By Joe Moore of Tennessee Senior Benefits of Morristown
We have learned in the past four months that Wal-Mart stores draw people like an ice cream truck draws kids. Life was more simple before we got a call from a major insurance company, wanting us to represent them in Wal-Mart stores, offering Part D (the New Medicare Drug Plan that went into effect January 1, and Medicare Advantage Plans-Part C of Medicare).
Besides me, it involved my two sons who work with us at Tennessee Senior Benefits, Tim and Greg Moore, and fellow insurance agent Brian Hartness (Rogersville City Alderman). Our office staff of Phyllis Bailey and Louise Coffey are involved and my wife Jackie has been supporting us from the sidelines.
Except for the first three weeks or so in January when some drug cards didn’t work exactly as they should, it has been a great experience. Part D is really helping some people a lot. But, in early January, we were beginning to wonder whether we should leave town before we got run out. We are not exactly a bunch of rookies or dummies in the insurance business. I have been licensed for 19 years, Tim 17, Greg 9 and Brian 20. My third son, Jeff, licensed for 13 years may have been involved except for his CD Swap Shop business.
Like most everyone else, we were over-whelmed with new information and new procedures. The number of people enrolling in the drug plans, and the different choices was enough to confuse most everyone (42 choices of drug plans in Hamblen County). It took us studying this project and working with it for at least 60 days before it finally came fully together in our minds.
We started by holding seminars at a lot of the Senior Citizens Centers and restaurants. We saw more deer-in-the-headlights looks from customers than I have ever seen. The more we tried to explain it, the more befuddled the looks were. But, thank goodness it is now getting much smoother.
We have found the easiest way to explain Part D is to go to the simplest product at only $14.08/month in Tennessee). For an investment of $168.96 per year, the customer gets the following: 1. The customer pays the first $250 of prescriptions per year. 2. Out of the next $2000 worth of drugs, the plan pays $1500 (75%)-the customer pays $500 (25%). So, if a customer is purchasing $2250 of retail value of prescriptions, they would only pay $750 (a $1500 discount for a $168.96 investment). 3. “Donut hole”-next $2850 worth of prescriptions-the plan pays nothing, customer pays all. 4. Once a client pays $3600 per year out of their pocket, the plan pays 95%-customer 5%.
More drugs need more consideration to find the best plan. If a person is taking many dollars worth or a great number of drugs, it normally takes a computer to decipher the best plan. Our office computers have become a hot-bed for finding the “best” plans.
Let me dwell for a moment on the “Donut Hole”. So many folks don’t understand this. But with most plans it is really very simple, when the retail value of drugs reaches $2250, the plan quits paying until the person has $3600 out of their pocket. This concerns me because the plan may have lulled someone into thinking the drugs are only costing a constant 25%. All of a sudden, they will cost full price for the next $2850. A lot of people will not be prepared for this and possibly cannot afford their medications. With the right plan though, the donut hole could be avoided.
The dual eligible (both Medicare and Medicaid) recipients are being treated differently. Some will have prescriptions available for $5 or less, no deductible and no premiums.
Ever heard of PDP, MA-PD, CMS, IEP, AEP, OEP, ICEP, SEP, PFFS, PPO, or HMO? These terms are now part of our new vocabulary. Other terms include “locked out”-which means if someone is not enrolled by May 15th, they cannot enter a plan until November 15th, unless they enter Medicare during this period. They cannot change plans during this period, unless they are dual eligible or have “special circumstances”, “credible coverage”-means that present coverage is as good as or better than the minimum government plan.
With the addition of Part D, Medicare now has four parts:
Part A-which covers some, but not all of inpatient hospital care.
Part B-helps cover doctors’ services and outpatient hospital care.
Part C-includes all Medicare Advantage Plans. Since Original Medicare does not cover everything, and a Medigap plan can be expensive, you can choose to get health benefits from a private insurer through a Medicare Advantage Plan. A person must have Medicare A and B to join a Medicare Advantage Plan.
Part D-Prescription Drug Plans-new for 2006. To join Part D, you must have Medicare A or B.
This article would not be complete without a discussion of Part C. There is only one health question: Do you have end-stage renal disease? In our area, four companies offer these plans that include a Part D Drug Benefit. Prices range from -0- premium (that is correct NO PREMIUM) in some counties (Grainger, Hawkins, Knox, Hancock, Sullivan, Washington, Carter, Unicoi, Sevier and Blount); $53/month is Hamblen, Jefferson, Cocke and Greene; $83/month in Claiborne and Campbell Counties. Blue Cross has the BlueAdvantagePlus for $88.98/month; Cariten the Advantage Plus for $78/month, and John Deere Secure Plus 15 for $93/month. Each plan has different deductibles and co-pays. For Part D and Medicare Advantage Plans, you can only be in one plan at a time
Is one better than the other? It depends on the situation of how medical bills are structured. Are there a lot of in-hospital bills? A lot of outpatient bills? Medicare Advantage Plans can really help someone that does not have a lot of medical bills, by saving premiums. Disability Medicare recipients can really benefit, because some premiums of Disability Medicare Supplements can be in the $300/month range, and in some areas a MA-PDP plan is –0– premium.
Where does this leave Medicare Supplements? When we first started offering Medicare Advantage plans, we thought they would take 25-30% of the Medicare Supplement business. We are pretty close to being right. Do the Medicare Advantage Plans cover as well as Medicare Supplements? Usually not, as Advantage Plans leave co-pays, but could still be the best for someone healthy with out-of-pocket costs, because of -0- or lower premiums than supplements. As our sales group represents Blue Cross and many other Medicare Supplement companies, when asked what the best coverage would be, we would usually recommend a Medicare Supplement, along with a Part D Drug Plan.
The 2000 or so people we have enrolled in these new plans in the past four months are sure a change in what we had been previously involved with.
Although these plans have not been trouble-free, we feel great about what we have been able to do to help people. With the TennCare cuts, a lot of people have been left without drug coverage of their needed medications; these plans have at least given these people their prescribed drugs, if they are on Medicare.
All edges on these plans are not completely smooth, but pharmacists are now saying that most plans are working as they should, that this is now just like most of the old insurance plans. Most of the early problems are fixed. People are getting their medications as the plans were designed to accomplish. Brian Hartness says the least he has seen savings are 38.5%.
A lot of myths surround this program, some of the most common: 1. You have to have low income to qualify. No, but your income can determine your premium and your cost of medication. 2. You have to come from TennCare or Medicaid to qualify. No, this program is for anyone on Medicare. 3. Since dual eligibles (Medicare and Medicaid) were automatically placed in Part D programs, they must have been placed in the right program. Not exactly, what medications enrollees were taking was not considered. Not all Part D plans cover the same drugs. We have changed many from their original plans to lower out-of-pocket costs. 4. Once in a plan, you cannot change. Wrong. Dual eligibles can change anytime. Anyone else can change until May 15th. November 15th opens an “Annual Election Period” when any plan can be changed. 5. All plans are the same. No, CMS gave insurance companies the minimum requirements. Insurance companies developed their own enhancements.
There will be changes in the future. The bottom line is it is helping people manage sky-rocketing drug and medical bills. It was estimated approximately 900,000 Tennesseans were eligible to join. The latest numbers we have seen, as of January 13th, 559,000 had some plan.
I am glad we are involved, having made a lot of new friends and created a lot of new customers. I wonder if we will be around to see Part E of Medicare and wonder what it will look like. Part D sure has been a different game, requiring a different game plan.
Joe Moore has been owner of Tennessee Senior Benefits at 2351 E Morris Blvd in Morristown since 1987. The company specializes in Life and Burial Insurance, Medicare Supplements, Long-Term Care Insurance, Rollovers of 401k or IRA’s, health insurance, cancer insurance, Wealth Transfer Products, etc. Joe is also Regional Marketing Director of Shenandoah Life Insurance Co and sits on Shenandoah Life’s National Advisory Board. He also holds the national designation of Certified Senior Advisor. Tennessee Senior Benefits can be reached at 423-581-1004.
| Vanishing Premiums or Vanishing Policies?
Being in the life and health insurance business for 19 years this May, and being involved with 20,000 or so insurance policies, I feel my experience has hopefully made me wiser to the way this business works. In the past 19 years, we have recruited over 1000 insurance agents to sell our products and have represented 60 or 70 insurance companies. I have personally sold 3000+ policies, and feel we have become able to identify most potential problems before they become a reality for the client.
If anyone owns a Universal Life Insurance Policy (also marketed under the names of Adjustable Premium Life, Interest Sensitive Life, and other various offshoots of these names), you may want to review your coverage to see how long it will last. If there is not enough money going into the policy to carry it to death, it is known in the insurance industry as an “Under-Funded UL”.
As Regional Marketing Director for a major life insurance company, we receive many calls from our home office for our agents to try to revise a life insurance policy, and explain the problems to the client. Seems that back in the good old 80’s and early 90’s many policies were sold that do not have enough money going into them and in danger of collapsing (lapsing). At the time of sale, they sounded very good. Probably the cheapest plan the customer could find that would illustrate lasting through someone’s lifetime.
The problem was illustrations were shown at 8-21% interest rates and at this rate, premiums would “vanish” in a few years. This would have worked if interest rates had remained at these levels. They did not. The policies depended on the interest earnings on the cash values to keep them solid. At today’s interest rates of 4-5%, typically there is not enough money earned on the balances to carry the policies through a long life. What can happen is the policy and death benefit can vanish, not the premiums. The earlier the problem is detected, the easier it is to fix.
Life insurance is mainly comprised of three different types: 1. Term Life Insurance (for a term of time; normally 5, 10, 15, 20, 25, or 30 years) 2. Whole Life Insurance (designed to last through a lifetime) or 3. Universal Life Insurance (a hybrid policy being a mixture of Term and Whole Life Insurance).
Generally accepted thoughts on the various types of life insurance available are:
Term - when someone wants to protect a debt or obligation for a term of time (mortgage, business debt, college education for children, etc.). These policies are the most affordable form of life insurance available and are normally sold to younger persons for pure protection. Only about 4% of term policies have the death benefit ever collected. Most expire without a paid benefit, but the person has been fully covered for the term of time chosen. Approximately, 96% persons buying term life insurance either let the policies lapse or outlive the policy term of time.
Whole Life-a policy designed to last someone’s whole life: Final Expense or Burial Insurance, normal whole life, and products guaranteed to last until someone’s death. Sometimes growing death benefits and in 10-15 years the cash values exceed what premiums have been paid into the policy, if bought at an early age. If premiums continue to as scheduled, this policy cannot be outlived.
Universal Life – this product can be described as a bucket with a steady flow of water (money or insurance premiums) poured into it. There is a hole in the bottom of the bucket letting water out (the true cost of insurance). At first there is more money going into the bucket than going out, but as time goes on, the hole becomes bigger and eventually there is more money going out than going in. The bucket runs out of water, or in the case of universal life it runs out of money. When the policy runs out of money, it will collapse or call for higher premiums each year to keep it in force.
If a person knows and understands a universal life insurance policy, there is usually no problem with it running out of benefit-it is expected. However, many people are surprised when there Vanishing Premium Life Insurance Policy converts to a Vanishing Death Benefit Life Insurance Policy. This can cause hard feelings toward the Insurance Agent and/or Insurance Company. The only way to combat the problem and keep the death benefit is to continue to pay ever-increasing premiums or replace it with a policy that has guaranteed values-“Whole Life”.
These policies were sold individually and many were sold through payroll deduction. We have found many of these sold through payroll deduction at a major Morristown furniture manufacturer in the mid-1980’s. We have normally been able to fix the problems.
There are some telltale signs to predict a coming problem:
Have you been told by your insurance company that your premiums must be increased to keep the policy in force?
Look at your policy statements, have your cash values been not increasing each year or going down in value?
Most of these problems arise 10-25 years after the sale and catch consumers completely off guard! It is normally better to catch these problems as soon as possible, before it is not repairable.
My thoughts are that the older a person is, the more they need permanent life insurance, “Whole Life”
WITH THE WRONG POLICY, YOU CAN OUTLIVE YOUR LIFE INSURANCE!
Problems we have encountered in our area include: a policy marketed through a leading credit union that carries to age 70; a company specializing in sales to Veterans expiring at age 75; a leading Seniors Organization sold a 5-year Term Policy that went up in price every 5 years and expired at age 80. We never could understand their thinking of selling this type of plan and specializing in Senior Insurance. It was apparent to me they either did not care about the customer, had no idea what they were selling, or both.
Life Insurance marketed by mail includes “Guaranteed Issue” products. There are no health questions and companies can brag about “Guaranteed Acceptance”. The drawback is there is normally a 2 or 3-year waiting period until the natural death benefit will be paid, with accidental death being covered immediately. There is a place for this type of policy, but normally for persons not being able to answer health questions. Have you ever heard someone say, “The insurance didn’t pay”? The normal reason is it was not in effect for the needed time. However, the problem could also be not full disclosure of health problems on the application. In Tennessee, if someone dies in the first two years of the application, or commits suicide, the company only has to return the premiums paid. The health questions on an application are very important.
Are there answers to these problems? Yes, in most cases. Companies have developed “rescue products” that may be used to combat vanishing policies. Most are available to be issued before age 86. The client is left in a better position than they were holding old policies. Even with substantial cash values in current policies, it is wise to review what options are available.
With the average person living longer (the average age of death in 1906 was age 47), insurance companies have become more competitive with each other, the consumer is able to purchase more insurance than they did even 10 or 15 years ago for the same dollars.
We have shown many people how to make their life insurance dollars go farther. Life Insurance policies are not all created equal. If any of the above-described problems relate to your policies, you may need your coverage reviewed. It is better to be safer now than to be sorry a few years later.
Joe Moore has been owner of Tennessee Senior Benefits in Morristown since 1987, representing many life and health insurance companies. He is a Certified Senior Advisor, and Regional Marketing Director for Shenandoah Life Insurance Co., serving on Shenandoah’s National Advisory Board. He can be reached at 423-581-1004 or 1-800-226-1004
| Insurance Companies Helping Solve Aging Problems By Joe Moore, Owner Tennessee Senior Benefits, Morristown Leave it to the Insurance Companies to help folks try to solve problems! After all, their success depends on how they are able to help folks solve problems. The “Baby Boomer” Generation has brought about a lot of special needs and changes in our country and in the insurance industry. As a “Certified Senior Advisor (CSA)”, I have access to a lot of interesting facts and predicted future problems for seniors, in the USA: - ten thousand (10,000) persons turn 60 every single day of the year
- the fastest growing age group today is 85 and older
- seventy-seven percent (77%) of the nations wealth is controlled by seniors, but bankruptcies for seniors age 65+ increased 244% between the years 1991-2001, 82,000 Americans 65 and older filed for bankruptcy in 2001 alone, making older Americans now the fastest-growing age group in bankruptcy.
- life expectancy today is 77 years, and was only 47 years in 1906
- two-thirds of all persons ever living past age 65 are alive today
- over the next 15 years, the age 50+ population will increase 74%, the under 50 population will only increase 1%
- the highest percentage of suicide in our population is white males, over age 75.
These facts bring us into uncharted territory to try to deal with the problems of America living longer, and how to afford a lot of the potential solutions. We are living longer, but as a whole, are we happier? Our older population is getting bigger. And, at the same time, the younger population is shrinking. So the effect is that you have a small young population responsible for supporting a huge senior population. Who’s going to pay for this older population’s problems and continued well-being? Our government does not have a full piggybank to pull the dollars from. Their piggybank is already drained below empty. These are real problems facing us which will escalate in intensity in the very near future. Eleven Percent (11%) of the people in the United States who are 65 and older lives at or below the poverty level. Eleven percent – that’s three point eight million people. You see, we have a serious problem brewing out there. Take Medicare. Without Medicare… that 11% of people over age 65 at the poverty level would grow to almost 30%. Gone would be the great medical benefits Medicare gives to older adults. Without Social Security 45% of American seniors would be at the poverty level – or below it. That’s how important those two entitlement programs are. Without these two programs, our average way of life would be very little better than a third-world country. We would fast become a country of haves and have-nots, with probably over half of our senior population living in poverty. A lot of seniors still have financial obligations and debts beyond belief. I think back to 1982 when my parents qualified for a 30-year loan on their home. Dad was 72, Mom was 64. My father made it to age 83, my mother to age 79. Needless to say, the debt was still outstanding on their home at their death. I am aware of a lot of seniors with worse financial problems than those that faced my parents. They at least got to stay in their home; some seniors do not have this luxury. A lot of seniors today have to choose between eating and spending their money for medications. If our generation has 77% of the nations wealth, the problem arises as to how to intelligently transfer our wealth to the next generation. It is for sure we have not yet got it mastered how to live forever, just long enough to create problems. If someone is fortunate enough to have accumulated a few dollars, insurance companies may have some answers that seem very sensible to me. They have developed products that are known as “Wealth Transfer Products”. And most of them are very consumer oriented. With one of our popular products, a 65-year old non-smoking female, being reasonably healthy, could place $50,000 with an insurance company and get a guaranteed for life paid up death benefit of $101,500. A 65-year old non-smoking Male would have $91,000 of guaranteed for life death benefit. Double the premium doubles the death benefit. Another way of determining the death benefit is that the female would receive 203% of money premium in guaranteed death benefit, and a male would receive 182%, at age 65. There are no federal income taxes due at death, because this is a guaranteed paid up life insurance policy. This avoids probate, since it is a life insurance policy, and the benefit goes straight to the beneficiary. It is not subject to stock market volatility. It is all guaranteed, is issued from ages 50-85, and has options of a single payment or being paid off in 5 or 10 years. This is an excellent product to enhance and transfer an estate by putting Required Minimum Distributions from retirement plans into it after age 70 1/2. This type of transfer is not for everybody. In most situations, this should be from money that taxes have been paid on and one knows that they will not need this money in their lifetime. However, there are ways to make this a sensible move and then get your money out later. For example, let’s assume 65 year-old, Non-Smoking Mrs. Gladys has $100,000 in Bank CDs, and is hoping to leave it to the next generation. There is a $75,000 debt on a home that she would also like to leave debt free to the next generation. If death occurred today, there would only be $25,000 cash left after paying off the debt on the home. By transferring the $100,000 into a Wealth Transfer product, the beneficiary could receive $203,000 instead of $100,000. The net result is the beneficiary could have the home debt free and $128,000 cash after paying off the $75,000 loan. I have chosen a guaranteed product to discuss; we have other plans giving more potential benefits but do not have iron-clad guarantees. Most seniors do not like surprises, and without guarantees there can be very negative results. Let’s say Mrs. Gladys lived 8 more years, was 73, and paid off the loan. If she so desired, she could surrender the policy for approximately the $100,000 she originally paid (this is a guarantee). The net result is she has been covered for $103,000 more than her premium for 8 years, and her net cost for the coverage is -0-, yes zero. It is a trade-off. She basically has traded her potential taxable interest earnings on this money for $103,000 increased protection for 8 years. Another potential benefit available on this product is the Accelerated Death Benefit Rider, with nursing home provision. What this means is that if Mrs. Gladys develops a terminal medical condition that should result in death within 12 months, she could get 80% of her death benefit in her lifetime. She could receive $162,400 while she is living and still leave a $40,600 death benefit to her heirs. If she was faced with a permanent nursing-home stay, she could draw up to 80% of the death benefit to pay for nursing home costs. This potentially eliminates the need for a separate nursing home policy, and nursing home policies can be very costly. This article is not intended to provide complete information about these products. They are much more fully explained in company literature, which of course, we have available. We are not claiming to have all the answers facing our future. We try to stay informed of the best products and potential solutions. This is a must, if you continue to do a great job for your clients. Joe Moore has been owner of Tennessee Senior Benefits since 1987. He is a Certified Senior Advisor and has specialized in Senior Insurance Products for seniors for 19 years. |
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