inability of millions of uninsured individuals to obtain health insurance,” Judge Marcus wrote. “Thus, to the extent the plaintiffs’ individual liberty concerns are rooted in the Fifth Amendment’s Due Process Clause, they must fail.”

The lawsuit was originally filed in Florida by 26 states, where a federal judge ruled against the individual mandate and struck down the law in its entirety.

The 11th Circuit ruling conflicts with a Cincinnati appeals court ruling that found the coverage requirement to be within the authority of Congress. An additional federal appeals court in Richmond is also deciding on the same issue.

Posted in Health Care Reform, Health Insurance |