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What Type of Life Insurance is Best for You?

What Type of Insurance is Best for You?


The choices in life insurance policies are bewildering. Keep one thing in mind: if you don’t need it, don’t buy it.

Do I Need Life Insurance?

Life insurance needs vary depending on your personal situation. If you have no dependents, you probably don’t need life insurance. If you don’t generate a significant percentage of your family’s income, you may not need life insurance.

If your salary is important to supporting your family, paying the mortgage or other recurring bills, or sending your kids to college, life insurance is important to ensure that these financial obligations are covered in the event of your death.

How Much Life Insurance Do I Need?

It’s difficult to apply a rule-of-thumb because the amount of life insurance you need depends on factors such as your other sources of income, how many dependents you have, your debts, and your lifestyle. The general guideline is between five and ten times your annual salary.


What Type of Policy Should I Buy?

The debate over term versus whole life insurance goes on. Some experts recommend that if you’re under 40 years old and don’t have a family disposition for a life threatening illness, go for term insurance, which offers a death benefit but no cash value.

Whole life offers both a death benefit and cash value, but is much more expensive. Half of all cash value policies are surrendered within the first seven years, making the coverage very expensive because huge commissions (thousands of dollars the first year) and fees limit the cash value in the early years. Since these fees are built into the complex investment formulas, most people don’t realize just how much of their money is going into their insurance agent’s pockets.


Whole Life

In this more traditional life insurance policy, the premiums stay the same over the life of the policy, which stays in effect until your death, even after you’ve paid all the premiums. A cash reserve is built up, but you have no control over how it’s invested.

Whole Life Insurance Summary

Variable Life

Variable life polices build up a cash reserve that you can invest in any of the choices offered by the insurance company. The value of your cash reserve depends on how well those investments are doing.

Variable Life Insurance Summary

Universal Life

You can vary the amount of your premium with Universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit. For this flexibility, you’ll pay higher administrative fees.

Universal Life Insurance Summary

How Much Will It Cost?

The least expensive life insurance is likely to be from your employer’s group life insurance plan. These policies are typically term policies, which means you’re covered as long as you work for that employer. Some policies can be converted upon termination.

The cost of other types of life insurance varies greatly, depending on how much you buy, the type of policy you choose, the underwriter’s practices, how much commission the company pays your agent, etc. The underlying costs are based on actuarial tables that project your life expectancy. High risk individuals, such as those who smoke, are overweight, or have a dangerous occupation or hobby (for example, flying), pay more.

There are often hidden costs in life insurance policies, such as fees and large commissions, that you may not find out about until after you purchase the policy. There are so many different kinds of life insurance, and so many companies that offer these policies, that I recommend using a fee-only insurance advisor who, for a fixed fee, will research the various policies available to you and recommend the one that best suits your needs. To ensure objectivity, your advisor should not be affiliated with any particular insurance company and should not receive a commission from any policy.

An healthy 30 year-old man could expect to pay approximately $300 a year for $300,000 of term life insurance. To receive the same amount of coverage under a cash value policy would cost over $3,000.


When choosing life insurance, use the Internet’s resources to educate yourself about life insurance basics, find a broker you trust, then have the policies he or she recommends evaluated by a fee-only insurance advisor.

Internationally known financial advisor Suze Orman strongly believes that if you want insurance, buy term; if you want an investment, buy an investment, not insurance. Don’t mix the two. For the record, unless you’re a very savvy investor and understand all the implications of the vavious types of life insurance policies, I agree with her. The bottom line is that the average person should be purchasing term life insurance.

Life Insurance Worksheet

1. Your dependents’ annual expenses, including mortgages, loans, credit card debts $____________

2. Your dependents’ sources of other income, including salary, interest and dividends, social security, pensions, etc $____________

3. Additional income needed (subtract line 2 from line 1 $____________

4. Divide line 3 by the interest rate you expect to earn (for example, if the prevailing interest rate is 8%, divide line 3 by .08) $____________

5. Face value of the policy needed $____________

Five Health Insurance Terms You Must Know

Here are some more helpful definitions.

Five Health Insurance Terms You Must Know

1. Premium:
Your premium is the amount you pay to the health insurance company each month to maintain your coverage. When trying to understand the cost of a health insurance plan, the premium is the first thing to consider. But make sure to balance it against other costs, such as copayments, deductibles and coinsurance. A good rule: choose a lower premium/higher deductible if you want to save money now, and a higher premium/lower deductible if you want to be more financially prepared for unexpected medical expenses later.

2. Copayment:
Your copayment, or “copay,” is the specific dollar amount you may be required to pay up front for a specific type of service. For example, your health insurance plan may require a $15 co-payment for an office visit or brand-name prescription drug, after which the insurance company pays the remainder of the charges. A good rule: if you make frequent doctor’s office visits, make sure you choose an affordable and consistent copayment.

3. Deductible:
Your annual deductible is the amount you may be required to pay out-of-pocket before the insurance company will begin paying for your medical claims. Keep in mind, your monthly premiums and copayments will often not count toward your deductible. Not all plans require a deductible, but choosing a plan with a higher deductible can keep your monthly premiums lower. A good rule: keep your deductible to no more than 5% of your gross annual income.

4. Coinsurance:
Coinsurance is the amount that you are obliged to pay for covered medical services after you’ve satisfied any co-payment or deductible required by your health insurance plan. Think about it this way: the insurance company may limit coverage for certain services to, say, 80% of charges. So, for example, if your insurance benefits cover 80% of x-ray charges, you will need to pay the remaining 20%, even if your annual deductible is already met. That 20% is considered coinsurance.

5. Maximum Out-of-pocket Costs:
Pay attention to this amount when considering a new health plan. Your maximum out-of-pocket cost sets a limit to your annual financial liability. Once you have paid out of pocket (typically through deductibles, copayments or coinsurance) to the “maximum” amount, the insurance company pays the full charges for any additional covered medical services rendered that year. Your monthly premium will not count toward your maximum out-of-pocket costs.

Changes to healthcare insurance coverage in 2012

The PPACA requires insurers to continue to standardize documents in 2012. New reporting requirements are also in effect.

The year’s provisions are:

Encouraging integrated health systems
Summary of Benefits and Coverage
Quality of care reporting
Reducing paperwork and administrative costs
Patient-Centered Outcomes Research Fee

The PPACA improves quality of care by creating incentives for doctors to form accountable care organizations (ACOs). These organizations allow doctors and other health care professionals to better coordinate patient care. They could help prevent disease and illness and reduce unnecessary hospital admissions or re-admissions.

Incentives will be paid by the Centers for Medicare & Medicaid Services (CMS) for Medicare patients, but many ACOs will also contract for other patients.

On February 9, 2012, the Department of Health and Human Services’ Center for Consumer Information and Insurance Oversight (CCIIO) issued its final rule regarding the Summary of Benefits and Coverage provision.

The rule applies to employees and dependents of domestic and international group and individual health plans. It applies to all fully insured and self-insured plans, regardless of grandfathered status. It does not apply to Medicare plans.

Beginning September 23, 2012, health insurers and self-insured group health plans will be required to provide a standard Summary of Benefits and Coverage (SBC) document to all individuals enrolling in medical coverage. This includes mid-year enrollment for new employees and those experiencing a special enrollment event, and ‘upon request’ by other enrollees.

The SBC includes:

A four-page benefits and coverage summary describing plan benefits, cost sharing and limitations
Consumer costs examples based on the specific plan’s benefits for two common medical scenarios: maternity and diabetes management
Customer service phone number and a website to review or obtain a copy of their full policy or certificate
Health care reform requires the Summary of Benefits and Coverage:

Be no more than four double-sided pages
Be printed in 12-point font
Be written in appropriate language that is respectful of culture
Use terms most people understand
The benefit documents must also include dollar values for:

Daily hospital room and board
Miscellaneous hospital services
Surgical services
Physician services
Prevention and wellness services
Prescription drugs
Mental health benefits
Other benefits
The PPACA says documents must also include:

The exceptions, reductions and limitations of the plan’s coverage
Details on the plan’s cost-sharing rules
How coverage renews or continues
A statement indicating the Summary of Benefits and Coverage is not a policy, and the full policy can be reviewed for details on how to use the plan.
A glossary of standard medical and insurance terms
All plans regardless of grandfathered status will be required to pay $1,000 per enrollee for what is considered willful non-compliance.

Learn about the Summary of Benefits and Coverage

Watch our webinar on the Summary of Benefits and Coverage

The Department of Health and Human Services is developing rules for how plans report on benefits and how they pay health care providers. The goal is to improve health outcomes through:

Case management
Care coordination
Chronic disease management
Medication and care initiatives, including the medical homes model for treatment or services
New rules are aimed at reducing hospital readmissions. A comprehensive program for hospital discharge could include:

Patient education and counseling
Thorough discharge planning
Post-discharge follow-up by a health care professional
To improve patient safety and reduce medical errors, health care reform requires use of:

Best clinical practices
Evidence-based medicine
Health information technology
The PPACA also supports widespread wellness and health promotion programs.

Grandfathered plans are not required to participate.

Many changes will make billing practices uniform to improve the quality of care. The PPACA requires health plans to adopt rules for the secure, confidential and electronic sending of health information. Standard documents could reduce paperwork and administrative duties, lower costs and decrease medical errors.

Grandfathered plans are not required to participate.

Reform creates a new Patient-Centered Outcomes Research Fee. Revenue from this fee will fund research to determine the effectiveness of various forms of medical treatment. Effective for plan years that began on and after October 2, 2011, insurers and self-insured group health plans must pay $1 per participant. The fee increases to $2 per participant in 2013, then to an amount indexed to national health expenditures for future years. The comparative effectiveness fee phases out by 2019.

Health Care Reform Update From Cigna

Supreme Court Ruling – Individual Mandate Upheld as Constitutional

PPACA became law on March 23, 2010. Shortly thereafter, 26 states and the National Federation of Independent Business (NFIB) sued the federal government, claiming that PPACA’s “individual mandate” provision (which requires all individuals to have “minimum essential” health coverage beginning in 2014 or be subject to a penalty) was unconstitutional.

After three of four federal Courts of appeal upheld the constitutionality of the individual mandate, the litigation ultimately wound its way to the Supreme Court.

PPACA Remains the Law of the Land

We removed the citation about the Commerce Clause because it did not apply.

Today the Supreme Court of the United States upheld the constitutionality of the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA). Accordingly, PPACA’s current health insurance reform provisions will remain in force and we will continue implementing the law, as applicable.

There will be no impact on implementation of PPACA for employers and plan sponsors, which will need to continue the process of activating the various provisions, including the employer mandate, which will go into effect in 2014.

In addition, there will be no impact on Cigna’s existing PPACA compliance and implementation efforts – all of which will continue to be in effect.

Cigna will continue to implement PPACA, assist our stakeholders with compliance and remain actively engaged with lawmakers and other stakeholders. We will continue advocating for a health care delivery system in which every American has quality, affordable health care and maintains continuous health care coverage.

For more information on the Supreme Court decision, please refer to our Supreme Court Ruling Q&A.

Individuals/Customers: please call the toll-free number on the back of your ID card. A specially trained group of Customer Service Representatives is ready to answer your questions.
For the latest information on health care reform, we encourage you to bookmark our health care reform website, InformedOnReform.com

Travel Insurance

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Global Citizen: Comprehensive insurance for international living:
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•        Affordable monthly premium with no loading.
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TravelGap Single Trip: travel medical policy with sickness, accident and medical evacuation benefits.
Covers illness or injury due to terrorism
Pre-existing conditions coverage available
Travel Gap Excursion (primary required/covers prex)
Travel Gap Voyager (no primary/no pre-ex)

TravelGap Multi Trip- annual multi trip health insurance for frequent travelers.
Unlimited trips throughout the year (70 day max./trip)
One time yearly premium ($89-$199 yearly premium)

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TripProtector- travel insurance to protect your investment.

Coverage for trip cancellation and/or trip interruption
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Trip Cancellation & Trip Interruption coverage
Premium based on age and length of trip
Trip Protect E-Saver (online only)
Trip Cancellation, Baggage Loss, AD&D
No medical
Primary health plan is NOT required

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Health Care Reform Update

Legislative news from Aetna Public Affairs

Week of March 5, 2012

A couple of new polls released last week show that the Affordable Care Act (ACA) is hurting President Obama in 12 battleground states likely to be important to the outcome of the November election. But there are signs that the problem for the President could be easing. A Gallup/USA Today poll found that a clear majority of registered voters call the bill’s passage a “bad thing” and support its repeal. Seventy-two percent of those polled also believe the individual mandate to be unconstitutional. A Kaiser Health Tracking Poll found that Americans overall are divided on the law, with 43 percent having an unfavorable view of it while 42 percent have a favorable opinion. What is noteworthy, however, is that the number of those with favorable views jumped five percentage points in the past month. The percentage of those who expect their families to be worse off under the ACA similarly dropped 8 percentage points, from 33 percent to 25 percent – a two-year low. As for the issue’s impact on the fall elections, Kaiser is reporting that most Americans say health care will be just one of many factors in their vote this year. 


By a vote of 51 to 48, the Senate last week tabled an amendment by Sen. Roy Blunt (R-MO) regarding the “conscience rights” of health plans and health care providers. The amendment was offered during consideration of a transportation bill. The Blunt amendment would have amended the ACA to specify that a “health plan shall not be considered to have failed to provide the essential health benefits (EHB) package or failed to meet any other ACA requirement if it declines to provide coverage of specific items or services because such coverage is contrary to the religious beliefs or moral convictions of: 1) the sponsor offering the plan; or 2) the purchaser or beneficiary of the coverage. Although the amendment did not specifically mention coverage of contraceptive services, the recent debate on Department of Health and Human Services regulations addressing contraception was a significant factor in bringing the issue to the Senate floor.


CALIFORNIA: Governor Jerry Brown is counting on $6.5 billion in additional revenue by June 2013, but the non-partisan Legislative Analyst’s Office (LAO) is saying, not so fast. The LAO has a more pessimistic view of expected capital gains in California over the next 16 months. With Facebook expected to become a publicly traded company, LAO notes that much attention is being paid to the strong likelihood that employees will exercise stock grants late this year and next. California’s heavy reliance on volatile capital gains income has been a big reason why the state has found it so difficult to budget accurately in recent years. The analyst office pegged California’s deficit at nearly $13 billion, while the governor’s forecast is only $9.2 billion.

MAINE: The decision by U.S. Senator Olympia Snowe not to seek reelection this fall has set off a compressed timeline for various candidates to decide which elective office to seek.  A U.S. Senate candidate needs 2,000 certified signatures by March 15 to qualify for the primary ballot, and a candidate for the U.S. House needs 1,000 signatures.  Numerous well known politicians are considering entering the Senate race.  In addition, should Congresswoman Chellie Pingree, one of the state’s two U.S. Representatives, enter the race several state senators and state representatives would in turn likely run for her seat.  Both houses of the state legislature are narrowly controlled by the Republican party.

OKLAHOMA: The Senate Health and Human Services Committee gave its approval last week to a bill that would allow Insure Oklahoma to expand its offerings and create the Health Insurance Private Marketplace Network Trust, beginning July 1, 2013. The committee’s approval came after Sen. Gary Stanislawski, R-Tulsa, reassured fellow Republicans that the measure was not a step in the direction of implementing the ACA. The bill would establish a seven-member trust board and create membership requirements. It also would authorize the trust to administer premium assistance for individuals whose family income does not exceed 250 percent of the federal poverty level, subject to certain limitations, and to assist certain small businesses and their eligible employees to purchase health insurance or buy in to a state-sponsored benefit plan. It also would authorize the trust to administer a program to assist small business in offering employer-sponsored health insurance. The measure would direct the governing authority to seek any and all federal approval necessary to implement the act. Responding to a series of questions, Stanislawski said he believed the law would show federal officials that the state was interested in finding an Oklahoma-based solution to the requirement to establish a health insurance exchange. The bill now goes to the full Senate for consideration.           

TEXAS: The state may be challenging federal health care reform in court, but state lawmakers are still monitoring how the law will affect costs and care in Texas. The ACA has been a political football since it was first introduced in 2009. A House Public Health Committee hearing last week started with about 90 minutes of projections from economist Thomas Saving of Texas A&M University, who told lawmakers that the reforms would eat up the federal budget, forcing Washington to push more Medicaid costs to the states.  He projected that the state’s share of Medicaid –  about 34 percent in 2010 – would rise to almost 40 percent. However, Billy Millwee of the Texas Health and Human Services Commission said that under the federal law the percentage of uninsured Texans would drop from 26 percent to 9 percent.  The Texas legislature won’t meet again until January 2013. Updates on how implementation of the law could affect the state’s tight budget will be watched closely as budget writers figure out how to pay the bills.

WASHINGTON: The Office of the Insurance Commissioner (OIC) has filed an emergency rule prohibiting insurers from limiting prescription drug coverage to generic drugs only, even though the OIC has approved products with such restrictions. The OIC is planning stakeholder meetings on the issue, but none have been scheduled yet.  In short, the rule prohibits a health carrier from offering a plan with a prescription drug benefit that limits the prescription drug benefit to generic drugs only.  It does not prohibit the plan from:

Using a tiered prescription drug benefit structure that includes a generic tier;
Applying lower cost-sharing for generic drugs that are therapeutically equivalent to a prescribed brand name drug;
Using a step therapy protocol;
Requiring substitution of a therapeutically equivalent generic drug with the prescribing physician’s approval; or
Requiring pre-authorization for prescription of a brand name drug based on the patient’s clinical response.

Health Reform Connection
America’s Health Insurance Plans

Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies. Those companies include Aetna Health Inc. and Aetna Health Insurance Company, 151 Farmington Avenue, Hartford, CT 06156

© 2012 Aetna Inc.

Changes in health plans – Healthcare Reform 2012

The enactment of the Affordable Care Act (ACA) in 2010 is ushering in changes to the health care system that impact individual consumers and employers alike. The law includes major health insurance market reform provisions that will expand access to coverage for many more Americans beginning in 2014.

A number of important provisions, however, will have an impact on the marketplace in 2012. What follows is a brief description of the key issues we are tracking for 2012. The list is not meant to be exhaustive, and other ACA-related issues may be of equal or greater concern to different individuals and businesses:

Scheduled for 2012

W-2 Reporting: Employers must begin preparing this year to report on employees’ 2012 W-2 forms – to be issued in January 2013 – the aggregate cost of their employer-sponsored coverage. Employers, however, may have chosen to report earlier on employees’ 2011 W-2 forms issued in January 2012. For purposes of this reporting requirement, “applicable employer-sponsored coverage” includes coverage under any group health plan made available to an employee by the employer, regardless of whether the employer or the employee paid the cost. Applicable coverage as defined includes major medical and employer flex credits contributed to a health flexible spending arrangement (FSA), if the flex credits exceed the employee’s salary reduction to the FSA.

Employers are required to report the cost of coverage provided under hospital indemnity, other fixed indemnity or specified disease or illness policies only if the employers contribute to the cost of that coverage or if the coverage is purchased by employees on a pre-tax basis through a cafeteria plan.  Employers do not need to report the cost of wellness programs, employee assistance programs (EAP) and on-site clinics unless the employers include the cost of these benefits when charging COBRA premiums.

Quality of Care Reporting: By March 2012, Health and Human Services (HHS) must develop annual reporting requirements for group health plans and insurers offering group and individual coverage.  Reports must provide information about how the plan or coverage:  1) improve health outcomes through the plan’s quality of care provisions, 2) implement activities to prevent hospital readmissions, 3) implement activities to improve patient safety and reduce medical errors, and 4) implement wellness and health promotion activities. HHS has yet to issue regulations on this reporting requirement, and the details of what must be reported are still unclear. However, health plans and insurance issuers generally will be required to report on how health outcomes are improved through various programs and initiatives. The requirements only apply to non-grandfathered plans.

MLR Reporting: The medical loss ratio (MLR) provision requires health plan issuers to meet new minimum medical spending requirements – 85 percent in the large group market and 80 percent in the small group and individual markets. Using 2011 data, insurers in 2012 begin to face the possibility of paying rebates to policyholders if the MLR thresholds are not met. In most instances, insurers/plan issuers must issue rebates to group health policyholders rather than to subscribers. Rebate process simplification in the new final rules released in December 2011 should help employers effectively manage rebates on behalf of their plan beneficiaries. Plan issuers must issue a notice of rebate to policyholders and subscribers, and rebates must be paid by August 1, 2012 for the 2011 experience year. Reporting and payment of any rebates that are due will occur annually thereafter.

Administrative Simplification: The ACA mandates adoption of “operating rules” for the standard electronic transactions used in the administration of health plans. The new rules will improve the uniformity and utility of the existing electronic claims, remittance advice (ERA), referral certification and service authorization, premium payment, eligibility verification, and claims status inquiry transactions. The ACA also requires the adoption of two new standards, as well as associated operating rules, for electronic funds transfer (EFT) and claims attachment transactions.

The ACA required HHS to adopt standard operating rules for eligibility and claims status by July 1, 2011 and fully implement them by January 1, 2013. The adoption of operating rules for ERA, as well as the adoption of a standard and a set of operating rules for the EFT, is required by July 1, 2012 with an effective date of January 1, 2014.  The adoption of operating rules for claims payment, premium payments, certification and authorization and enrollment transactions, as well as the adoption of a standard and a set of operating rules for claims attachments, is required by July 1, 2014 with an effective date of January 1, 2016.

The ACA also mandates that a new health plan identifier standard be established by Oct. 1, 2012.

Women’s Wellness: When non-grandfathered plans become effective or renew on or after August 1, 2012, they must include 100 percent coverage of women’s preventive services when performed by an in-network physician. Aetna’s plans already comply with a number of the required women’s preventive services. Adjustments will be required for non-grandfathered plans to comply with the remainder including coverage for the following with no member cost-share: 1) prenatal visits, 2) additional gestational diabetes screening tests; 3) lactation support, devices and counseling; and 4) FDA-approved contraceptive methods, including prescribed drugs, implantable devices, sterilization procedures and patient education and counseling for women with reproductive capacity (certain religious employers may qualify for an exemption). Other changes may apply.

The Patient-Centered Outcomes Research Fee: Health insurance issuers and sponsors of self-funded group health plans will be assessed an annual fee to fund patient-centered outcomes research. The fee is imposed for a limited number of years, beginning in 2012 and ending in 2019. The trust funds the Patient-Centered Outcomes Research Institute, which was created “to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, monitored, and managed”.

Possible impact in 2012

Summary of Benefits and Coverage: Insurers and group health plans must provide a summary of benefits and coverage document to individuals before enrollment and re-enrollment. (The new rules also require 60-days-notice to enrollees when a health plan or issuer modifies the terms of the plan or coverage.) The requirement is effective as of March 23, 2012, but the federal agencies have not yet issued final uniform standards, which may result in a delay in the effective date. The U.S. Departments of Labor, Health and Human Services, and Treasury jointly released an FAQ on November 17, 2011 addressing implementation requirements, and it states that the departments anticipate the final rule will provide insurers and health plans with “sufficient time” to enable them to comply with the final rule requirements.

Health Insurance Exchanges: The ACA requires states to set up health insurance exchanges by 2014, opening a new marketplace for individuals and small businesses to buy health coverage. The federal government will operate a federal exchange to serve residents of states that have opted not to create their own exchanges or are unable to operate an exchange by January 2014. As of December 2011, HHS has awarded more than $220 million in grants to help a number of states create exchanges, a process that will continue in 2012. HHS also issued proposed rules and guidance in 2011 for the future operation of exchanges. Having solicited comments on the proposed rules in the fall of 2011, HHS is expected to issue additional rules and guidance in 2012.

Wellness Incentives: A five-year/$200 billion grant program will be available to small employers (less than 100 employees) that did not provide a wellness program as of March 23, 2010. The program was slated to open up in 2011, but guidance has not yet been issued that would clarify various aspects of the program, including the application process. Guidance is expected in 2012. What is known is that the grants are intended to apply to “comprehensive” wellness programs that include health awareness initiatives (including health education and preventive screenings), efforts to maximize employee engagement, initiatives to change unhealthy behaviors and lifestyle choices, and efforts to create a supportive environment. Starting in 2014, employers will be permitted to offer employees rewards of up to 30 percent of the cost of coverage for participating in a wellness program and meeting certain health-related standards (potentially increasing to 50 percent of the cost of coverage).

Essential Health Benefits: As of 2014, the ACA requires that non-grandfathered health insurance coverage offered in the individual and small group markets, both inside and outside of the health insurance exchanges, offer a “comprehensive” package of coverage known as “essential health benefits.” Guidance from HHS on what exactly should be considered an essential benefit, and what should not, has been eagerly awaited since this clarification will determine to a great extent what a compliant plan design looks like and how costly it will be. HHS issued preliminary guidance on December 9, 2011, that indicates states will have the flexibility to determine essential health benefits by selecting a benchmark plan “that reflects the scope of services offered by a typical employer plan” in their respective states. If states choose not to select a benchmark, HHS intends to propose that the default benchmark be the small group plan with the largest enrollment in the state. HHS is soliciting additional comments on essential health benefits that are due by January 31, 2012. It is unclear when final guidelines will be available.

90-Day Maximum Waiting Period: Starting in 2014, waiting periods for coverage that are greater than 90 days cannot be applied by group health plans or insurers offering group coverage. Existing plans will need to be amended to reduce waiting periods that are longer than 90 days, and group health plans and insurers may need to begin preparing for this change in 2012.

Definition of a Full-Time Employee: A key definition for the employer mandate that becomes effective in 2014 is the definition of full-time employee. The number of full-time employees will determine application and cost of the employer mandate.  The definition of full-time employees is also relevant to ACA’s automatic enrollment provision, which will become effective after final regulations are issued (anticipated to be 2014).

For purposes of the employer mandate, the ACA defines full-time employees as those who work an average of at least 30 hours per week. However, it is unclear how this definition is measured and over what time period it is measured. When determining the number of full-time employees relative to the employer’s affordable coverage requirement, employers will be allowed to exclude those full-time seasonal employees who work less than 120 days during the year. Part-time employees are counted as full-time equivalent employees in determining whether an employer is subject to the employer mandate, but part-time employees are excluded from the penalty calculation. The ACA does not define full-time employee for purposes of the automatic enrollment provision. The agencies have announced that they intend to coordinate the definition of full-time employees for purposes of the employer mandate with the definition for purposes of automatic enrollment.

Healthcare Reform – Rescission

Rescission requirements impact group health plans   

The federal health care reform law changed the way health plans and issuers approach rescissions in both the group and individual markets. Group health plans are affected whether they are insured or self-insured.  
What constitutes a rescission?
It’s important to understand what constitutes a “rescission” for federal health care reform, as opposed to another type of coverage termination. A rescission is broadly defined as a retroactive termination of a member’s coverage.  
However, there are some important exceptions from this broad definition. For example, termination of coverage because of nonpayment of premium or contribution (either by the group or the member) is not a rescission. It is not considered a “rescission” when the member’s coverage is retroactively canceled to the last paid-to date if the member pays no premiums or contribution for periods of time after termination of employment or eligibility. The member’s coverage can be retroactively canceled to the last paid-to date. 
Restrictions on rescissions
If a group health plan or issuer is faced with a “rescission,” certain restrictions apply for plan years that start on or after September 23, 2010:
·         The federal health care reform law does not allow the plan or issuer to rescind coverage, except in cases of fraud or intentional misrepresentation of material fact as prohibited by the plan or coverage. Examples of when a group may consider rescinding coverage include intentional misrepresentations of marital status or dependent eligibility.
·         Although federal law may prohibit rescinding coverage because of a member’s lack of intent, the plan and issuer may still cancel coverage prospectively.
·         When a policy or coverage is rescinded due to intentional misrepresentation of material fact or fraud, the plan or issuer must:
o        Provide notice of the rescission 30 days in advance of taking the action
o        When providing notice, inform the member of the opportunity to appeal the determination to rescind (as outlined in regulations for the appeals provision)
For group health plans, group customers control communications of memberUship eligibility. Therefore, when a member is removed from coverage, we would not be aware of the reason for the coverage termination. For this reason, we believe it is the employer group’s responsibility to comply with this provision. If the group notifies us within a reasonable period of time that the member is no longer an employee and, therefore, no longer a member, we would assume that it is not a rescission because we received no payment from the member. 

Employee Health Insurance Plan Options

Workers often make decisions about whether to accept, reject, or change jobs based on benefits, and health insurance is frequently ranked by workers as the most important benefit, excluding salary, their jobs offer.  This means that it is a vital part of attracting and keeping the best workers. Companies that want to recruit top talent must offer benefits packages that at least match their competitors in value. However, there are a lot of options and trade-offs to consider when purchasing employee health insurance plans. These plans come in four different general categories:

Health Maintenance Organizations are about the most common plans. These allow patients to choose primary care physicians and require the physicians to make specialist recommendations within a select network of other doctors. This reduces the choices available to individual patients, but in most cases also reduces the cost to patients and employers to some degree, especially deductibles. In recent years HMOs have begun to offer more choices but also become more expensive.

Preferred Provider Organizations allow patients to see doctors outside of their networks, with higher deductibles, as well as higher premiums. Since these plans are generally the most expensive, they’re not very common among small companies. Point of Service plans are something of a compromise between HMOs and PPOs, with premiums similar to the former and deductibles slightly less than the latter. Physicians caring for patients with Point of Service plans can make recommendations within or outside of the network.

Another option includes high deductible plans. These often have low management costs and premiums, but deductibles can run as high as $5000. These are most often adopted by companies with relatively young and healthy workers, who do not require much health care except in extreme catastrophes. Aside from selecting a type of plan to suit the health needs of your employees, each type can be adjusted to suit a mix of employees. For example, paying a larger amount of the premium for an HMO or PPO plan will help a company to retain younger employees, which will reduce the overall risk (and thus premiums) for an employee body that may include older people as well.

The costs and benefits of each type of plan can also vary widely between carriers. This is why it can be especially helpful to consult an independent broker, who is familiar with what various carriers offer, but does not have a bias toward any one carrier. A broker can also help to educate your employees about the plan and serve as an advocate for you if you have difficulty with the carrier

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Wayne Group Insurance

Founded in 2008, Wayne Group Insurance is a small, well-established health insurance brokerage.

We operate in California.

Our products include:

  • Employee benefits packages – Health insurance plans, etc.

We have worked with businesses in numerous different industries and people from all walks of life. With a long history in the industry Wayne Group is well prepared to offer you the best possible advice for your health, & life insurance and financial needs.