Jason interviews Julie Toomey about health insurance in retirement.
Below is the full transcript:
Announcer: Welcome back, America, to Sound Retirement Radio where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host Jason Parker.
Jason: America, welcome back to another round of Sound Retirement Radio. So glad to have you on the program with us this morning. You’re listening to Episode 115. We’re going to be talking all about health insurance today, and I’ve got a really great guest, Julie Toomey. We’ve had her on the program in the past, we’re going to be bringing her on in just a minute. Before we do, as you know I like to renew our minds in the morning. I think the best way that we can do that is with a verse, and so this comes to us from Philippians 2:3. “Do nothing out of selfish ambition or vain conceit. Rather, in humility, value others above yourselves.” That’s awesome.
And then, you know I like to give you a joke, something that you can share with your grandkids if you’re going to be spending some time with them this weekend. Because we have Thanksgiving coming up, one of my favorite times of the year, here is a joke for you. Why do Pilgrims … It’s so stupid … Why do Pilgrims’ pants always fall down? Because they wear their belt buckles on their hats. All right. Oh, man, that’s just fun. That’s awesome. Well, maybe.
Okay, Julie Toomey. Let me tell you a little bit about her. Julie Toomey is one of the owners of Toomey and … They wear their belt buckles on their hats! Come on! That’s just ridiculous. Okay. Julie Toomey is one of the owners of Toomey and Associates, LLC, which is located in Poulsbo, Washington. Toomey and Associates, LLC is a health insurance agency serving Washington and Alaska. They specialize in offering both employer-sponsored and individual health plans. Julie and her husband, Drew … I have just got this, I can’t let go of this thing this morning … Julie and her husband, Drew Toomey, established Toomey and Associates, LLC seven years ago and have since brought on Lindsay and Katherine to help their growing business. Julie Toomey, thank you for being a guest on Sound Retirement Radio this morning.
Julie: Oh my goodness, thank you so much for having me on, and I can tell you are enjoying that joke. A lot.
Jason: It’s so bad. Julie, I’m sorry for botching your bio there, but I really-
Julie: Oh, don’t worry.
Jason: I’m really grateful to have you on the program and…
Julie: Of course, any time.
Jason: Health insurance is a big deal. As you know, at Sound Retirement Radio we’re always trying to help our listeners gain a greater sense of confidence as they’re preparing for retirement. There’s been a lot of changes in health insurance recently, so maybe we could start just giving us a quick update. We’re in an open enrollment season right now, tell us what’s going on. What should we be thinking about?
Julie: Well, right now rates are kind of rising, as you can see in the media. Across the states, there are double digit increases in rates for individual folks who are using either the exchanges or are purchasing insurance direct. This does not necessarily reflect all the changes for an employer-sponsored plan, but employer-sponsored plans could still see those double-digit increases depending on where they’re at and who their carriers are. But, really, at the end of the day for our individuals right now, we’re seeing these increases and they’re having to start looking at insurance carriers with smaller networks in order to bring the insurance rates back into something where they can afford.
Jason: Okay. You know we work with a lot of people that are retiring early, sometimes in their mid-50s, maybe right around 60, and so that means that they’re going to have to buy, in many instances, they’re going to have to buy their own insurance until they hit Medicare age. What are some of the issues you find, when we refer people to you, Julie, because we send a lot of people your way, but what do you find are some of the concerns people have as they’re trying to make that transition into retirement with health insurance?
Julie: The major concern, especially here in Washington, when you’ve got a couple over the age of 55, turning 60, they’re looking at between $750 and $1,250 a month to pay for their insurance premiums, and it could be higher depending on what insurance plan they go through. So the major thing is the cash flow, and what do they do to maintain their cash flow in order to pay for their insurance premium so they can protect their financial security.
Jason: Is that per person? $750 to $1200 per person?
Julie: That’s for the couple. I am sorry, yeah, it’s for a couple. If there’s a couple coming to me, that’s about what they’re going to pay for a two-person family after the age of 55 to 60.
Jason: Okay, and that’s in Washington state. So we should let our listeners know if they’re listening from all over the country, maybe even different counties in Washington state, premiums can be different. Is that true?
Julie: Exactly. That’s true. There’s five different rating systems in Washington state, not systems, but areas, so each of the areas have different rating.
Jason: Okay, and then with those types of premiums, are people looking at really high deductible plans? Or, are those pretty comprehensive here in Kitsap County?
Julie: Typically, they’re still looking at the really high out-of-pocket maximums and deductibles, and those deductibles this time of year are anywhere from 6,000 to 7,150. We’re typically talking about the Bronze level plans when I’m using those figures, between $750 and $1,250 a month for that couple.
Jason: So that’s the lowest plan. What’s the difference between the Obamacare and private insurance? Is there any difference between buying a Bronze plan from a private person, a private insurance person, rather than just buying it from the exchange? Is it exactly the same insurance? Is there any difference?
Julie: Well, right now insurance carriers are either choosing to be on the exchange or off the exchange. If an insurance carrier had a product that could be direct-to-consumer and they have a product that’s on the exchange, those products would have to be the same unless they changed it and created a different name for it. But, yes, if you’re purchasing off the exchange versus on the exchange, you’re looking at the same plans. But in Washington state, you’re typically seeing an insurance carrier is either on the exchange or they’re off the exchange, they’re not both this year.
Jason: Oh, okay, so it’s possible you could get a different plan if you don’t go through the exchange? There’s different …
Julie: That’s correct.
Jason: So, the insurance carriers aren’t required to offer their plans through the exchange?
Julie: They are not, but the majority of them are putting their plans to market through the exchange over doing a direct-to-consumer insurance product.
Jason: Okay. Now we were all kind of promised this big fancy dream that with everybody being required to buy health insurance, that it would actually reduce everybody’s expenses and provide us with better coverage. How is it that we’re seeing double digits? Why do we keep continuing to see these plan premiums increasing?
Julie: Well, unfortunately with all of the constraints that were brought along with the Affordable Care Act, one of the constraints was they had to have the youngest individual versus the older individuals, they had to have that at one-to-three ratio. So, in order to cover our older generation, they had to move the premiums up for everyone, and so you’re not seeing our younger, healthier adults purchasing insurance plans. Rather, they’re taking the penalty and saying if for some reason I end up in the hospital, I’ve got GoFundMe.
Jason: Oh, GoFundMe. Oh, yeah. Tell our listeners what GoFundMe is.
Julie: GoFundMe is … I guess what they call it is a crowd sourcing. You go online and you create a profile for a friend or a family member, and say this friend or family member is in a dire situation please help them financially. You can donate to the web site and help this individual out with their expenses, whether they be medical, or if this person wants to go on a trip, or they want to go to college. The GoFundMe site, individuals can create any worthy cause that feel is worthy, and ask their friends and family for donations.
Jason: Yeah, boy, that’s amazing how the world is changing, and why people think that they can do without insurance. It’s also interesting to see how many. There’s this backlash of people saying, “I’d rather pay these tax penalties than be forced to go buy insurance.” Now, we just had an election and it looks like the tide is really changing in America. We’ve heard from the Republicans that they would repeal Obamacare, and now they’ve taken control of the House, the Senate, and the Presidency. Julie, do you think that these Affordable Care Act plans are still going to be around come next year, or?
Julie: You know, that’s anyone’s guess, Jason. My thought process is, with how long it takes for an insurance carrier to get a plan to market, it’d be really hard for them to repeal Obamacare and have all the plans disappear immediately from the marketplace, and have new plans in their stead with new rating systems. Really, insurance carriers are going to be starting their ratings for 2018 come January, so unless there’s some really fast work in the House, the Senate, and the President, I think we’re going to see what we have in the current trajectory of insurance plans for 2017, and potentially even 2018. They’ve got a lot of regulations that they’ve put in place in the past few years, so if they’re going to repeal Obamacare, there’s many layers to this that they’re going to have to peel back through the IRS, and the Center for Medicare and Medicaid Services, and on the state levels. There’s a lot of moving parts to what Obamacare has brought to the table, and if they are going to repeal it, I urge them to do it well. I urge them to do it slowly, so that the American people and the insurance carriers can do it in a fashion that’s not going to destabilize the insurance market, or the individuals using those insurance plans.
Jason: It seems to me, though, we had a plan and a program in place before the Affordable Care Act took place. Why not just go back, right back, to the system that we had in place? Just change all the rules, and say, “Hey, we’re going back to the way that it was being done before.”
Julie: That’s a great way to look at it. My biggest concern is there are many individuals who are currently insured, who are using tax subsidies to help pay for their insurance plans. Also, insurance rates are based on past claim history, and so they’re going to have to use very similar rates to what they currently have in order to pay for insurance claims for this coming year. If you go back to the old rating systems, you may have some … I would think there would be fear on the insurance carriers’ side as well as the office of the Insurance Commissioners that have to regulate those rates to make sure that they’re going to be able to cover any of the claims that are coming through the following year. I don’t know, I want …
Jason: A lot of unknowns. A lot of unknowns right now with health insurance.
Jason: So what about short-term insurance? Tell us, tell our listeners a little bit about that.
Julie: Well, short-term insurance plans have been available, and continue to be available through Obamacare, but one of the major setbacks to a short-term insurance plan is they can still exclude any pre-existing conditions. Oftentimes, they’re going to work their hardest to deny a claim, if it’s a rather large one, to look back at your medical history and say, “You know what? You should have known that you had this condition, and therefore we’re not going to cover anything.” On top of that, short-term insurance plans don’t cover any preventative care. So you can’t go to the doctor for your preventative visits without paying out of pocket. Short-terms plans are really great for, “Hey, I fell on the sidewalk and I hurt myself,” or that kind of thing. It’s not something that can be tied back to a pre-existing condition. Short-term plans, they really can exclude pre-existing conditions, and they can exclude conditions that you thought weren’t pre-existing. And then on top of it, in the current system, it’s not a qualified health plan. So, if you are paying a premium for a short-term plan on a monthly basis, you are still going to be penalized on your taxes for not having a qualified health plan for your tax year.
Jason: Nice. Are they considerably less expensive?
Julie: Yes. They are considerably less expensive.
Jason: You know, Julie, I’m not even familiar with short-term health insurance plans. If somebody wants to learn more about that type of insurance, where do we go? How do we find out more about it?
Julie: You can go online, you can come talk to me and I’m happy to walk people through what that looks like and why it may or may not be a great idea for their certain situation.
Jason: As the rule and the law works today with the Affordable Care Act, and correct me if I’m wrong here, you can be healthy as can be and choose to not buy insurance. Then, if you choose not to buy insurance you pay a penalty, and that penalty is increasing this year, right? The tax penalty?
Julie: I believe it’s 2.5% of your Adjusted Gross Income, or around $695 per adult and half that for a child, capped typically at a 4% family.
Jason: Okay, so there’s a penalty if you don’t buy insurance. But let’s say you say, “You know, I’m just not going to buy insurance,” and then all of a sudden you’re diagnosed with cancer. The insurance companies don’t, correct me if I’m wrong here, but they don’t have the right to say, “I’m sorry, but we’re not going to take you on after the fact. We’re going to let … ” Even if you have cancer now, you can buy a plan. Is that the way that the Affordable Care Act works, is they say they can’t, insurance companies can’t, decline you for pre-existing …
Julie: They can’t, yeah. They can’t decline you for a pre-existing condition, but they can decline you for trying to get insurance mid-year. Right now we’re in open enrollment, so an individual has between November 1st to January 31st to pick up an insurance plan, a qualified insurance plan. If they choose not to and mid-year they find out they’ve got a cancer diagnosis, unless they have something that allows them a special enrollment period, and we can talk about that, they don’t have access to pick up an insurance plan in mid-year. They would have to wait until the next open enrollment to purchase a plan for a January 1st effective date. So, if something’s pretty aggressive in their cancer treatment, those monies they would have to pay out of pocket for those costs until January 1st came along, and then they could pick up an insurance plan at that point. I hope that answers …
Jason: But, the reality is it’s almost like my house is on fire and as long as I can … I mean, basically I can buy insurance on my house after it’s burned down. Almost. That’s kind of the way that this thing works, because I can get really sick, wait until November to get my insurance, and then know that in January I can start my treatments. Which, really, if that … That might just drive up the cost of care because I’ve had to wait to begin my treatments until my insurance kicked in.
Julie: It does. It really does drive up the cost of care.
Jason: It gives people the opportunity to say, “I’m not going to buy insurance beforehand, I’ll wait until something bad happens and then try to buy insurance.” But, they could be out of luck, and if they are out of luck then they go to GoFundMe, and try to raise some money to …
Julie: Exactly. Exactly. And, if they have …
Jason: They’re called COBRA Qualifying Events, and really, a special enrollment is, “Hey, I got married.” One of the individuals in the marriage had an insurance plan, and so we can add the other individual to that plan. Or, someone was born and that person can be added on to an insurance plan. A divorce. They had an insurance plan, they got a divorce, and now they’ve got access to purchase a new plan. They had a group-sponsored employer plan, and they got let go or they quit, and now they no longer have access to it. Or, they were offered COBRA and it was too expensive, that gives them an open enrollment period. But, this open enrollment period is not for a very long time. It’s between 30 and 60 days, depending on what type of situation they’ve incurred. Typically on the exchange, though, they have a 60 day period of time in which an individual can add folks on to an individual plan. Or, if they’ve been removed from a group insurance plan they can jump off the group insurance plan and get onto an individual plan.
It’s not typically what happens, it can’t be a voluntary loss of an insurance, a group insurance product. If you continue to work for that employer and you just decided, “I am not going to pay for the employer-sponsored plan anymore,” you can’t just drop out for whatever reason. You need to be laid off and no longer have access to that group plan, period.
Jason: Okay. Julie, I’m sure there’s a lot of people out there that are going to want more information. Maybe they’re going to want to talk to you, specifically. For our listeners out there, what’s the best way for them to find you and contact you if they have some questions on health insurance?
Julie: Yeah, they can find us on the web at toomeyandassociates.com, and my … I don’t know if I can give my phone number out?
Julie: My phone number is 360-930-0943, and on our web site they’ve got access to contact us via email. But they can look around on there, see if they’ve got any further questions. They can find us on Facebook, or Google+.
Jason: All right. Do you find … Talk to us a little bit about the transition. So, somebody is 64, they’re just getting ready to qualify for Medicare. Do people generally have better insurance once Medicare starts? And, do they pay less money for that coverage than they do the private health insurance leading up to Medicare?
Julie: It all depends on where they’re at in the continuum of income, and if they’re receiving subsidies to help pay for their insurance premiums. But if we’re talking about an individual who’s on a current individual plan, and no subsidies are being applied to that premium, generally speaking, once they move to Medicare they should be in a better spot financially on the monthly premiums.
Jason: Okay, so talk to us a little bit about Medicare and that transition. Is that a difficult transition for people coming off traditional health insurance, and trying to get into Medicare? Is there a qualifying event that takes place?
Julie: Once they turn 65, that’s typically and generally when they are eligible for Medicare parts A and B. At that point Medicare typically sends them their Medicare card, and there are certain situations in which that Medicare card doesn’t come. So if you’re an individual turning 65, and within the three months prior to your birthday you haven’t received that card, you’re going to want to contact Medicare. Part of that transition is … I just lost what the full-on question was, Jason. I apologize.
Jason: That’s okay. Just this transition into Medicare. I mean, it’s a big deal for people and they want to make sure they’re going to be able to continue to see their doctors. Many times they’re looking at maybe getting a supplemental plan, because Medicare is only 80/20 insurance, right? It’s only going to cover 80%, if you don’t have some kind of supplemental.
Julie: That’s correct.
Jason: Do you recommend supplementals to people?
Julie: Yes, we do. We do. There are many supplemental plans that are available in all states, and individuals can get those supplements via the internet and going to talk with a broker. But, I definitely advise a lot of my folks to come sit down and talk with us between six and 12 months before they turn 65 and are eligible for that Medicare, so that we can walk them through what’s going to happen. When they’re going to receive their Medicare cards, what Medicare actually is, what are the parts of Medicare, and what they should expect, and then what plans are available to help cover some of those gaps that Medicare has.
Jason: This all can be very, very confusing. There’s a lot of moving parts. Health insurance is a big concern. Many times, Julie, we actually find as we’re doing cash flow planning for people that their health insurance expenses are one of the biggest expenses they have on their budget. If they haven’t yet paid off their mortgage, usually their mortgage is first, and then health insurance is second. If there’s an opportunity to reduce your out-of-pocket expense, or your insurance premiums, people want to know that. You mentioned the subsidies, and we don’t have a lot of time to talk about this, maybe a minute or so, but I’ve heard some and met some people recently that have quite a bit of money in assets but their income is really low and they qualified for subsidies in the past. Is that still the way that the program works now? Can you qualify for a subsidy even if you have a lot of money in the bank, but your income is low?
Julie: That’s correct. Your eligibility for subsidies is based on your Adjusted Gross Income, and so when you take a look at your taxes, you take a look at that Line 37, and I am not a tax consultant but that’s what they use in order to determine eligibility for a tax subsidy. They don’t use what’s in the bank, so if you’re bank account is not using any interest and stuff, those monies are not going to qualify against you for a tax subsidy.
Jason: You’ve been listening to Julie Toomey with Toomey and Associates, folks. She a great resource, especially here in our community. Julie, thank you for your wisdom, and your expertise, and your knowledge on the subject.
Julie: Thank you so much, Jason.
Jason: Take care.
Announcer: Information and opinions expressed here are believed to be accurate and complete, for general information only, and should not be construed as specific tax, legal, or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates, have no liability for investment decisions, or other actions, taken or made by you based on the information provided in this program. All insurance-related discussions are subject to the claims-paying ability of the company. Investing involves risk. Jason Parker is the President of Parker Financial, an independent, fee-based wealth management firm located at 9057 Washington Avenue NW, Silverdale, Washington. For additional information, call 1-800-514-5046 or visit us online at soundretirementplanning.com.