2013 Medicare Costs and Taxes

If you're eligible for Medicare, or will be soon, you likely know that Medicare costs for services and coverage are subject to change every calendar year.  The coming year also brings an increase to Medicare payroll taxes for high-income earners.

 

 

 

 

Below are some of the cost changes for Medicare Beneficiaries in 2013:

 

Part A Premium for those who are not eligible for Premium Free - $441 per month

Part B Premium - $104.90 (Subject to change based on income)

 

Part A Hospital Deductible - $1,184

Part B Deductible - $147

 

 

Part D Drug Program - Initial Coverage, Coverage Gap and Catastrophic Coverage:

 

Initial Coverage Stage - Beneficiary will pay copayments based on the Part D Plan's tier level for each drug (many plans have an initial deductible up to $325)

 

 

Coverage Gap - Once combined costs incurred by the beneficiary and the Plan reach $2,970

 

While in the Coverage Gap the Beneficiary will pay no more than:

• 47.5% of the plan's cost for brand name drugs
• 79% of the plan's cost for generic drugs

 

Catastrophic Coverage - After the Beneficiary's out of pocket costs for generic drugs and the full cost for brand name drugs (including the 52.5% brand name drug discount) = $4,750

 

While in Catastrophic Coverage the Beneficiary will pay:

• 5% coinsurance, or
• $2.65 copy for generics and $6.60 for all other drugs

 

Part D Drug Plan benefits change every January 1st, and the above tallies start fresh.  The Coverage Gap (also known as the infamous "Donut Hole") is being phased out entirely by the year 2020.

 

 

Increased Medicare Payroll Taxes:

Readers who earn (or are aspiring to do so) more than $200,000 will want to know (or maybe not) that the following increased Medicare taxes are to be implemented on January 1, 2013:

Medicare payroll taxes, now set at 1.45% of payrolls, will be increased .9% (to 2.35% total) for high-income individuals and couples.   This increase will be taken into effect for self-employed individuals earning over $200,000 annually, married individuals filing separately earning over $125,000 annually, and couples filing jointly with a combined income of at least $250,000 annually.

Note that these same income limits will be used to trigger a 3.8% annual tax on net investment income (the proceeds of which are to be used to help fund health care reform changes).


For complete details, download the 2013 Medicare & You Guide


Until next time,

Andrew Herman
AH Insurance Services, Inc.

 

Medicare Annual Election Period (AEP) for 2013

Medicare Annual Election Period (AEP) for 2013

 

It's that time of year again for the Annual Election Period (AEP) for Medicare Health and Drug plans.  The AEP runs from 10/15 - 12/7 and is the period when you can change your Medicare Health/Drug plan or return to the original Medicare program.  Any changes made become effective on January 1st, 2013.

 

There's no doubt your mail box is filling up with advertisements from every insurance company with a Medicare Health and Drug Plan.  But please remember that along with those advertisements will also come the Annual Notice of Change and Evidence of Coverage documents from your current Medicare Insurance Plan.  As you know change is inevitable; and this year is no exception.

 

It is important that you review your 2013 plan documentation to see what has changed and how  the changes affect you.  As in past years, we will be contacting all of our Medicare clients between October 1st and October 15th to discuss changes in your plan and help you determine if the same plan, or a different plan will best meet your needs. According to CMS rules, agents can discuss plan benefits beginning on October 1st; and enrollment applications/changes can be processed beginning on October 15th.  So if you have received your Annual Notice of Change and Evidence of Coverage documents, and you have a question or concern about your coverage, feel free to give us a call first!  We don't want you to worry one minute about your Medicare Plan.  The earlier we know your needs have changed or any changes your plan has made that adversely affect you, the more time we have to research alternatives for your Health and Drug Plan needs.

 

Medicare Health and Drug Plans are governed by enrollment guidelines established by the Centers for Medicare and Medicaid Services (CMS).  Please refer to the following chart, courtesy of Universal Health Care Insurance Company:

 

HSAs: Costs Are on the Rise

What is an HSA? What is it used for? Who is qualified to have one?

An HSA is a Health Savings Account; it is a supplement to a high-deductible healthcare plan (HDHP). As a lot of companies, especially with the current economic conditions, are cutting back on health insurance, more and more people are finding themselves having healthcare plans with high deductibles. The HSA does not get rid of the high deductible; but it does serve as a non-taxable security fund in case of medical emergency. As the 401k is established to help squirrel away money for retirement, untouched for other purposes, the HSA is used to set money aside only for medical use. These non-taxable caches are meant to lighten the burden in case the deductible has to be filled in one fell swoop; or simply to pay for routine medical care on a tax-favored basis. The best part, though: whatever money is left over in the HSA at the end of a year will be rolled over into the next year.

So What Is New with HSAs?

The tax-deductible contribution limits have increased slightly: the contribution limit for individual plans has increased from $3,050 in 2011 to $3,100 in 2012; and for family plans from $6,150 in 2011 to $6,250 in 2012. Furthermore, the 10% penalty for using HSA funds for non-approved expenses is being raised to 20%. Finally, under the Patient Protection and Affordable Care Act (PPACA), HSA approved expenses on drugs include only doctor-prescribed medications, with the sole exception of insulin. Before PPACA, there was no requirement for OTC medications to be prescribed by a doctor in order to count as an approved expense.

How About Partial Year Eligibility for People Newly Insured by an HDHP?

A 2006 change in the HSA law allows individuals whose HDHP coverage begins part of the way into the year to make the full annual contribution amount for their first year of HSA eligibility. This change in the law was intended to help people fully fund their HSA accounts, especially since many insurance plans apply the full year deductible amount even though coverage might be in effect less than 12 full months. To take advantage of this rule, the individual’s HDHP coverage must take effect any time after January 1 but no later than December 1. Normally, less than full-year HDHP coverage would require the individual to pro-rate their HSA contribution for the year based on the number of months they had HDHP coverage. However, to avoid having to pay back any of the “extra” contribution amount, the individual must remain covered by an HDHP through December 31 of the following calendar year. If the individual does not remain covered by HDHP during this “testing period,” the extra amount must be included in the individual’s income and will be subject to additional taxation. If you are unsure or know that you’re not going to keep your HDHP coverage through December 31of the following year, you may be better off prorating your contributions for your first year of HSA eligibility.

Are HSA Contributions Tied to the HDHP Deductible?

HSA contributions are not limited by the amount of the HDHP deductible. This means that even if you are covered by an HDHP with the minimum deductible (i.e., $1,200 for individual coverage or $2,400 for family coverage), you may still contribute up to the full amount to your HSA. On the other hand, if you purchase an HDHP with a deductible higher than the annual HSA contribution limit, your 2012 HSA contribution will still be limited to $3,100 for individuals with self-only coverage or $6,250 for individuals with family coverage.

Contribution Deadlines

HSA contributions for a given year must be made on or before the due date (without extensions) for filing tax returns for that year. That means for most years contributions must be made on or before April 15 of the following calendar year.

What Else Should I Know About HSAs?

In addition to the tax favored treatment of qualified medical expenses, HSA account funds can be drawn down without penalty or taxes to pay for the following types of premium:

1)      Qualified Long Term Care Insurance;

2)      Health Insurance while receiving federal or state unemployment compensation;

3)      Continuation of Coverage plans, such as COBRA, required by federal law; and

4)      Medicare premiums.

Qualified medical expenses are defined to include unreimbursed medical expenses of the accountholder, his or her spouse, or dependents. Therefore, the HSA account can be used to pay for medical expenses incurred by family members even if they aren’t covered by the HDHP.

Until next time,

Andrew Herman

Medicare Advantage Disenrollment Period (MADP) ends on February 14th

Attention! The Medicare Advantage Disenrollment Period (MADP) is ending on February 14, 2012! There is still time to review your plan and make sure it is what you want.

The MADP runs from January 1^st through February 14^th, and it replaces the old Open Enrollment Period (OEP) that used to run the first three months of each calendar year.  During the OEP, Medicare beneficiaries previously were allowed to switch from one Medicare Advantage plan into another; however the new MADP is much more limited.  Now, during MADP Medicare beneficiaries can only switch FROM Medicare Advantage to traditional Medicare. There is no Medicare Advantage hopping, nor can traditional Medicare beneficiaries still sign up for a Medicare Advantage plan.

However, people who drop their Medicare Advantage (MA) plan to switch to traditional Medicare will be made eligible for a special enrollment period for a Medicare Prescription Drug (Part D) plan (PDP). This special enrollment period is available regardless of whether or not the MA plan included prescription drug coverage. This is different from the prior rules under OEP, which did not allow someone to pick up new Part D coverage if that person didn't have any form of Part D coverage (either as part of a MA plan or a standalone PDP) at the beginning of the calendar year.

Also new in 2012 is the Medicare Advantage special enrollment period based on Plan Rating.  Any Medicare beneficiary eligible for an MA plan is allowed to enroll in a 5-star MA plan at any point during the calendar year, if a 5-star plan happens to be available in the beneficiary’s service area.  An individual may use this special enrollment period only one time per year.

Until next time,
 

Andrew Herman