Planning with Social Security and Medicare

Transcription

1 CONTINUING EDUCATION PROGRAM Planning with Social Security and Medicare Sponsored By: Presented By: Source: Broker Education Sales & Training, as of April Information provided by third parties is deemed to be reliable but may be derived using methodologies that are propriety or specific to the third party source _(05/15) FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

2 Super CE Program > Classroom Course: Planning with Social Security and Medicare: o Approved for one (1) hour of state insurance CE credit. Also, approved for 1 hour of CE credit for CFP, IMCA, and CPE FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 2

3 CE Forms > Sign-in/Sign-out Forms > CE Package: Student Information Form PowerPoint Presentation Class Evaluation Form > Certificates of Completion FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 3

4 Before We Begin > Turn off/silence and put away any cell-phones /iphones/tablets > Remove any reading materials other than the classroom PowerPoint presentation > You must remain in the room during this presentation > Questions??? FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 4

5 Agenda > Social Security (OASDI) Retirement (OA) Survivor (S) Widow(er) Benefits > Medicare: Parts: A, B, C, D > Medicare Supplement (Medigap) Policies FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 5

6 History of Social Security (OASDI) > Social Security Act of 1935 created Old Age Survivor Insurance (OASI). Then in 1956, SSA added Disability Insurance (DI) benefits. OASDI > In 2013, the OASDI program was providing benefits to about 58 million people¹: 70% (41 million) are retired workers and dependents of retired workers; 6 million survivors of deceased workers (11%), and 19% (11 million) disabled workers and their spouses and dependents (19%); > OASDI is the #1 federal entitlement program.² President Franklin Delano Roosevelt, seated, signing the Social Security Act into law on August 14, *Source: Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds; The 74th Report; estimated expenditures; CBO s 2014 Long-Term Projections for Social Security: Additional Information FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 6

7 OASDI Financing > In 2013, total revenue was $855 billion, while total expenses were $840 billion, leaving a surplus of $15 billion¹ > Sources of revenue: FICA Payroll tax supplies 85% o FICA/SECA generally 12.4% of taxable earnings up to $118,500 (6.2% both employee and employer) o Maximum yearly withholding $7,347 in 2015; Income tax on SS benefits (2.5%); Interest on intra-governmental debt (12%); and General funds (0.5%) > Paid to Trust funds: OASI (2032) DI (2017) Source: ¹Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds; The 74th Report; FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 7

8 Eligibility for OA Retirement Benefits > Two basic requirements Attaining age 62 for one full month; and Being fully insured > To be fully insured, a worker must earn 40 credits (Quarters of Coverage): In 2015 for each multiple of $1,220 in earnings you earn one credit: Maximum of 4 credits per calendar year ($4,880). 4 credits per year x 10 years = 40 credits to be fully insured. > Fully insured = 100% of benefit (PIA) at FRA. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 8

9 Determining FRA Depending on the worker s year of birth: Year of Birth Full Retirement Age (FRA) 1937 or earlier months for every year after 1937 until months for every year after 1954 until and later 67 FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 9

10 Calculate OA Retirement Benefits > Step 1: Index the earnings record The wage index method on indexed earnings over a fixed number of years after 1950, (for an individual retiring in 2015 use wages from 1974). That is 40 years of earnings history. > Step 2: Calculate the AIME Take highest 35 of 40 years of earnings history. Those earnings are then indexed for inflation and averaged. This indexing is a mechanism for expressing prior years earnings in terms of the worker s current dollar value. A worker s earnings would be indexed to the average wage index two years prior to his or her age 62. > Step 3: Calculate the PIA (actual SS retirement benefit) using the PIA formula (2015): 90% of the first $826 of AIME (1st bend point), plus 32% of AIME over $826 and through $4,980 (2nd bend point), plus 15 % of AIME over $4,980 (3 rd bend point) FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 10

11 PIA Calculation Example: Jack > Jack age 66 in 2015 (born in 1949) has earned maximum earnings since age 22 (1975). Indexed earnings $3,492,021 (highest 35 years) > AIME = $3,492, (35 x 12) = $8,314 > PIA formula (bend points *): First $749 x.90 = $ ($4,517 - $749) 3,768 x.32 = 1, ($8,314 - $4,517) 3,797 x.15 = Total = $ 2, > PIA Amount at FRA (age 66) = $2, (round to the lower multiple of $.10) and then add the COLA s for 2012 (3.6%), 2013 (1.7%), 2014 (1.5%), and 2015 (1.7%) = $2,663. * Jack must use bend points from his first year of eligibility 2011 Source: * FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 11

12 COLA > Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2013 through the third quarter of 2014: For 2015 COLA increase was 1.7%, which, on average, represents an increase of $22 per month, or approximately $264 a year. For many beneficiaries it will be less because of the Medicare Part B premium increases that are deducted from SS checks. SSA projects a 2.8% COLA on SS Wage Statements. > CPI W vs. CPI E vs. Chained CPI Social Security COLA Increases, FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 12

13 WEP and GPO Provisions > Windfall Elimination Provision (WEP) when an individual receives a pension from a job that was not covered by Social Security. Usually these jobs are government-related, including state and federal employees and teachers. How it works: First PIA bend point ($826) is multiplied by 40% (not 90%) reduced by 50% ($413 in 2015) Substantial Earnings: work in a job for 21 or more years and the earnings are considered substantial, these earnings can offset the WEP reduction. For each year over 20, the 50% factor is reduced by 5 percentage points. So if the worker had substantial earnings for 30 years the WEP is eliminated. > Government Pension Offset (GPO) a law that affects spouses, widows and widowers. Social Security benefits will be reduced by two-thirds of the worker s government pension. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 13

14 When Should I Apply for SS Retirement Benefits? > A worker who is fully insured will have the following options: Reduced benefits beginning at age 62; Full benefits at FRA (age 66); or Increased benefits, if delayed beyond FRA to age 70 (Delayed Retirement Credits- DRC). In 2013, 73% of the 37,892,659 retired workers elected to receive reduced benefits prior to their full retirement age. Relatively more women (75 %) than men (70%) received reduced benefits. Less than 2% waited to elect benefits at age 70 and later* Source: *SSA, 2014 Annual Statistical Supplement, Master Beneficiary Record; FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 14

15 Effect of Early or Delayed Retirement Year of Birth FRA DRC Benefit, as a percentage of PIA, beginning at age ⅔ 93⅓ and 2 months 66 and 4 months 66 and 6 months 66 and 8 months 66 and 10 months 8 74½ 79 1/6 85 5/9 92 2/9 98 8/9 130⅔ 8 73½ 78⅓ 84 4/9 91 1/9 97 7/9 129⅓ 8 72½ 77 ½ 83⅓ 90 96⅔ ½ 76⅔ 82 2/9 88 8/9 95 5/9 126⅔ 8 70½ 75 5/6 81 1/9 87 7/9 94 4/9 125⅓ 1960 & Later ½ 93½ 124 FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 15

16 Case Study: Jack s Election Options Age benefits are claimed Year % of PIA Benefit in today's dollars if PIA is $2,663 per month $1, , , , , , , , ,515 *No future COLA projections FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 16

17 Retirement Earnings Test Limits 2015 Limit Under full retirement age $1 of benefits withheld for every $2 in earnings above the limit Year individual reaches full retirement age $1 of benefits withheld for every $3 in earnings above the limit for months prior to attaining full retirement age Month individual reached full retirement age and beyond Reduction no longer applies $15,720/year $41,880/year Unlimited FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 17

18 Maximizing SS Benefits for Singles > When should singles Start SS retirement benefits? Which starting date will maximize the PV of projected benefits? Which starting date will minimize longevity risk? > For singles who live to average L/E and whose benefits are not affected by the earnings test, the PV of benefits is approximately equal no matter when benefits begin. The average mortality for a male and female who reach age 62 today is 83.8 (21 years) and 86.3 (24.3 years) respectively.¹ > However, for singles who are risk averse and live beyond average L/E, they would be better off to wait to at least their FRA, and if concerned about longevity they would be better off waiting to age 70 (Longevity insurance). Source: ¹SS Online Life Expectancy Calculator; FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 18

19 Planning For Married Couples > One of the most complex areas of Social Security planning. Married couple s choice of benefits: Spouse s own earned workers benefit (PIA) Spousal benefit (if eligible) Survivor benefits > Supreme Court strikes down Section 3 of DOMA (Windsor Case) Now, same-sex couples can enjoy the same legal rights as heterosexual couples. However, to qualify must live in states that recognize same-sex marriage (only apply to legally married couples) 37 States and the District of Columbia: AK, AL, AZ, CA, CO, CT, DE, FL,HI, IA, ID, IN, IL, KS,MA, ME, MD, MO, MN, NC, NH, NJ, NM, NY, OK, OR, PA, RI, SC, UT, VA, VT,WA,WI and WY. > IRS Revenue Ruling (State of Celebration) FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 19

20 Spousal Benefits > To qualify for Spousal Benefits (Gender Neutral): Primary earner (worker) must file (be entitled) to his/her own benefit (can file and suspend only at FRA) Spouse must be at least age 62 or have a qualifying child and has been married to the worker for at least 12 months prior to filing for spousal benefits. Spouse, if entitled to his/her own earned workers benefit, must not exceed 50 percent of the PIA of the primary earner (worker). > The Spousal Benefit: Spouse can receive up to 50% of the primary earner s PIA at FRA. Reduce benefits beginning at age 62 (born , reduction is 30%). > Spousal benefits are not increased with the DRC (should not delay beyond age 66) FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 20

21 Spousal Benefits Prior to FRA > If a spouse files for spousal benefits prior to his/her FRA, he/she is deemed to have filed for all benefits for which he/she is eligible (Reminder: The primary worker must file for his/her own benefit to make spouse eligible for spousal benefits). Deemed Filing Rule: A spouse who is entitled to reduced retirement benefits and a reduced spouse s benefits must file for both benefits if eligibility for both benefits exists in the first month of entitlement. (POMS - GN ) > This rule will result in a permanent reduction to both the spouse s own earned worker s benefit and the spousal benefit. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 21

22 Married Couple Switching Strategies > After FRA, allows filing for a limited benefit and then later switching to a larger benefit to maximize benefits for married couples. > Pick and choose: Reset (Re-do) strategy File and Suspend (F/S) strategy; and Restricted Application (Claim Now, Claim More Later) strategy. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 22

23 Reset (Re-do) Strategy > Originally designed to help retirees who were forced back into the workforce. Complete the Request For Withdrawal of Application (Form 521). o o Indicate reason for withdrawal request. Payback funds received from SSA, including any spousal benefits > Interest-free loan Strategy According to SSA this strategy cost the SS Trust Fund $4-billion dollars > Docket #SSA : Time limit to within 12 months of the first month of entitlement It also permits only one application withdrawal per lifetime Source: FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 23

24 File and Suspend Strategy > The primary wage earner spouse files for benefits at FRA, and then immediately suspends the benefit. This allows the other spouse, with a lower benefit or no benefit on their own work record, to start collecting a spousal benefit. The other spouse must be age 62 or older to start spousal benefit. The suspending of benefits also allows the primary wage earner to collect delayed retirement credits (DRCs). > The Senior Citizens Freedom To Work Act of 2000 allowed this loophole that can boost total benefit payments for married retirees by as much as 15%. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 24

25 File-Restricted Strategy > This is a switching strategy where the higher earning spouse files a restricted application for only spousal benefits, at his/her FRA, allowing his/her own benefits to continue to build DRCs until age 70. Meanwhile, the lower earning spouse files for benefits under his or her own earnings history, making spousal benefits available for the higher earning spouse. This amounts to a free check from ages 66 through 70. > At age 70, the higher earning spouse reapplies for his/her own worker s benefit at age 70 (increased with the DRC). > This approach works well with couples with different age differences and different PIA ratios. *Alicia Munnell, Alex Golub-Sass, and Nadia Karamcheva, Strange But True: Claim Social Security Now, Claim More Later; April 2009 from the.boston College Center for Retirement Research,. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 25

26 OA Retirement Benefits for a Divorced Spouse > Divorced spouse is entitled to OA retirement benefits: For retirement benefits, the ex-spouse does not have to file for SS benefits, but he/she (ex-spouse) must be entitled to receive benefits (age 62 or older). Does not affect current spouse s benefits (if remarried). > Requirements for eligibility: He/she must be age 62; He/she had been married to the worker for at least ten (10) years prior to year of divorce; He/she has been divorced for at least two (2) years; He/she is not eligible for equal or higher benefits on his or her own record, or someone else s record, and he/she remains unmarried. > Benefits are subject to the retirement earnings test limits FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 26

27 Aged Widow(er) Survivor Benefits > Dual entitlement (Gender neutral): Earned worker s benefit Survivor benefit > Aged Widow(er) Survivor Benefits: Full (100%) survivor benefit of deceased spouse s PIA when s/he attains FRA, or reduced benefits (71.5%) as early as age 60 (50 if disabled) If the deceased received a reduced benefit at the time of death, the aged widow(er) s benefit cannot exceed the greater of this amount or 82.5% of the deceased s PIA. Lump sum death benefit of $255 in 2015 SSA Pub # What Every Women Should Know FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 27

28 Aged Widow(er) Survivor Benefits > Alternatively, if the deceased s benefits were increased with DRCs and COLAs, the survivor benefits will be increased > If the deceased spouse had not yet claimed benefits, survivor benefits will be determined as if the decedent had claimed benefits at the later of FRA or date of death. > Widow(er) can claim survivor benefits, while allowing their own earned worker s benefit to accrue DRCs up to age 70, then switch to the higher benefit. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 28

29 Divorced Spouse Survivor Benefits > Same benefits as a widow(er) providing the marriage lasted 10 years from the date of divorce. The same benefit formula, age requirements, and actuarial reductions apply A divorced ex-spouse can apply for benefits on the ex-spouses worker's record (higher benefits). If the surviving ex-spouse remarries after age 60 (50 if disabled), the remarriage will not affect eligibility for survivor benefits. > Able to choose the higher of either survivor benefit at death of ex-spouse or his/her own earned worker s benefit. Can choose to delay earned worker s benefit to age 70 to receive DRCs then switch. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 29

30 Taxation of Social Security Benefits* > The Combined Income Formula, (aka, Provisional Income) determines how much of a retiree s SS benefits are subject to taxation. Single or HHLD Married Filing Joint Base amount $25,000 Base amount $32,000 $25,000 - $34,000 = up to 50% taxable Above $34,000 = up to 85% taxable $32,000 - $44,000 = up to 50% taxable Above $44,000 = up to 85% taxable > Modified Adjusted Gross Income (MAGI) plus interest from tax-exempt bonds plus 50% of SS benefits is compared against these thresholds. Note: That it is up to either 50% or 85% of SS benefits that are taxed. Source: *IRS Publication 915. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 30

31 Medicare FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 31

32 Medicare > The basic federal health insurance program for Americans aged 65 and older and younger adults with disabilities Covers individuals without regard to income or medical history (Medicaid provides health care coverage for people with low income and limited assets). Only covers about 59% of healthcare expenses > In 2013 covered 54 million Americans (45 million aged and 9.0 million disabled) > Administered by The Centers for Medicare and Medicaid Services (CMS) President Johnson signing Title XVIII of the Social Security Act of Source: ¹Congressional Budget Office (CBO) Medicare Baseline Projections *CMS 2014 Trustees Report, FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 32

33 Medicare Coverage > Part A Hospital Insurance (HI) > Part B Supplementary Medical Insurance (SMI) Part A and Part B is known as Original Medicare > Part C Medicare Advantage (MA) plans > Part D Prescription Drug Plan v/pubs/pdf/10050.pdf FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 33

34 Medicare Coverage Choices START STEP 1: Decide how you want to get your coverage. Original Medicare or Medicare Advantage Plan Part C (HMO/PPO) Part A Hospital Insurance Part B Medical Insurance Part C Combines Part A, Part B, and usually Part D (MA-PD) Part D Prescription Drug Coverage Step 3: Decide if you need to add supplemental coverage STEP 2: Decide if you need to add drug coverage Part D Prescription Drug Coverage (Most MA plans cover prescription drugs. You may be able to add drug coverage in some plan if not already included). Medicare Supplement Insurance If you join a MA plan, you can t use and can t be sold a Medicare Supplemental Insurance FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

35 Medicare Part A > Referred to as Hospital Insurance (HI) Inpatient hospital care, Home health care services following hospital stays, Skilled nursing facility (SNF); and Hospice care services. > Compulsory*- 99% of Medicare beneficiaries do not have to pay a premium for Part A services because they have at least 40 credits (fully insured). Those individuals with credits can buy into Part A by paying a premium of $224. Those individuals with fewer than 30 credits can buy into Part A by paying a premium of $407. Source: *A U.S. Court of Appeals recently ruled that those who receive Social Security cannot opt out of Medicare Part A. For the full opinion, see: http//thefundforpersonalliberty.org/pdf/ appeals-court-opinion.pdf FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 35

36 Medicare Part A Financing > For 2013, Part A revenue was $251.1 billion > Sources of Medicare Part A Revenue: Payroll Tax (accounting for 88% of Part A revenue): o Employee and Employer each pay 1.45% (2.90%). o S/E pay full 2.9 percent (able to deduct up to 50%). o No cap on wages subject to tax. Medicare Surtax: An additional 0.90% surtax for certain high income taxpayers whose earnings are above the un-indexed applicable threshold amounts (IRS Form 8959): $200,000 single individuals; $250,000 married filing jointly; $125,000 if filing separately. o Note: S/E individuals will not be able to deduct this additional Medicare surtax. Source: ¹CMS 2014 Trustees Report, FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 36

37 In-Patient Hospital Care: Benefit Periods > Provides a 90-day benefit period with a 60 day lifetime reserve. Ends when not in hospital 60 days in a row > No limit to number of benefit periods a beneficiary can have. NOTE: Inpatient mental health care in a psychiatric hospital is limited to 190 days in a lifetime. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 37

38 Home Health Care > Fully covered by Medicare Must have face-to-face encounter with doctor (prior to start of care), be under care of a doctor and be homebound. Home health agency must be Medicare-approved Plan of care reviewed every 60 days ( episode of care ) > Out-of-pocket costs (Original Medicare): Nothing for covered home health care services 20% of Medicare-approved amount o For durable medical equipment (DME) Covered by Part B FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 38

39 SNF Care > Requirements: Must spend 3 consecutive days in acute care hospital w/in 30 days of admission to SNF. Must require daily skilled services, not just longterm or custodial care. > SNF care must be for a hospital-treated condition, or condition that arose while receiving care in the SNF for hospital-treated condition (7 days a week and or rehab 5 days a week). Must be a Medicare-participating SNF FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 39

40 Hospice Care > Special care for the terminally ill and family Expected to live 6 months or less. The focus on comfort and pain relief, not cure > Doctor must certify each benefit period Two 90-day period with unlimited 60-day periods. Face-to-face encounter > Out-of-pocket Costs Nothing ($0) for hospice care Up to $5 per Rx to manage pain and symptoms Hospice provider must be Medicare-approved FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

41 Medicare Part B (SMI) > Supplementary Medical Insurance (SMI) Doctor s services, Outpatient medical and surgical services and supplies, Durable medical equipment General home health services, and Other medically necessary (and preventive) medical services. > Part B is voluntary. Must enroll FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 41

42 Part B Financing > For 2013, Part B revenues were $255.0 billion¹ > Sources of Part B Medicare Revenue General revenues (73%) Beneficiary premiums (25%) Interest income and other sources (2%) > Part B does not have financing challenges similar to Part A, because it is funded by beneficiary premiums and general revenues that are set annually to match expected outlays. However, future increases in spending under Part B will require increases in general revenue funding and higher premiums paid by beneficiaries. Source: 2014 Annual Report of the Records of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance (SMI) Trust Funds. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 42

43 Part B Out-of-Pocket Costs > Deductible $147 > Co-pay 20% of covered services > Basic monthly premium $ (taken directly from SS check) By law, the Part B premium must represent one-fourth (25%) of the average cost for beneficiaries: Section 1839(f) of the SS Act of 1965 ensures that dollar value increases in Part B premiums for eligible beneficiaries (not subject to means testing) do not exceed the dollar value of the SS COLA > Means Testing: Income Related Monthly Adjusted Amount (IRMAA) More and more beneficiaries will be subject to this surcharge because threshold amounts will not be indexed until Roth Conversions will affect IRMAA FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 43

44 Part B Monthly IRMAA Individual Tax Return Married Filing Jointly 2015 Monthly Premium is If your yearly income in 2013 was.. $ $85,000 or less $170,000 or less $ (premium + 40%) $85,001-$107,000 $170,001-$214,000 $ (premium + 100%) $107,001-$160,000 $214,001-$320,000 $ (premium + 160%) $160,001-$214,000 $320,001-$428,000 $ (premium + 220%) Above $214,000 Above $428,000 Source: Note: Under current law the threshold amounts will not be indexed until FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 44

45 Automatic Enrollment Part A and B > Automatic for those receiving Social Security benefits Railroad Retirement Board benefits > Initial Enrollment Period (IEP) package Mailed 3 months before age 65, or > Disabled and under 65, will automatically get Part A and Part B after they get SSDI from Social Security, for 24 months. > Others must enroll themselves FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

46 Medicare Card > Keep it and accept Medicare Parts A and B > Return it to refuse Part B Follow instructions on back of card Front Back Jane Doe The 9 numerals is the Social Security number of Medicare recipient. The letter or letters and numbers tell how beneficiary is related to the person with that record. For example, the letter A, T, or M depending on whether you get both Medicare and Social Security benefits or Medicare only. If the beneficiary gets Medicare on their spouse s record, the letter might be a B or a D. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

47 Part A and B Enrollment Dates Initial Enrollment Period (IEP) General Enrollment Period (GEP) Special Enrollment Period (SEP) 7 month period begins 3 months before the month you turn 65. Coverage starts the first day of birth month. If you enroll on the month you turn 65 or during the last 3 months of your IEP, the start date will be delayed If you did not sign up for Part A or Part B during the IEP and aren t eligible for a SEP you can sign up between January 1 March 31 each year. Coverage begins July 1 of that year. May have to pay a higher Part B premium for late enrollment penalty (10% for each 12 full month). Once the IEP ends, you may have the chance to sign up for Part B when you were first eligible because you re covered under a group health plan*. During 8-month period that begins the month after the employment ends or the coverage ends, whichever happens first. (No penalty). Note: COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage and retiree health plans aren t considered coverage based on current employment. You re not eligible for a Special Enrollment Period when that coverage ends FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 47

48 Part B Late Enrollment Penalty Mary delayed signing up for Part B two (2) full years after she was eligible. She ll pay a 10% penalty for each full 12-month period she delayed. The penalty is added to the Part B monthly premium ($ in 2015). Her premium for 2015 will be as follows: $ (2015 Part B standard premium) + $ (20% of $104.90) $ (Round up) (For this example only) $ (Mary s Part B monthly premium for 2015) FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 48

49 Medicare Part C - MA Plans > Medicare Advantage (MA) plans, formerly Medicare+ Choice under the Balanced Budget Act (BBA) of 1997 and later renamed Medicare Advantage plans under the Medicare Modernization Act (MMA) of Estimated that 30% of Medicare enrollees (15.7 million) will choose an MA Plan in 2014¹. > Medicare payments to MA plans were projected to total $154 billion in 2014 Estimated costs per beneficiary is 14 percent more per patient than what the patient cost in traditional Medicare. ACA of 2010 levels the playing field. > Visit: Source: ¹CMS 2014 Trustees Report, FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 49

50 MA Plan Types > Medicare contracts with insurers to offer the following different types of health plans: Local HMOs and PPOs. HMOs account for 64% of enrollees and PPO s account for 23% of enrollees in Regional PPOs accounted for 8% of enrollees in 2014 Private Fee-for-Service, as authorized in 1997, 2% of enrollees Other types of private plans (cost plans, HCPP, PACE plans, medical savings demonstrations and pilots) accounted for 3% of enrollees in 2013 Special Needs Plans, typically HMO plans, are restricted to beneficiaries who are (1) dually eligible for Medicare and Medicaid (2) live in LTC institutions (3) have chronic conditions > Not all available plan types are in plan areas. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 50

51 MA Plan Costs > Must still pay Part B premium Some plans may pay all or part for beneficiary Some people may be eligible for state assistance > Beneficiary may also pay monthly premium to plan The average premiums for MA-PD plans in 2015 will be $39 per month. > Beneficiary may pay deductibles / coinsurance / copayments Different from Original Medicare Varies from plan to plan Costs may be higher if out-of-network FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 51

52 MA Enrollment /Disenrollment Initial Enrollment Period (IEP) Fall Open (Annual) Enrollment Period (AEP) MA Disenrollment Period (MADP) 5-Star Special Enrollment Period 7 month period that starts 3 months before 65 th birthday and 3 months after the month of 65 th birthday. Between October 15 and December 7, anyone can join, switch or drop a Medicare PDP. Coverage will begin on January 1, as long as the plan gets request by December 7. Between January 1 through February 14 you can leave MA plan and change to Original Medicare. Coverage begins the first month after leaving the MA plan. Between December 8 and November 30 can switch to a 5-Star MA plan. Plans are assigned their star rating once per year, in October. However, the plan won t actually get this rating until the following January 1. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 52

53 Medicare Part D Prescription Drugs > The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) 2003 (effective 2006) Offered by insurance companies and other private companies approved by CMS (voluntary). > Two ways to get Part D: Stand-alone Plans - PDP s add coverage to Original Medicare (Parts A & B). Integrated Plans - Medicare Advantage Plans (like an HMO or PPO), commonly called MA- PDs. > Visit: FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 53

54 Part D Financing > For 2013, it is estimated that Medicare Part D Revenue will be $69.7 billion¹ > Sources of Revenue: General revenues (73%) Beneficiary premium (14%), and State payments for dual eligibles (13%) > Part D does not have financing challenges similar to Part A, because it is funded by beneficiary premiums and general revenues that are set annually to match expected outlays. However, future increases in spending under Part D will require increases in general revenue funding and higher premiums paid by beneficiaries. Source: 2014 Annual Report of the Records of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 54

55 Part D Benefit Parameters for 2015 Deductible Tier 1 Initial Coverage* $2,960 Tier 2 Donut Hole $4,700 Tier 3 Catastrophic Coverage Beneficiary Pays $320 Plan pays 75% of drug costs up to $2,640 = $1,980 Beneficiary Pays 100% of Drug Costs ($6,680-$ 2,960) $3,720 Plan Pays 95% Beneficiary pays 25% of drug costs up to $2,640 = $660 ACA 2015, enrollees pay 45% on brand name drugs, and 65% on generic. Beneficiary pays greater of 5 % of remaining costs or $2.65 for generic drugs and $6.60 for all other drugs. *Initial Coverage Limit in 2015 is $2,960 ($320 + $1,980 + $660) When you reach $2,960 you are in Tier 2, the Donut Hole. True Out-of-Pocket (TrOOP) threshold expenditures is $4,700 ($320 + $660 + $3,720). Tier 3-Catastrophic Coverage once you spent out-of-pocket $4,700. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 55

56 Medicare Part D - IRMAA Beneficiaries who file Single with income that is: Beneficiaries who file MFJ with income that is: Part D-Income Related Adjustment Amount will be*: Income Threshold Tier 1 Less than or equal to $85,000 Less than or equal to $170,000 $0.00 Income Threshold Tier 2 Greater than $85,000 and less than or equal to $107,000 Greater than $170,000 and less than or equal to $214,000 $ premium Income Threshold Tier 3 Greater than $107,000 and less than or equal to $160,000 Greater than $214,000 and less than or equal to $320,00 $ premium Income Threshold Tier 4 Greater than $160,000 and less than or equal to $214,000 Greater than $320,000 and less than or equal to $428,000 $ premium Income Threshold Tier 5 Greater than $214,000 Greater than $428,000 $ premium *The Part D IRMAA is not collected by the Medicare Part D plans, but instead paid directly to the Federal government (Social Security, Railroad Retirement Board, or Office of Personnel Management benefits). The base premium rate is $33.13 in Income thresholds are not indexed for inflation through FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 56

57 Part D Enrollment /Disenrollment Initial Enrollment Period (IEP) Fall Open (Annual) Enrollment Period (AEP) MA Disenrollment Period (MADP) When you first become eligible for Medicare, you can join during the 7 month period that starts 3 months before 65 th birthday and 3 months after the month you turn 65. Between October 15 and December 7, can enroll in, change or drop a Medicare PDP. Coverage will begin on January 1, as long as the plan gets request by December 7. Each year between January 1 through February 14 can leave MA plan and change to Original Medicare with or without PDP. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 57

58 Medicare Supplement (Medigap) Policies > Health Insurance sold by private insurance companies to fill gaps in Original Medicare (Parts A & B) coverage (Shop around) > Standardized by the federal government (OBRA 1990): Currently, there are 10 standard plans (A,B,C,D,F,G,K,L,M and N) > Covers only the services Medicare covers. In 2013, enrollment increased to 10.6 million policies in force¹. > Enrolling in Part B triggers the open enrollment period to buy a Medigap policy with guaranteed issue from any company (lasts 6 months) Note: Waiver State Standard Plans: Three states (Massachusetts, Minnesota, and Wisconsin) offer standard Medigap plans, but are exempt from the OBRA standard plan provisions. Source: ¹AHIP Trends in Medigap Coverage and Enrollment, 2013 FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 58

59 Medigap Premium Ratings > Attained-age rated > Community-rated (Noage rating) > Issue-age rated FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 59

60 Medigap Plans Benefits A B C D F* G K L M N Medicare Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used) Medicare Part B coinsurance or copayment 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 75% 100% $20-$50 *** Blood (first 3 pints) 100% 100% 100% 100% 100% 100% 50% 75% 100% 100% Part A hospice care coinsurance or copayment 100% 100% 100% 100% 100% 100% 50% 75% 100% 100% Skilled nursing facility care coinsurance 100% 100% 100% 100% 50% 75% 100% 100% Medicare Part A deductible 100% 100% 100% 100% 100% 50% 75% 50% 100% Medicare Part B deductible 100% 100% Medicare Part B excess charges 100% 100% Foreign travel emergency (up to plan limits) 100% 100% 100% 100% 100% 100% Out-of-pocket limit in 2015 $4,940 $2,470 * Plan F is the cadillac. Plan F also offers a high-deductible plan in some states. If you choose this option, this means you must pay for Medicare-covered costs (coinsurance, copayments, deductibles) up to the deductible amount of $2,180 in 2015 before your policy pays anything. ** Plans K and L have out-of-pocket limits of $4,940 and $2,470 respectively ***Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don t result in an inpatient admission. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 60

61 Medigap Policy Open Enrollment Period Open Enrollment Period (OEP) This 6 month period begins on the first day of the month you turn 65 or older and enrolled in Part B. Once started cannot be delayed or repeated. > During Open Enrollment Period, an insurance company can t: Use medical underwriting; Refuse to sell you any Medigap policy it offers; Charge you more for a Medigap policy than they charge someone with no health problems; Make you wait for coverage to start (except in certain; circumstances) Pre-existing Condition: Have at least 6 months of prior creditable coverage prior to Medigap effective date without more than a 63 day lapse, the insurance company cannot make you wait for coverage related to your pre-existing conditions. Note: Be aware, that the insurer may charge a higher premium, if not enrolling during the OEP, and are not protected by a guaranteed issue right. FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 61

62 Resources > Social Security: Social Security Administration Social Security Benefit Calculators Social Security Advisory Board Social Security Retirement Questions FAQ AARP - American Association of Retired People Congressional Budget Office: Social Security Primer FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 62

63 Resources > Medicare: > Medigap Policies: Choosing a Medigap Policy; Centers for Medicare & Medicaid Services State Health Insurance Assistance Program FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 63

64 The End FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 64

65 Student Information Form FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC.

66 Don t Forget Sign-in/Sign-out Forms Student Information Form State Affidavit/Monitor Form Answer Key Exam Class Evaluation THANK YOU FOR BROKER DEALER USE ONLY. NOT TO BE USED WITH THE PUBLIC. 66