Healthcare Reform: Initial Enrollment Period

It's almost here!! Prepare for a mess.... Health Care Reform’s initial enrollment period is rapidly approaching October 1, 2013. For the everyday consumer this brings confusion, along with opportunity for some and concern for others. I have taken over Mosaic Employee Benefits, LLC to educate clients and their networks on the Patient Protection and Affordable Care Act (PPACA) relative to the unique planning strategies that have come about. Individuals and Small Businesses must note that PPACA does not make coverage "affordable" for everyone. Specifically, Milliman's report projects that individual premiums in Ohio will increase by as much as 55 to 85 percent in 2014 not including current medical trend, which has been an average increase of 7 to 8 percent nationwide each year. Moreover, some individuals may see their premiums increase by 90 to 130 percent depending on their current health status, while others may see decreases. Those in the small group market (employers with 2 to 50 employees) are projected to experience average increases of 5 to 15 percent in 2014, not including yearly medical trend increases. However, some small groups may see increases of up to 150 percent, while others may see decreases of 40 percent depending on the group's current age demographic and health status. Why the fluctuation in premiums? The guaranteed insurance law has solved the issue of an individual being declined for pre-existing conditions. Pre-existing conditions and gender no longer come into play. The cost will now rely on Age, Family Demographic, and Smoker Status. With new laws, an insurance carrier may not charge a 64 year old more than 3 times the premium of a 21 year old (new law community ratings 3:1 spread, current law 8:1 spread). The young and healthy will inherit the burden of the cost while individuals nearing or at age 64 with pre-existing conditions will most likely save premium dollars. How to plan? Failing to have an plan may prove to be costly. 1. Compliance – Two forms attached, offering insurance or not offering insurance. Employers must distribute the appropriate form to their employee’s by the October 1st, 2013 deadline. It is important to be able to track distribution. 2. Early Renewal Strategies – Most major medical insurance carriers are offering groups and individuals early renewal rates this December. Early renewal contracts extend the current plan participation, rates, and benefits thru December of 2014, delaying participation in a new exchange plan to 2015. **key for those with expected increases under new 2014 laws 3. Tax Credits – Businesses that have low income employees must be careful with affordable coverage laws. By providing group insurance and making it affordable (9.5% of income or less), you may hinder an employee’s chance of qualifying for assistance with individual plan premiums. 4. Individuals can now see their estimated premium cost for new “Metal Plans” on the health reform calculator for the state of Ohio: http://www.healthedeals.com/health-care-reform-calculator a. The below annual premiums reflect an individual making **$45,000 annually, nonsmoker (male or female - no longer matters come 2014 as all premium rates are unisex) i. 21 years old (no tax credit available at $45k income)–Bronze: $1,814 / Silver: $2,117 / Gold: $2,419 / Platinum: $2,721 ii. 31 years old (no tax credit available at $45k income)–Bronze: $2,505 / Silver: $2,922 / Gold: $3,340 / Platinum: $3,757 iii. 41 years old (no tax credit available at $45k income)–Bronze: $3,195 / Silver: $3,727 / Gold: $4,260 / Platinum: $4,792 iv. 51 years old ($171 projected annual tax credit at $45k income)-Bronze: $3,773 / Silver: $4,431 / Gold: $5,088 / Platinum: $5,745 v. 61 years old ($1,061 projected annual tax credit at $45k income)-Bronze: $3,673 / Silver $4,462 / Gold: $5,251 / Platinum $6,040 **Important: Only MAGI (modified adjusted gross income) is considered for subsidy qualification. Assets, as they stand now, will not be on the application for consideration.

Saving in your 30's

As I meet with more and more individuals and families in their mid 20's and 30's I find myself running into a common theme, Debt and lots of it, in all different ways.  Is it because the married couple had children too early, we are a spending society, or people just fail to plan these days on the hipster live now mode? 
The dramatic increase of health insurance premiums coming in 2014 certainly won't help the situation, with increases expected to range 50% - 300%.  These increases will bring a slew of mid 20's and 30's individuals to take the penalty in 2014 and forego health insurance.  If they don't take the penalty, they will take the increase, then what?  More debt!

Here are a few pointers to help fix your young adult years.  The ability to sleep at night knowing you are living a "comfortable" lifestyle, debt free!

1. Pay off your nonmortgage debt. Your thirties bring financial responsibilities you may not have had in your twenties, such as a mortgage or a family. Nothing frees up cash to meet those obligations like getting rid of your debt. Hopefully you paid off your credit cards in your twenties (if you didn't, make it a top priority). Next, focus on getting rid of student loans and other nonmortgage debt, such as auto loans.

 

2. Kick the debt cycle altogether. What good is it to pay off your loans only to take out another one and rack up more debt? An easy way to save for big-ticket items, and avoid going back into debt, is to put money you would have used for monthly debt payments, car payments, and interest charges into a savings account. For instance, after you make that final $300-per-month auto loan payment, keep making an equal payment to yourself. After one year, you'll have $3,600 saved. 

 

3. Get serious about retirement. Your twenties were the time to start investing. No matter how little money you had to spare, it gave you a great head start. Now it's time to look at your goals and set a plan in motion to reach them.

PPACA News Updates

1. Beware -Surprise: A new tax bill for you???
           - If you are one of millions who qualify to take advantage of a government subsidy when purchasing health insurance, be careful!  You could get hit by a surprise tax bill if your income was not accurately projected.  The subsidies for medical insurance are based on your current income.  If you or your spouse receives a raise fiscal year you may end up with a bigger subsidy than you are entitled to.  Law states you will have to pay back some if not all of this subsidy during tax season 2015!  Open enrollment is set for 10/1/2013 on the individual marketplace/exchange.  SHOP for small businesses has been delayed to 2015, announced 4/2/2013.  Could the individual exchange follow?

PPACA Reform Updates...

As we edge closer to 3rd quarter 2013, Brokers/Agents are being fed daily with updates, bills, and articles regarding the reform of health coverage set to take place 1/1/2014.  Mosaic Employee Benefits, LLC has decided to play a key role and continue its participation in the group and individual medical insurance markets whereas many brokers have decided to cut the cord.

Not all is set in stone, some of the below information is subject to change.  After countless webinars, wholesaler meetings, and web articles here are some of the facts starting to take shape:

- October 1, 2013 the exchanges, public and private, will be open for enrollment.  The possibility of an Agent providing you assistance is most likely. 

- Similar to Medicare, the exchanges will have an open enrollment period.

- Above $47,000 individual or $97,000 family you will be expected to enroll in one of the "Metal Plans" bronze, silver, gold, platinum or pay a tax/fine.  Anything under you may be eligible for assistance on premium.

-Though it's called the Affordable Care Act, premiums are expected to rise 30%-80% with the young professionals feeling most of the pain.  The new premiums for Metal Plans will be age banded.

-Bronze (60%), Silver (70%), Gold (80%), Platinum (90%)...these are not coinsurance's as we assume with the current plan models.  These percentages represent the combined collective out of pocket exposure for an individual or family, co-pays included.

-If you do not acquire a policy and are not exempt from insurance through one of the qualifications, you are subject to pay a fine. (visit our homepage www.mosaicemployeebenefits.com to see if you qualify as exempt)

*the above information is provided to you by HR360.com and various carriers in the health insurance market.  All statements are subject to change according to Fed or State laws

New Rules/Laws are being released on a daily basis.  Business Owners/Self Employed and Individual Policy holders, planning ahead and discussing with an agent about your unique situation is a must.  Windows of opportunity do exist to delay your participation with the exchanges until December 28, 2014 if certain conditions apply.  This may mean renewing or accepting a new policy between April and December of 2013 (keep your current benefits and premium through Dec 28, 2014).  Contact us and see how to qualify. 

Eric M. O'Brien
Mosaic Employee Benefits, LLC
Vice President / Benefits Consultant
614.431.4302
eric@mosaicemployeebenefits.com

Bankers, Agents, Planners..Who to work with?

Highlighting the last sentence from my previous post with a little personal experience. 

Banks:

In 2007 I worked at a bank as a Personal Banker (PB). My job was to take care of our everyday clients’ finances and ensure they were vested properly. While doing this I had a monthly scorecard to hit, which consisted of:

1. Checking & Savings Accounts - 19 new/month
2. Lines of Credit - HELOC's and Credit Cars, $100k/month
3. Mortgages - Minimum of $200k/month
4. Investments - $10k/month

When a client came in to run a wire transfer, I had to find ways to talk them into opening a line of credit, or reasons they needed a second checking account.  Missing these goals on a consistent basis would result in unemployment.  On the other side, if I hit the goals, I was offered some type of bonus or incentive.  We had an online catalog, updated each month, with our point totals from hitting sales goals.  95% of these points came from selling checking accounts and loans, not investments.  Prizes consisted of cash, vacations, furniture, gift cards, etc.  If the PB’s are not hitting these goals, the bank branch is not profitable, if the branch is not profitable it falls on the branch manager, if the branch manager is not performing it falls on the regional manager and so on.  There is a ton of pressure at all banks for these employees to meet their goals.  So as a client of a bank, guess what the Banker’s first priority is?........(pause)….. Loans and Checking Accounts!  On top of that, B Shares which is a completely different story.  Yes, Banks do have investment advisors specifically for high dollar clients, and they can do a good job.  Let’s just say I left for a good reason, I couldn’t take care of my clients with what they really needed.  Consistently pressured into mentioning products to people who didn’t need them…

 
PB’s can be good in certain situations: wire transfers, NSF fee services, balancing a check book, or opening a HELOC when the time actually makes sense.  They receive very little training when it comes to insurance and investing.  If you are not good with the internet, you may need a PB to open that new checking or savings account.

 
Captive Agents:

By definition, captive agents work exclusively for one insurance carrier and are obligated to give business only to that company. While some captive agents belong to affiliated groups of their parent company, the captive agent's main concern is to develop business for the parent company above all others. (http://www.insureme.com/insurance-agent/captive-vs-noncaptive)

 
My next experience was with a mutual insurance firm in 2008 as a captive agent.  When I accepted the new career path I was told I could shift my focus on building my own book of business, take care of clients in the correct manner, with limited investments and insurance products allowed by that company. “You have the opportunity to be a representative in a AAA rated company with the strongest product portfolio in the industry.”  Freedom at last, right?!!  I could do what was in the best interest for the client………….

 
Three months into the job I found a repetitive training schedule that focused on Whole Life Insurance and LTC sales ideas only. Nothing to do with a diversified portfolio, dollar cost averaging, share classes, annuities, or the correct way to save for a child’s college.  I had asked what sponsored college 529 plans we were allowed to offer and the answer I got from my team lead was "sell them a Whole Life Policy and have them use the cash value!" The training had one focus and that was on the profitable products of the company.  I knew I took a position at an “insurance company” and that insurance was going to be an important piece to what I do.  But when I interviewed they assured me it was not just insurance, that there would be a focus on the client’s finances as a whole, and I would be taught the right way to do things.  After speaking too many of my colleagues, I found quickly that this is what everyone is told when interviewing.  My mistake, I should have researched the profession a bit more than what I did.  The year I spent with the company was not all that bad.  I did become an “Insurance Professional” with some of the best training on Term, UL, VUL, and Whole life one can find!  But once again I found myself recommending products that didn’t exactly fit the client’s needs.  Example:

 
34 year old male
Spouse
2 children in elementary school
New Business Owner
$500,000 in liquid assets / diversified portfolio / 70-30 risk allocation
$50,000 in retirement accounts
$200,000 mortgage
Set appointment to look at term insurance options to protect family and look at additional investment options to grow current portfolio

 
My Managing Partner (MP) at the time had the ability to choose which appointments he wanted to attend with me and this so happened to be it.  I had my own recommendations set for the client with our term options printed, a valuable well thought out plan to benefit the family and his business. This was all overridden by the seniority of my MP who was looking out for the “office scorecard” and himself more so than his agent and the client.  At age 24 I fought for what I could, but no one would listen.  The final recommendation proposed by the MP: A custom 5 pay whole life insurance policy with a premium of $100,000/yr.  A ridiculous recommendation for the situation above.  Put all your eggs in one basket and lock up the liquidity of a majority of the funds you may need in the short term.  The client was a bit more savvy with his financial awareness than the MP had anticipated and never called back.  A week later I walked out of the office.  I attempted to apologize to the client but to this day have never heard back. 

 
I remind you this is my personal experience. I have seen what goes on behind the scenes at banks and captive agencies, the 3 P’s…. Push Profitable Products.  It’s what most companies do in all industries to become successful, I understand.  But in the world of finance, people need genuine guidance, not product pushers.  This all led to where I am now as an independent agent. 

 
Independent Agents:

 
Financial Planners with an independent/self-employed title are not married to one carrier or product.  They have access to almost every product out there without the scorecard.  Their goal: To shop the market, find the best possible product for the need, fill any gaps necessary, and lead a person, family or business to financial independence through the three phases:

 
1.      Protection
2.      Accumulation
3.      Distribution 

 
Financial independence cannot be reached with product pushers.  When making financial decisions, consult with a Financial Planner first and allow he/she to make a proper recommendation.  If you choose to work with a planner at a captive agency, be sure to compare it to other proposals/quotes/rates or premiums out there before you sign next to the x.  In my short 5 years in the industry I have seen to many people in the wrong product at the wrong time wasting unnecessary money that could be used elsewhere.

Keep It Simple....

I'm calling out what seems to be the majority these days, for lack luster habits with saving and the fantasy dream world of financial stability and what it really means. Now I remind you I stated the majority.... not all, but many middle and upper class individuals are spending in excess what they can afford with savings rarely in the picture.  They lack a proper plan, an organized budget, and responsibility to protect themselves by leveraging risks with a strong insurance portfolio. 

As you read these first few sentences you are probably thinking this is another blog set up to try and convince the public to come and invest or purchase insurance products from my firm.  Before you think any further, this is not the case.  I am not blaming the individual for his or her hesitation to get their finances and insurance to par.  I am blaming the industry and the professionals themselves for their approach to a buying market. An over-saturated insurance industry with too much to choose from, unethical sales practices, and captive/banking agents.  It has become an annoying process for one to open a checking account or get an insurance quote online due to the sharing of information to 3rd parties and companies taking advantage of the opportunity to cross-sell uneeded products for additional profit.

I have been in the financial industry since 2007 (relatively young ((now 28)) for my profession) when I graduated from The Ohio State University with a degree in Family Financial Planning and Varsity Lacrosse. The average age in my office sits at 47!  Within these 5 years I have put in my time, plus some, and have broadened my services range more than most advisors you will find in today's market.  As I mature as a Financial Planner/Agent, it has been easier to put myself in the clients shoes and I wonder, if I were not in the industry I am in today, how would I know what financial stability is?  What is financial independence? Am I saving enough? How should I save?  Are my savings protected? How do I avoid the annoying sales calls? Am I paying too much premium? Most importantly.... How do I avoid being "sold" a product? (why many individuals steer clear of professionals they don't know in my business)

I have seen the good and the bad with financial planners in my city.... to keep it simple, find a friend in the business, try to stay away from captive agents and banks.  If you do not have a friend or family member in the business, ask your close friends who they work with and if you can be referred.  This will help your chances from being taken advantage of in a fee/premium market.  Savings may become more of a habit to people if the investment/insurance world becomes a bit easier to understand for the everyday investor, with agents and planners who are out there to do the "right thing."   By "right thing" I don't mean... selling a certain product to a client to hit your company scorecard for an extra bonus in your paycheck or vacation points as some captive agents or banking professionals would do so.  BE proactive, go find an advisor you trust and start saving today.  In the next blog I exaggerate on the title of Captive Agents and Banking Professionals, when to aviod them and why. 



Trouble saving these days???  Check out the facts below, you are not the only one!


A new survey by Yahoo! Finance shows Americans have a disturbing lack of hope and a frightening lack of retirement planning.

Among the highlights of the poll:
-- 41% of Americans say the 'American Dream' has been lost.
-- 37% of adults have NO retirement savings and 38% plan to live off Social Security.
-- 63% of Americans believe the economy is getting worse, including 72% of those over the age of 55.
These findings are consistent with broader trends The Daily Ticker has reported on in the past year: Despite macro data showing the economy has technically recovered from the 'Great Recession', the majority of Americans just aren't feeling it. Considering 49 million Americans are living in poverty, the "real" unemployment rate is 16% and millions of Americans are facing foreclosure, it's no wonder many believe the recession never ended.
Consistent with that sentiment, the survey shows a plurality of Americans are less willing to take on debt, feel less confident about buying at house, and are spending less yet have lower savings vs. 1- and 3-years ago.
Dan Gross and I discuss the survey in the accompanying video. As is his wont, Dan focused on the glass half-full findings in the survey, including:
-- 53% of Americans ages 18-34 still see America as the land of opportunity.
-- 45% of parents believe their kids will be better off than they are.
-- 68% of Americans say their currency financial situation is either "excellent" or "satisfactory."