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Choosing an Annuity

Choosing an annuity is made out to be the most difficult decision in the world but it really doesn’t have to be.  There is a logical progression to be made when making a choice.   In this post I will go over the steps that need to be taken to make the right choice.

Before getting into the steps,

I would like to point out a few key points that will help you along the way.  The first is that there is not a “best” annuity for every thing or a company that has the “best” annuity for all situations.   Insurance companies jockey back and forth to offer the best product for a certain situation. They do not try to have the best product for every situation.  Also, they do not  keep their product competitive for long.  Usually an insurance company will offer a very competitive or the most competitive product for only 6 to 18 months and then they will lower rates.

The other important point is not to simply go by a company name.

Insurance companies lean on their reputation heavily to get a prospects business.  They will use the name as a way to offer a less than competative product to the public and it works.  People will blindly buy an insurance companies product simply because of the company offering it.  This is a sure fire way to make sure you are not getting the best in class product.

The first and most important step when picking an annuity is to determine what you want it for.

This sounds simple and silly but it is the most important part of the entire process and the most common mistake people make.  I cant count the number of times I have talked to someone who is about to purchase an annuity because of some incredible feature it has.  The problem is that the feature usually will do little or nothing to help them with what they need the annuity for.  You need to figure out what you are trying to accomplish.  There are a limited number of things people want to accomplish with money and a limited number of areas where an annuity will work.  Here are the most common ones.  It is critical to determine which you fit into.

• Draw a future income stream at some future date
• Immediate income draw
• Grow a lump sum of money to leave to heirs
• You want to grow a lump sum of money to use for a known future expense or purpose

Once you determine what you are trying to accomplish, it becomes much easier to find the best product to accomplish the goal.

For example, if you want future income, the best way currently is to use an annuity with an income rider or if you need immediate income your best bet is to use an annuity for that purpose called a SPIA.  If you want to leave the most money to heirs possible, you would use an annuity with a high death benefit roll up feature and so on…..

By determining your need, you can identify the right type of annuity to use to get the job done.  Once you determine the type of product needed, you then need to find out which company has the best “highest paying or earning” product of that type.  For example, if you need an immediate income, you would use a SPIA.  The highest paying SPIA’s are currently offered by Symetra, Great American, Guggenheim and NY Life.   This will change over time but they are at the top currently because they will pay out the most money immediately.  If you need income 5 years from now, you would use an idexed annuity with an income rider and the highest paying company would be Security Benefit SIA Annuity.  Again, how long will they be able to say they pay the most?  No one knows for sure but right now they pay the most.

I had a person call my office and he was told Met Life would work the best to generate income of $320,000 7 years from now.  (he was 58 years old)

The representative he spoke with said Met was the best.  At the the time, Forethought was paying out the most income of any carrier for a person that age.  I ran the guaranteed income payout for Forethought in 7 years vs. the Met life payout and the forethought income beat the Met Life Income by $5,000 a year for the rest of his life and his spouses life.  There is a 70% chance either he or his wife will live to at least age 90 based on current life expectancy.  At a difference of $5,000 a year, this would add up to a $125,000 mistake had they gone with the lower paying product.  (25 years multiplied by $5,000)

It can be a chore  choosing an Annuity and finding the highest paying company for a specific product type.

To accomplish this, make sure you work with an independent agency that holds all contracts.  I spend a great deal of time maintaining active appointments with every company offering any type of competitive product for this exact reason.  This way I am able to ensure I am showing people the best option for their specific situation.    Feel free to call or email me if you have questions or need advice.

This post is for a review of the United Healthcare Medicare Complete and the AARP Medicare Complete plans for 2013.  If you want 2012 information CLICK HERE

United Healthcare will be making some minor changes for the better to the 2013 Medicare Complete plan line which includes United Healthcare Medicare Complete and AARP Medicare Complete products.  All products listed are Medicare Advantage plans.  Look at seperate postings for information on AARP Medicare Supplement plans.

The United Healthcare Medicare Complete product is very similar to the AARP branded version but most versions do not have out of network coverage as they are usually HMO plans.  The in network benefits tend to be a little better than the AARP branded in network benefits as a result.  for 2013 the United Healthcare branded products will look similar to the 2012 version with a few improvements such as a lower annual out of pocket max, a outpatient surgery benefit that offer more than 80% coverage and  a lower primary doctor copay.  The improvement to the outpatient surgery benefit is the most needed change overall and this will reduce costs for many members.

The AARP Branded Medicare Complete plan took on a $20 monthly premium in 2012 and it looks like that will stay for 2013 as well.  The outpatient surgery benefit and out of pocket max on this plan will also be improved over last years version.   The AARP branded plan is on a PPO platform in most states and offers out of network coverage as a result.  Last years version only provided for 70% coverage out of network.  It is not yet known if this will be improved for 2013 or not.

The drug coverage in both versions will be mainly the same for 2013 with some very small ($2 or $3) increases in the name brand tiers of the drug coverage.  While the United and AARP Medicare Complete plans did not compare well to competitors in 2012, it should be in a much more competitive position for 2013.

WANT TO LEARN MORE? REGISTER FOR OUR “HOW TO CHOOSE A MEDICARE PLAN” WEBINAR – CLICK TO REGISTER

We always get a lot of questions on Medicare Part D.  Here are some commons questions that we hear and additonal information on part D.  If you have other questions, please email Ed Crowe at [email protected]

1.  Popular Summer Medicare Part D Coverage Questions

2.  More on your Medicare Part D Coverage and the 2012 Donut Hole

3.  Average Retail Drug Prices

1.  Popular Summer Medicare Part D Coverage Questions

 Question:  As we travel around this summer, will we still have Medicare Part D prescription coverage outside of our home state?

Yes.  You can use your Medicare Part D prescription drug plan at any of your plan’s network pharmacies, and most Part D plans include more than 50,000 pharmacies in their network.  If you are in a remote area of the country and are having trouble finding a network pharmacy, you can always telephone your Medicare Part D plan’s Member Services department and ask them to help you find the nearest pharmacy (the toll-free number is on the back of your Member ID card). 

Question:  If I purchase prescription drugs while outside of the United States, and bring them back with me, will my Medicare Part D plan reimburse me for these drugs if they are on my Part D plan’s formulary?

 Probably Not.  Although you can always ask your plan for more information, the Medicare Part D program does not anticipate coverage for medications purchased outside of the United States. 

Question:  We just moved from North Carolina to Florida and our Medicare Part D plan was cancelled because of our relocation.  Can we enroll back into our same plan now (in July) or do we have to wait until November/December?

 You can enroll now into a new Medicare plan.  Most people are not allowed to change Medicare Part D prescription drug plans outside of the annual Open Enrollment Period (or Annual Election Period) that runs from October 15 through December 7 of each year.  However, a Special Enrollment Period is available for people who move to a new Medicare plan service area during the plan year and allows people to join a new Medicare prescription drug plan or Medicare Advantage outside of the annual Open Enrollment Period.   

 Question:  I will turn 65 in September and will be eligible for Medicare.  When is the best time to join a Medicare prescription plan?

 It depends on when you need your Medicare prescription plan coverage to begin.  Initially, you have a seven (7) month window of time to join a Medicare Part D or Medicare Advantage plan.  So if you enroll in a Medicare Part D plan within the three (3) months before the month that you become eligible for Medicare (for example, the 3 months before you turn 65), your Medicare plan coverage will start on the first day of your birthday month (or Medicare eligibility month).  If you join a Medicare plan during your birthday (or eligibility) month, your prescription drug coverage will start on the first day of the next month.  Finally, if you join a Medicare plan during the three (3) months after your birthday (or eligibility) month, your drug coverage will start the first day of the month following the month when you enroll.

 Did you have a question that needs answered?  No problem, you can email Ed Crowe at [email protected] for answers.

2.  More on your Medicare Part D Coverage and the 2012 Donut Hole

 Question:  How do I find out how much more money I need to spend before I exit this year’s Donut Hole?

 The easiest way may be to check your monthly Explanation of Benefits letter.  Your Medicare Part D plan regularly sends you an Explanation of Benefits (EOB) statement detailing your Medicare plan coverage.  You will notice that the letter is separated into sections and in Section 2, you will find information on your current stage of coverage.  You will also see a box in Section 2 of your EOB letter that is entitled, “What happens next?”  In this box, your Medicare plan shows the details of how much more you will need to spend before moving into the next stage of your plan’s coverage. 

 So if you are in the Initial Coverage stage, the “What happens next” area will tell you exactly how far away you are from your Coverage Gap (or Donut Hole).  If you are in the Donut Hole, you will see how much more money you will need to spend before entering the Catastrophic Coverage portion of your Medicare Part D plan.   

Question:  I have already reached my Medicare drug plan’s initial coverage limit of $2,930 and entered the 2012 Donut Hole, so do I now pay the difference between the $4,700 out-of-pocket limit and my plan’s $2,930 initial coverage limit before exiting the Donut Hole?

 Not exactly.  You will stay in the 2012 Donut Hole until your total out-of-pocket costs exceeds the $4,700 threshold – less any name-brand drug discounts you receive while in the Donut Hole.  As a note, there are two different numbers that are used to define your Medicare drug plan’s Donut Hole or Coverage Gap: (1) The total negotiated retail value of your medications:  When the total value of the retail cost of your drug purchases exceeds $2,930, you go into the 2012 Donut Hole. (2) Total Out-of-Pocket Spending:  After your actual spending for covered medications has reached $4,700, you exit the Donut Hole.  (Remember, the brand-name discount counts toward meeting this total out-of-pocket spending amount).

 For example, if you are in your Medicare Part D plan’s Initial Coverage Phase, purchase a medication with a $100 retail cost, and only pay a $30 co-payment out of your own pocket (the plan pays the other $70), you get $30 credit toward the $4,700 Donut Hole exit point and $100 toward your $2,930 Initial Coverage Limit.

Now when you are in the Donut Hole and you buy the same $100 medication, and your plan does not have any Donut Hole coverage, you are responsible for the full $100 drug cost.  However, this year, you will get a 50% discount on all brand-name drugs bought in the Donut Hole, or a 14% discount on generic drugs purchased in the Donut Hole.

 If your $100 medication was a name-brand, then you will pay only $50 – but, you will get the full credit for the $100 purchase toward meeting your $4,700 out-of-pocket threshold or Donut Hole exit point.

 On the other hand, if the $100 medication was a generic drug, you would pay $86 dollars and get credit only for the actual $86 you spent toward meeting the $4,700 Donut Hole exit point or out-of-pocket threshold.

Question:  Will the Medicare Part D plan’s Coverage Gap or Donut Hole really ever go away?

 Yes, but only to the extent that you will still pay 25% in the Donut Hole.  As many people know, the Medicare Part D Donut Hole is scheduled to “close” in 2020.  But medications will not be free when the Donut Hole is finally “closed”.  In 2020, the co-insurance or cost-sharing for both generic and brand-name drugs purchased in the Donut Hole will be no more 25% of the plan’s negotiated retail price.  So, if your 2020 Medicare Part D plan follows the CMS standard Medicare Part D parameters with 25% co-insurance paid during the Initial Coverage Phase, you will pay no more in the Donut Hole than you would pay during normal coverage and the Donut Hole will be effectively eliminated.

 On the other hand, if your 2020 Medicare Part D plan has a $0 (or low) co-payment for your medications during the Initial Coverage phase, and then you find that you are paying 25% of your medication retail prices in the Donut Hole, it may not seem as though the Donut Hole is “closed,” although it technically is.  

3.  Average Retail Drug Prices

 Question:  What does the “negotiated” retail drug price mean and why is it important?

 The negotiated retail drug price is the amount that you would pay for your medication at a particular pharmacy when you have a Medicare Part D prescription drug plan.  The negotiated retail price for a certain medication may be different from the pharmacy’s regular price, and it can be different from pharmacy to pharmacy and from Medicare Part D plan to plan.

For example, if you purchase a formulary medication like Lipitor®, you may see on your receipt a negotiated retail price slightly more or slightly less than someone who is enrolled in another Medicare plan.  And, if you were to go to a different pharmacy using your same Medicare plan, the negotiated retail price could also be slightly different.

 The negotiated retail price is important to you because your total annual negotiated retail drug costs are used to determine the point when you enter into your plan’s Donut Hole phase.  So based on the differences in negotiated retail price between plans, you may meet someone using the same medications, but entering the Donut Hole a short-time before or after you.  Also, if you are in the Donut Hole, you will receive a discount on the negotiated retail price of your formulary medications.  So, based on the negotiated retail prices, people in different Medicare plans will pay different discounted prices in the Donut Hole.

Crowe & Associates can offer clients the lowest cost life insurance utilizing quote software which compares all insurance company quotes.   We will provide the print out to clients so they can see which company is currently making the best offer.

We can help you determine the type of life insurance you need (Term vs. Permanent)  – We will help you decide which is best for your situation. Currently-our clients are choosing term insurance about 70% of the time.  We can also help you find the lowest cost plan.  For term insurance, this is currently protective life and American National depending on age and amount of insurance.   The lowest cost carrier changes every 4 of 5 months so we run new quotes for every client.

For permanent insurance the company offering the best price changes depending on your age but the most competitive are Aviva, Genworth, Lincoln Financial and NorthAmerican.

Call or email us if you would like to get a quote.  We will provide quotes over the phone or by email.

Crowe & Associates is located at 155 Main Street, Suite 205 in Danbury, CT.  (Please note that our new address will be 304 Federal Road, Suit 107, Brookfield, CT 06804 -as of August 31, 2012)  The agency is filed with the BBB and currently has an A rating.   (All contact information listed below)

The agency is completely independent and as a result, maintains contracts with 100’s of insurance companies to offer the most competitive products at any given time.   We have representatives throughout Connecticut , NY and Mass.  We work with the following insurance programs and work with clients by phone, email, in person at our office or we will even make house calls.

• Medicare Advantage, Supplement and Part D plans– We use all carriers including AARP/United, Empire, Anthem Aetna, Connecticare, Humana and many more.  We help clients determine the best type of plan and company for them.
• Life Insurance- We work with all types of life insurance including term, permanent, Whole life, UL and burial insurance.  We work with all life companies and can guarantee the lowest rate available.  We use a quoting data base which is updated daily to ensure we show the client the lowest cost companies.
• Health insurance-We work with all individual health insurance companies including, Golden rule, Humana, Celtic, Aetna, Anthem, Assurant and Connecticare.
• Group Health Insurance-We work with all group health carriers doing business in CT,MA and NY.  We also have a strategy for small groups which allows us to lower a standard small group rate by up to 25% without reducing benefits.
• Long Term Care- We work with Genworth, TransAmerica, Mutual of Omaha, Med America and most other major carriers.  State partnership programs in NY and CT are very strong and we can explain to clients why it is vital to take advantage of the offer.
• Disability Insurance-We can provide group and individual Disability policies utilizing a number of companies.
• Retirement planning-We specialize in risk free investments and income producing investments which include annuities and CD’s.  Market linked CD’s and Income annuities are of great interest .  We work with clients to find the company that will provide the highest payouts.
• Dental and Vision-We offer individual dental and vision plans from a number of companies.  Our most popular plan is the Careington dental and vision discount plan  which is low cost and uses an Aetna dental network.

Crowe & Associates is located at 155 Main Street, Suite 205 in Danbury, CT.  (Please note that our new address will be 304 Federal Road, Suit 107, Brookfield, CT 06804 -as of August 31, 2012)  The agency is filed with the BBB and currently has an A rating.   (All contact information listed below)

The agency is completely independent and as a result, maintains contracts with 100’s of insurance companies to offer the most competitive products at any given time.   We have representatives throughout Connecticut , NY and Mass.  We work with the following insurance programs and work with clients by phone, email, in person at our office or we will even make house calls.

• Medicare Advantage, Supplement and Part D plans– We use all carriers including AARP/United, Empire, Anthem Aetna, Connecticare, Humana and many more.  We help clients determine the best type of plan and company for them.
• Life Insurance- We work with all types of life insurance including term, permanent, Whole life, UL and burial insurance.  We work with all life companies and can guarantee the lowest rate available.  We use a quoting data base which is updated daily to ensure we show the client the lowest cost companies.
• Health insurance-We work with all individual health insurance companies including, Golden rule, Humana, Celtic, Aetna, Anthem, Assurant and Connecticare.
• Group Health Insurance-We work with all group health carriers doing business in CT,MA and NY.  We also have a strategy for small groups which allows us to lower a standard small group rate by up to 25% without reducing benefits.
• Long Term Care- We work with Genworth, TransAmerica, Mutual of Omaha, Med America and most other major carriers.  State partnership programs in NY and CT are very strong and we can explain to clients why it is vital to take advantage of the offer.
• Disability Insurance-We can provide group and individual Disability policies utilizing a number of companies.
• Retirement planning-We specialize in risk free investments and income producing investments which include annuities and CD’s.  Market linked CD’s and Income annuities are of great interest .  We work with clients to find the company that will provide the highest payouts.
• Dental and Vision-We offer individual dental and vision plans from a number of companies.  Our most popular plan is the Careington dental and vision discount plan  which is low cost and uses an Aetna dental network.

Most people will automatically  be signed up for Part B of Medicare.  If you are getting Social Security payments, you will be signed up prior to you 65th birthday.  When you get the Medicare Card, it will show that Part A and B are in place.  There are instructions on the card if you decide you do not want part B.

If you’re 65 or older and you aren’t getting Social Security or RRB benefits yet (for instance, because you’re still working), you won’t get Part A and Part B automatically. People of any age diagnosed with ESRD and who meet certain requirements are also eligible for Medicare Part A and Part B, but must sign up for them.

You need to sign up by contacting Social Security at 1-800-772-1213. TTY users should call 1-800-325-0778. If you worked for a railroad, call your local RRB office or 1-877-772-5772 to learn more about signing up.

CMS cheat sheet part B sign up

I get a lot of questions about the various Medicare penalties and how much they cost.  I will summarize them here and then provide a link to a site which provides the specific detail.  Here is the overview.

Everyone who qualifies for Medicare does not need to pay for Part A of Medicare.  Some people do not qualify for part A and they need to pay a premium if they want the coverage.  For them, part A costs $451 a month but for most people it costs $0

Medicare Part B costs $99.90 a month for most people.  It can cost less for some people and more for higher income earners.  For example, an individual making over $85,000 a year will pay $139.90. The scale tops out at $319.70 a month for those that make over $214,000 a year.

If you sign up late for part B, you will pay a 10% penalty for every 12 months you didnt have part B, for life.   If you are over age 65, actively working and getting health coverage, you do not need to sign up for part B.  If you are not actively working and getting retirment coverage over the age of 65, you should sign up for part B because the penalty will count for you.

There are two Part D penalties.  The first is for those that sign up late for part D drug coverage.  The penalty is 1% of the average premium for every month you do not have a part D plan.  The average premium is about $31.00 a month which puts the penatly at about 30 cents for every month you do not have a plan.  The penatly never goes away.

There is also a Medicare Part D income penalty.   The penalty starts at about $11.00 a month for those that make over $85,000 a year.  It is added on to the insurance plans premium every month.   Here is a grid of the penalty levels

CMS has a very good page which summarizes this information.  You can see it by clicking here.

Small groups in Connecticut have access to a method which can lower their overall insurance premiums by up to 25% and can also provide them with a reimbursement of premium at the end of the year.  They can achieve these savings without reducing benefits.

The method is called small group alternate funding.  Most brokers and employers do not even realize such a mechanism is available to groups under 50 eligible employees in CT but it is.  To read more about this topic, click on our previous blog entry which gets into much greater detail.   CLICK HERE FOR BLOG ARTICLE

Anthem BlueCross BlueShield offers two plans in Connecticut for 2012.  They offer a PPO and an HMO plan.  The HMO “Mediblue HMO” has been around for 3 years.  The PPO is new for 2012 and has the best benefits on paper of any Medicare Advantage plan in Connecticut.

The PPO offers substantially better benefits than the HMO to such an extent it does not make much sense for a consumer to consider the plan.  The PPO utilizes the nation anthem BCBS nationwide network.  It has out of network benefits which are almost par withe in network benefits.  They have $0 copay for a primary doctor and $0 copay for some generic drugs as well.  Two of the better benefits are the Hospital benefit which is $250 a day for 6 days in or out of network.  Meaning that you can go to a non participating hospital and pay the same as if it was an in network hospital.  The outpatient surgery benefit is a max copay of $250 which is the best available.  Lastly, the out of pocket max on this plan is $3,400 in and out of network combined which is far better than any other advantage plan in CT.

We have nearly 900 clients in this plan throughout Connecticut so we have a very good pulse on how it is working.  There are some problem areas that have come up that consumers need to be aware of.

-There are a number of doctors that are listed as in network but will not see patients on the Anthem PPO.  They either charge them full price or will not see them at all.  This has occurred a number of times in 2012

-The customer service for the PPO leaves a lot to be desired.  Many times the representative does not even understand the plan and gives out incorrect information.

-There are a number of common drugs which are not in the formulary and there are a number of generic drugs in the 2nd and 3rd tier.

While this plan is the best on paper and works well for many people, it is not administered well and generates a number of calls to our office from clients.   Billing departments at doctors offices should be contacted prior to enrolling in this plan to make sure they accept it.  Be very clear with the billing department that the plan is the Anthem “PPO” Medicare Advantage plan.  Make sure they understand it is not a supplement plan.

Anthem PPO summary of benefits

Anthem HMO summary of benefits