Archives for September 2013

Is Medicare Advantage Right for You?

Medicare Advantage Open Enrollment is right around the corner. It might be time to consider a switch.

Medicare Advantage
Medicare Advantage Plans are quite different from traditional Medicare plans in a number of ways. Medicare Advantage Plans are operated by private insurance companies and not by Medicare itself. Under the terms of the Medicare Advantage Plans, these plans must include all of the benefits available under Part A and Part B of traditional Medicare. Medicare Advantage Plans usually offer more benefits than traditional Medicare. For instance, those enrolled in a Medicare Advantage Plan will not need to purchase a separate Medigap plan to cover the deductibles and co-pays that traditional Medicare does not cover. Also, those in a Medicare Advantage Plan will usually not find it necessary to purchase Medicare Part D prescription drug coverage as most Advantage policies have prescription drug coverage.Coverage under Medicare Advantage comes in a variety of plans. Seniors may choose an HMO plan, a PPO plan, a fee for service plan or a health savings account.Almost anyone can enroll in a Medicare Advantage Plan during the open enrollment period. Only those with end stage renal disease are prohibited from enrollment.So, now the question is, are these plans right for you? What are the advantages and the disadvantages?The major benefit of a Medicare Advantage Plan is that there are more benefits available for seniors without a great deal of additional cost. These plans also avoid the hassle of having to purchase separate gap coverage and coverage for prescription drugs under Medicare Part D.However, there are some disadvantages to keep in mind. If you choose a HMO or PPO plan, you will be limited in the doctors that you can choose to provide your care. You will only be able to see in-network providers unless you are willing to pay a substantial amount of out of pocket expenses. Some of these plans also require a referral from a primary care provider to visit a specialist. This is not the case with traditional Medicare. In traditional Medicare, you may see a specialist when you choose. You are not limited to seeing doctors within a network.

4 Things That Won’t Show Up On Your Credit Report

By

Credit report

“John, you spend a lot of time writing about items that appear on our credit reports and how they influence our credit scores. Would you mind writing about the items that do not appear on credit reports and why they don’t appear?”

Ask and ye shall receive.

This is actually a very good idea for a credit report article and the Minter is correct, I do spend a lot of time focusing on items that appear on credit reports and almost none on items that do not.

This will be fun.

Prepaid Debit Cards, Checking Accounts, and Traditional Debit Cards

None of these aforementioned items appear on your credit reports. Debit cards and checking accounts are really the same thing, as a debit card is like a plastic version of a paper check.

And, a prepaid debit card is really not much more than a reloadable gift card with fees.

None of the three items are a true extension of credit, as you’re only able to spend money that is already either: A) loaded on the card, or B) deposited in an account with a bank or credit union.

There is considerable confusion over the prepaid debit card and credit reporting issue because some of the companies and individuals who are paid to endorse these cards suggest they will help your credit reports and scores, which isn’t at all true.

In fact, the credit bureaus now have language in their reporting standards guide that addresses the issue of prepaid debit cards and credit reporting.

It reads, “Do not report prepaid credit cards/gift cards because the consumer has no credit obligation.”

There is, however, one scenario when you checking account could bleed into your credit report: If you have overdraft protection in the form of an unused installment loan that loan can be reported to the credit bureaus.

I personally have one of these on my credit reports and have had it for many years.

Evidence That You Are Now Married

When you get married nobody in the credit industry knows about it.

The credit reporting agencies don’t know about it, your credit scores don’t know about it, and lenders don’t know about it.

There is nothing on a credit report that appears or changes just because you’ve gotten married.

Now, if you choose to apply jointly with your new spouse or you otherwise co-mingle your existing debt obligations and liabilities, then eventually your credit reports will look similar to your spouse’s credit reports because the data will be so similar.

Want some free advice?

Maintain credit independence even after you’re married.

There’s no reason to co-mingle your debts and there’s no reason to jointly apply for credit, except in the instance where you’ll need two incomes to qualify for a loan.

Wealth Metrics

There’s nothing on a credit reports that indicates your salary, your net worth, your debt-to-income ratio, or the amount of money in your wallet, 401K, IRA, SEP, Money Market, brokerage account, or any other savings account.

There is no way to presume someone’s income by looking at his or her credit reports.

This shouldn’t be a surprise because credit reports are supposed to tell a story about your creditworthiness, not your income.

Income and other wealth metrics are measurements of capacity, or your ability to pay a bill. Credit reports and credit scores are supposed to tell a story about whether or you’ll choose to pay your bills.  

Public Utilities and Medical Bills

While there are exceptions to this rule most of the time your public utilities and medical bills do not appear on your credit reports month after month like a credit card or auto loan obligation.

If you do see a public utilities or medical bills on a credit report, they are likely there because they’ve gone into default and are being “worked” by a collection agency.

When a utility or medical bill goes into default, the service provider will normally outsource the collection of that bill to a debt collector.

And, debt collectors commonly report liabilities to the credit reporting agencies.

John Ulzheimer is the Credit Expert at CreditSesame.com, and a credit blogger at SmartCredit.com, Mint.com, and the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. You can follow John on Twitter here.

Should Young Adults Stay on Their Parents’ Health Plan?

By Jen Wieczner

Under the Affordable Care Act, there are options. Here’s what families need to know.

When Rob Wyse’s 22-year-old daughter received the offer letter for her first post-college job this summer, after the congratulations the family had a decision to make: Should they keep their daughter on the family health-insurance plan or tell her to get her own?

It doesn’t cost much for Mr. Wyse, a New York communications professional, to enroll his daughter in his plan, which also insures his wife. But the daughter’s new job is in Maryland, where doctor visits would be reimbursed at lower out-of-network rates under the Wyses’ New York-based plan, meaning her out-of-pocket costs would be higher. While she is healthy, she has had two knee injuries that required surgery. Her employer’s premiums, however, might be higher than her parents’.

Many families are crunching the numbers on various such scenarios, now that the Affordable Care Act, or ACA, presents young adults in particular with more health-insurance options than they had before.

Since 2010, the ACA has required insurers to allow dependents to stay on their parents’ plan until age 26, even if they have a job with benefits. In 2014, young adults will also be able to buy insurance on the new state exchanges if they can’t get affordable coverage (costing 9.5% of income or less) through an employer. (This assumes, of course, that the young adult complies with the ACA; another option is to skip insurance and pay the penalty.)

“Three years ago, [health-insurance options] wouldn’t have been a discussion in our house,” Mr. Wyse says.

Generally, for a two-parent family with at least one child under 26, keeping the young adult on the family plan is the best option in terms of both price and quality—sometimes even if the child can get coverage through a job, insurance experts say. That’s because many employers charge workers a family rate for insurance, and employer plans typically offer better coverage than individual plans.

There’s another benefit: Since employer health-plan premiums are withheld from salaries, parents also may get a tax benefit for paying more to insure additional children, especially if the contribution pushes their taxable earnings below the Social Security tax cap of $113,700 a year, or reduces their Alternative Minimum Tax liability.

But while many families will find it worthwhile to keep kids on the parents’ health plan, that won’t always be the case. Here are some of the issues they need to consider as they make their decision:

Plan Status: Is the parents’ plan exempt from ACA rules?

There’s an exception that would prevent working young adults who have their own health benefits from taking family coverage this year: Their parents are enrolled in a “grandfathered” health plan, meaning it is exempt from some ACA rules until 2014.

Grandfathered plans are those that existed on or before March 23, 2010, and have basically stayed the same since. More than one-third of those who get health insurance through a job are enrolled in one, according to the Kaiser Family Foundation.

But by next year, grandfathered plans will also have to cover adult dependents even if they can get insurance through an employer.

Geography: Does the young adult live in a different state?

Young adults can stay on their parents’ plan after they leave the nest, even if they are married—and they need not be claimed as a dependent on their parents’ tax forms. But if the child lives far away, local doctors may be out of the family plan’s network, meaning out-of-pocket costs could be high.

If young adults are healthy and the cost of their parents’ plan is significantly lower than what they could get on their own, they might schedule routine doctor visits for when they come home and use the family insurance only for emergencies in their own state.

Age: How old are the parents and young adult child?

Some carriers allow young adults to stay on their plan until age 30; others drop them on their 26th birthday, and still others allow them to stay through the end of that calendar year or until they turn 27. It may be simpler for kids close to the cutoff age to get their own insurance to avoid having to start the whole process over again in a few months or aging out of their parents’ plan before they can get their own coverage, experts say.

Families should also consider whether the adult child is married or planning to start a family soon. The parents’ plan won’t cover in-laws or grandchildren.

And Medicare won’t cover kids of any age, which is something to keep in mind if the parents are approaching age 65 and planning to retire.

Cost: What does the employer pay toward dependent coverage?

While the ACA forces employers to offer health insurance to dependent children until age 26, it doesn’t require them to pay for any part of that coverage. Firms do have to cover enough of their employees’ insurance to make it affordable under the law, but they can cut back on what they pay for the kids. And in fact, 71% of employers raised dependents’ premium contributions in recent years—with increases outpacing those of employees’, according to consulting firm Towers Watson TW +2.44% & Co.

In general, if a family is already insuring one child, it won’t cost much more, if anything, to add another young adult, as most employers still charge the same family rate for any number of kids, or raise the premium incrementally beyond three. It would be more expensive for a single parent to add a young adult to the health plan than it would be for a two-parent family already insuring a spouse, says Bryce Williams, head of Towers Watson’s exchange solutions, which will sell federally subsidized health insurance in 2014 in addition to other plans.

But if employers charge extra for each dependent, as 15% say they will do next year, that could tip the scale in favor of an exchange plan.

Earnings: How much does the young adult earn and are they claimed as a dependent?

Some young adults might get a better deal buying health insurance through the exchanges that open Oct. 1, especially if they qualify for a government subsidy.

But only those who can’t buy affordable health insurance through a job are eligible for subsidies. And while 20-somethings generally pay less for health coverage because of their age, they also will get smaller tax credits than older workers: A 25-year-old would have to make $33,000 or less to get a subsidy, while a 50-year-old earning $45,000 could receive $1,115 back, according to the Kaiser Family Foundation’s eligibility calculator.

Since subsidies are determined by household income, the cost of an exchange plan depends not only on the young adult’s salary, but also on whether the parents claim that child as a dependent. Families might consider scratching 20-somethings with modest earnings off their tax forms and sending them to collect their subsidy on the exchange, says Carrie McLean, senior director of customer care for eHealth Inc., EHTH +7.58% the online insurance broker.

On the other hand, if parents also are buying on the exchange, including a nonworking or low-earning young adult could qualify the whole family for subsidies because household income is then stretched across more people. A 55-year-old couple earning a combined $78,000 wouldn’t be eligible for subsidies, but if they included their jobless 25-year-old, they could receive more than $9,000 in tax credits.

Privacy: How much does the child want parents to know?

For all of our medical privacy protections, there is a loophole: While doctors themselves keep visits confidential, they send bills explaining the services provided—and it isn’t always the patient who opens them. When young adults stay on the family health plan, often it’s their parents who end up reading the medical bills.

“They don’t necessarily want their parents to know when they’re seeing a doctor and what for,” says Ms. McLean.

Ms. Wieczner is a reporter for MarketWatch in New York. Email: jwieczner@marketwatch.com.

A version of this article appeared September 19, 2013, on page R3 in the U.S. edition of The Wall Street Journal, with the headline: Should Young Adults Stay on Their Parents’ Health-Insurance Plan?.