Employee Benefits, Health Care, Retirement, and Aging Notes

Employee Benefits, Health Care, Retirement, and Aging

The Most Common Employee Benefits

  • Life Insurance
    • Term Life
    • Whole Life
  • Dental Insurance
  • Optical Insurance
  • Long Term Care
  • FICA (Federal Insurance Contributions Act)
    • Medicare
    • Social Security
  • Unemployment
  • Disability (private too)
  • Parental Leave
  • Education/Professional Dues
  • FMLA
  • Health Insurance
  • Retirement Assistance
  • Aging and Housing

The Affordable Care Act (ACA)

  • Mandate: Everyone must have insurance (with some exceptions).
  • Qualifying Coverage: Private (ACA), Private (employer), Medicare, Medicaid, CHIP, Individual, COBRA, Tricare, etc., all count as insurance.
  • Dependent Coverage: Those under 26 may stay on their parent’s plan.
  • Policy Requirements:
    • No lifetime or annual limits.
    • Some preventative care covered at no charge.
    • Insurance companies must spend 80% of premiums on health care (not salaries, marketing, or bonuses).
    • 12.8 million Americans received rebates in 2013, and 8.5 million in 2015 (or their employers did).
    • Rate increases of 10% or more must be justified.

Primary Challenges Before Obamacare

  • Cost of insurance for individuals/groups.
  • Access to buy insurance, particularly for individual/families.
  • Large numbers of uninsured.
  • Policies that didn’t cover the basics or provide enough insurance.
  • Cost of medical care and prescription drugs.
  • Preexisting condition exclusion.
  • Lifetime maximum benefits.

What Stayed the Same with Obamacare

  • Most Americans get coverage from Group/Employer Plans
  • Group/Employer-based Health Insurance barely changed:
    • Children can remain on policy until 26
    • Insurance companies limited on excessive profits from premiums
  • Standardized under ACA: “Minimum Essential Coverage”
    • Lab Services
    • Emergency Services
    • Prescription Drugs
    • Mental Health and Substance Disorder Services
    • Maternity and Newborn Care
    • Pediatric Services
    • Rehabilitative Services, including ambulatory patients
    • Preventative, wellness, and disease management
    • Hospitalization

What Changed After Obamacare?

  • Individual Mandate:
    • Everyone required to buy insurance or pay a “tax” (2% of income - max 325 in 2015; Reduced to Zero in 2019).
  • Subsidies:
    • Subsidies for those earning up to 400% poverty level.
  • Preexisting Conditions:
    • No preexisting condition exclusion.
    • Waiting periods may continue.
  • Employer Subsidies:
    • Large employers must provide a plan or pay "tax" - employers also receive tax credit.
    • Smaller employers (under 25 employees) will receive a large subsidy.
  • Health Care Marketplaces:
    • Individuals and employees of small companies may buy insurance through Health Care Marketplaces.
    • Most Americans are covered under group policies through their employer.
    • Dental coverage available and/or included.
    • Those under 26 may stay on parents' policy.

Two Big Changes With Obamacare

  • Healthcare Marketplaces
    • Subsidies for low income Americans
  • Medicaid Expansion

Healthcare Marketplaces

  • Previously, individuals, families, and small companies had trouble buying health insurance. Few plans were available and the prices were based on whatever the insurance company could charge.

ACA Subsidies

  • ACA subsidizes insurance premiums for those with income between 138% and 400% of the FPL.
  • The ACA intended to cover adults under 65 by expanding Medicaid to cover all low income Americans up to 138% of FPL.
  • For example, there are 414,000 Floridians with incomes between 100-138% of FPL.
  • The federal government would pay for all of this.
  • In Florida (with exceptions), Medicaid is available to people making approximately 100% or less of FPL. IN ADDITION: FL Medicaid only available if you’re pregnant, have a child under 18, or are disabled.
  • So if you’re between 100% and 138%, you get nothing. And in Florida (and some other states), single healthy people below the poverty level get nothing.

Medicaid Gap Under ACA

  • Nonelderly Uninsured Adults in Non-Expansion States Who Would Be Eligible for Medicaid if Their States Expanded, 2019
    • Currently Eligible for Medicaid: 0.4 Million (8%)
    • Currently in the Coverage Gap: 2.2 Million (50%)
    • Currently Eligible for Marketplace Coverage: 1.8 Million (41%)

2023 Marketplace Open Enrollment Period Plan Selections by State

  • Total: All Marketplaces: 15,878,982
  • New Consumers: 3,099,387
  • Returning Consumers: 12,779,595

Current Status of ACA

  • Individual mandate fine reduced to zero.
  • Most Americans will get insurance from their employer.
  • Health Care Marketplaces are available for individuals.
  • Medicaid can be expanded, and more states are doing so under relaxed rules.
  • To come: Minimum policy standards eliminated?
  • Birth control coverage mandate.
  • New Addition: “Thin Policies” and Association Health Plans under ERISA
  • The House and Senate Reconciliation Act (“Big Beautiful Bill”) will likely make some cuts, but it does not appear those cuts will dramatically change the ACA.

American Health Insurance Today

  • Public Health Insurance
    • Medicare
      • For those over 65
      • Traditional Indemnity (or Medicare Advantage HMO)
      • Essentially untouched by ACA
    • Medicaid
      • Poverty + (children and/or disabilities)
      • Income thresholds intended to be expanded under ACA
  • Private Health Insurance
    • Group Policies
      • Most Americans have these policies from employers.
      • Mostly untouched by ACA except for Essential Health Benefits
    • Individual Policies
      • ACA Marketplaces
      • Coop group and/or Skinny Policies: Banned under ACA and recently permitted under new law. What about Pre-Existing Conditions???

Health Insurance

  • Individual and Private (ACA: Platinum, Gold, Silver, Bronze)
  • Traditional Indemnity
  • PPO
  • HMO
  • Medical Savings/High Deductible/Catastrophic
  • Public
    • Medicare
    • Medicaid
    • CHIP/High Risk Pools

Traditional Indemnity Plans

  • Your Cost = Doctor’s Charges
  • Your reimbursement =
    • U&CC x ___ %
    • After deductible
    • Subject to maximum out of pocket costs

An Example:

  • You see a doctor
  • She charges you 125
  • Your health plans says U&CC = 100
  • Your plan pays 80%
  • You get 80
  • BUT AFTER
    • 1000 deductible
    • Subject to 5000 out-of-pocket maximum

2024 Insurance Premium Chart for Health, Dental, Vision and Life

FloridaBlue Health Insurance

  • BlueCare
    • Employee Only: 125.44
    • Employee + Domestic Partner/Spouse: 334.50
    • Employee+Child(ren): 250.88
    • Employee + Family: 895.99
  • BlueOptions
    • Employee Only: 174.22
    • Employee + Domestic Partner/Spouse: 464.59
    • Employee+Child(ren): 347.29
    • Employee + Family: 532.24
  • 348.44 is approximately 40% of the 995 premium (after surcharge)

Preferred Provider Organization (PPO)

  • Similar in many respects to traditional indemnity
    • In plan: reimbursed (e.g.) at 90%
    • Outside plan: 60%
  • You can see any doctor
  • Deductibles and maximum out of pocket applies
  • ACA: primary and preventative care subject only to co-pay – deductible does not need to be satisfied. Most private employer-based plans now do the same.
  • PLUS: CO-PAYMENT

Health Maintenance Organizations (HMO)

  • Pros
    • Provides comprehensive care at no additional charge (beyond co- pay)
    • Must have sufficient network
    • Specialists and hospitals included: max out of pocket limited
    • Few forms or paperwork
  • Cons
    • Provides comprehensive care with contracted doctors and hospitals, for care deemed medically necessary and appropriate
    • Generally only provides emergency care outside network
    • Often must see primary care doctor as gate keeper

New(ish) Stuff

  • Health Savings Account (HSA) + High Deductible PPO Plan
  • Concierge Medical + High Deductible Plan/Catastrophic plan.
  • HMOs that are more like PPOs
  • Concierge Medicine (for the very affluent)
  • Also FSA – Flex Spending Account (which is NOT an HSA).

Non-ACA Issues in Healthcare in 2025

  • In network
  • Emergency services
    • Is it an emergency?
  • Hospital visits with out of network physicians/services
    • 20-42% of all visits (Washington Post 2019)
  • No Surprises Act of 2022 (but with hoops to jump through)
  • Balance billing for Emergency Services (already illegal in Florida for PPO/HMO)
  • Fraudulent/Erroneous billing

What Law Covers Which Plan?

  • Large Organization Self-Insurance
    • Looks like insurance
    • Requires a Trust, Excess Loss Insurance, and (likely) a Third-Party Administrator
    • Looks like insurance – most people never know the difference
    • Covered by ERISA (29 USC § 18)
    • No minimum standards
    • Venue in federal court: No punitive, pain & suffering
    • Requires employer to be sophisticated
  • Insurance Policy
    • Insurance covered by state law; benefit under ERISA
    • Traditional tort remedies and damages calculations
    • States have different tort reforms

Some Self-Insurance Wrinkles

  • Complaints about employer self-funded medical benefits go to the U.S. Department of Labor. Many consumers complain about slow and challenging process.
  • For insurance in most states appeals goe to an independent external reviewer through a state agency for insurance regulation.
  • No Suprises Act of 2022 does not apply to self-insured companies.

Health Insurance Portability and Accountability Act (HIPAA)

  • Much of it relates to patient privacy
  • Key point for this course
    • No gap in coverage means no waiting period
    • No gap in coverage exempts preexisting conditions

COBRA

  • Deal with change in jobs – fire, layoff, etc.
  • May buy existing insurance at unsubsidized rate
  • Previous employer may add small fee
  • Particularly useful in combination with HIPAA and ACA preexisting condition rules for a waiting period.

Retirement

Saving for Retirement

Social Security and Medicare

Social Security

  • President Roosevelt pushed for Social Security during the Great Depression. But in order to get money to people immediately, it was never set up as a pension. Instead, current tax dollars paid current recipients.
  • During the height of the Baby Boom working years, Social Security amassed a huge surplus because many more people were working than were retired.
  • As the Boomers retired, the huge surplus got tapped. But the problem is that each generation the followed the Boomers (especially Gen X) is much smaller than the Boomers. In 2037 the surplus runs out and only current FICA taxes will pay for Social Security.
  • Essentially this is an accounting and actuarial issue.

What will happen to Social Security?

  • Social Security can be fixed by:
    • Increasing FICA tax.
    • Increasing FICA tax on high earners.
    • Taxing salaries above 160k (which are not taxed now).
    • Means testing benefits.
    • Extending retirement age (which is currently 70 for full benefits).
  • What can you expect from Social Security (using 2024 numbers)?
    • If your average salary over the highest 35 years is 160,000 or higher, you would receive the maximum benefit of 58,476/year.

What is Medicare?

  • Medicare is health insurance for Americans age 65 and older who have worked (and paid FICA) for ten years or more.
  • Traditional Medicare is a traditional indemnity plan.
  • Medicare is confusing because it is multiple programs (identified by a letter) that were passed as laws at different times for different reasons.
  • There have been concerns about Medicare funding but over the past ten years Medicare has cost far, far less than projected – several TRILLION less!

The “Parts” of Medicare

  • Free for those having paid FICA for at least ten years.
  • Medicare A: Hospital Insurance
  • Income based premiums:
    • EXAMPLES: 164/month for under 97,000; 329/month for 123k-153k; 560/month for over 500,000.
  • Medicare B: Medical Insurance
  • Medicare C (Medicare Advantage): Medicare HMO
    • Alternative to Medicare Parts A & B (and D & G). Often free, low cost, and/or wacky benefits.
    • Optional for those with Medicare Parts A & B. Can also be for Medicare C, but the HMO’s often include drugs.
    • Complicated, but less so after the Inflation Reduction Act. Average premium: 31.50/month
  • Medicare D: Prescription Drug Plan
    • Optional for those with Medicare A and B.
    • Pays for many of the out of pocket costs for Medicare A & B (co-payment, co-insurance, deductible and more). Average premium: 145/month
  • Medicare G: Medicare Supplement (MediGap)

Retirement Savings

Two Employer-Based Approaches

  • Defined Benefit Plan
    • “Pension”
    • “Guaranteed” benefit
    • Mostly paid for by employer
    • Employer responsible for investments and security
    • 5-7 year vesting period (maximum – sometimes less)
  • Defined Contribution Plan
    • “401(k)” or “403(b)”
    • Mostly paid for by employee (pre-tax) (annual limits); employer may contribute
    • Nothing guaranteed: Employee responsible for investments
    • Employee contribution may vest over three years
  • Individual Options
    • IRA and Roth IRA (6,000/year under 50 - 122k income max single person) (SEP for self-employed)
    • IRA fully deductible unless you or spouse covered under work plan

The Three Most Important Things

  • Start early – Interest is an amazing thing
  • Don’t ever leave money on the table (20% of Americans do!)
  • Know what to do if you change jobs

Start Early

  • Susan invests 5,000 annually between the ages of 25 and 35
    • In total, she invests 50,000
  • Bill invests 5,000 annually between the ages of 35 and 65
    • In total, he invests 150,000
  • Chris invests 5,000 annually between the ages of 25 and 65
    • In total, he invests 200,000

Really, Start Early!

  • If you make 160,000/year at the end of your career and want to live a similar lifestyle in retirement (E.g. age 70 – full SS retirement)
  • Standard (inaccurate?) assumption is you spend a bit less (80%), so you need a bit less
  • The average Social Security benefit is 21,204/year
  • Our 160,000 earner would get approx. 58,476/year
  • Retirement Age? Means Testing?
  • Assuming you will live to age 85, all together, you would need to have saved approximately 2.5-3 million
  • 3 million = 150,000/year
  • Does not include Social Security

Some Basics

  • Most employers offering retirement benefits offer 401(k) plans (called 403(b) if it’s a non-profit organization).
  • 401(k) plans involve the employee’s voluntarily contribution and potentially the employer’s contribution.
  • The employee chooses how to invest the money based on a finite list of choices available through whatever brokerage firm the employer has chosen.
  • While education is always available, many employees are overwhelmed by the choices. Some people refuse to participate because they don’t understand the program.

What should I invest in?

  • NOTE: Professor Bauer is not a certified financial planner or broker and has no specialized training to give investment advice. BUT:
  • Your investment savings, particularly at first, should be safe and sensible investments that essentially perform along with the market and don’t require a tremendous amount of attention from you.
  • Good choices include a number of broad based mutual funds and ETFS.
  • They include: S&P 500, Russell 2000, “’total’ market funds,” total bond funds, total international market and bond funds, and Target Date Funds. These do what the market does.
  • You may never go wrong with these sensible conservative choices, but for most people this is certainly the best way to go unless and until your knowledge, interest, and personal situation changes.

Remember: A 401(K) is tax deductible

  • Americans pay tax on income.
  • You’re taxed at 12% for the first 44k, 22% from 44k to 95k, etc.
  • The highest bracket is 37% for amounts above 575k.
  • Some things get deducted from your income – so it’s income that you don’t pay taxes on. These include the personal/standard exemption (14,600), interest paid on a mortgage, and money put into a 401(K).
  • Example:
    • Melody is in her 20s and earns 40k/year
    • She contributes 4.5% or 150/month to her 401(K) and her employer matches it. So each year her 401(K) gets 3600 (plus earnings)
    • Melody pays no tax on the 1800 she contributed.
    • Although Melody contributes 150/month, because of the tax deduction her paycheck is reduced by (and thus it costs her) about 110/month.

Don’t Leave Money On The Table! (20% do!)

  • Defined Benefit Plan
    • How long before you vest?
  • Defined Contribution Plan
    • What is employer contribution based on?
    • How long before you vest?
    • How is it invested?

What’s an IRA?

  • One of several types of retirement savings programs under federal law for individuals.
  • Most of these programs are for persons without access to an employer-sponsored 401(K).
  • If you leave your employer and rollover your money (see upcoming slide), you will have an IRA.

WHAT'S THE DIFFERENCE BETWEEN A TRADITIONAL AND A ROTH IRA?

  • Roth IRAs are limited to individuals making less than 153k/year and couples making less than 228k in 2023.
  • Traditional Ira
    • Get a tax break when you contribute. Pay no taxes on the account until you withdraw.
  • Roth Ira
    • Deposit after-tax earnings. Pay no taxes when you withdraw.

Changing Jobs?

  • Defined Contribution: Transfer your money to an IRA
    • Don’t leave money with employer
    • PARTICULARLY if invested in company stock
    • DON’T TAKE YOUR MONEY OUT OF ACCOUNT!
      • 10% penalty + regular tax rate (15/28/33%)
      • (plus state income tax – if any) 40% of all Americans!

Need Advice?

  • Financial Planner
    • Anyone can call themselves a “Financial Planner”
    • Stay clear without more information
  • Registered Representative/Stockbroker
    • Their job is to sell you things, not to advise you.
    • Often registered and/or licensed, state/federal/private
    • Inherent conflict: the more they sell the more they earn
  • “Investment Advisor”: A registered Rep/Stockbroker managing higher
  • Chartered Financial Analyst
    • Granted by CFA Institute based on education, experience, and passing a test
    • No continuing education requirement
  • Personal Financial Specialist
    • Add-on certification for a CPA with extensive personal financial planning experience
    • Useful for people needing an expert with a deep tax or accounting background
  • Certified Financial Planner
    • Title granted upon passing an exam, plus CLE and ethics requirements.
    • Fiduciaries: Must put clients’ interests ahead of own.
    • Cost: Hourly or package rate.

Ready to Start Investing?

  • Typically, your first goals should be:
    • Making 401(k) contributions sufficient to get maximum matching from your employer.
    • If your employer does not match contributions, your goal should be to either create a retirement fund for yourself (Roth or IRA) or to create a supplemental fund in addition to any pension (again, your best options are Roth or IRA).
    • Save six months of living expenses to be held as cash, money market, or a CD or a near-zero risk government bond.
    • Ideally you should have six months of savings. BUT having credit limits (in other words access to cash) to meet six months of living expenses is a great start!

What Do I Invest In?

  • Seek professional advice!
  • Just because consumer investment banks like Fidelity, Schwab, Vanguard, TD Ameritrade, and even Robinhood (and many more) give free advice doesn’t mean it’s bad advice! But keep in mind how advisor is paid.
  • For most of you, time is your friend
    • Invest for the long-term and don’t worry about your investment going up or down on a month-to-month basis. If you choose well – just let it ride.
  • Most of the consumer investment banks offer educational videos, and lots of tools and calculators.
  • The smartest 401(k) investments for most people include: ETFs, Mutual Funds, Robo-funds/advisors, and Target Date Mutual Funds.
  • Some consumer investment banks offer fractional shares and free money to start. But STRONGLY consider whether it makes any sense for you to be buying individual stocks.

Aging: It Happens to Everyone

Aging and Housing

  • Aging in Place
  • 55-Plus Communities
  • In-Law Suite
  • Continuing Care Retirement Communities
  • Assisted Living
  • Subsidized Elder Housing

Aging in Place

  • Positive
    • The current first choice of most Americans
  • Negative
    • Challenges of house
      • Steps at entrance
      • Bedroom on upper floor
      • Inaccessible bathroom
      • Inaccessible kitchen
    • Challenges of neighborhood
      • Walkable?
      • Public transportation?

Age in Place: Reverse Mortgage?

  • A “Reverse Mortgage” is officially called a Home Equity Conversion Mortgage (“HECM”) insurance by the Fair Housing Administration.
  • They are HEAVILIY advertised because they generate large fees for issuing institutions.
  • Companies have repeatedly been cited for deceptive advertising.
  • In short, HECM is good if you are healthy, financially stable, need a one-time infusions of cash (e.g. replace roof), and if living with a partner, the partner is over 62 and healthy.
  • For almost all other situations an HECM will likely make matters worse.

55-Plus Communities

  • Positive
    • Often an exciting and fun opportunity
    • Often attractive recreation- oriented communities
  • Negative
    • Often not accessible
    • Generally not walkable
    • No services
    • Declining value?

Secondary Suite (“In-Law Suite”) or “Accessory Dwelling Unit” (separate building)

  • Positive
    • All the benefits of family
    • Potentially lower costs than many other options
    • Ability to share in childcare and other needs of family
  • Negative
    • You must have family
    • Your family must be willing
    • You and your family must like each other. A lot.
    • Some loss of privacy and independence for entire family
    • Expensive to do right
    • Zoning?
    • Loss of friends or community
    • Additional care may still be necessary
    • Transportation?

Continuing Care Retirement Communities

  • Positive
    • All your needs taken care of for the rest of your life
    • Never have to move again
    • Community
  • Negative
    • EXPENSIVE!!!

Assisted Living and “Board & Care”

  • Positive
    • Safe(r) housing
    • Stimulation and community
    • Practical care
  • Negative
    • Less care than you might imagine
    • Huge variation in services
    • Generally no medical services or skilled nursing
    • Needs may exceed care
    • Restrictive
    • Expensive

What does Long Term Care Policy MQT stand for?

  • Medicaid Qualifying Trust

Cost of Insurance

  • Average annual premiums: 1,958

Annual Cost of Care

  • Skilled nursing facility: 74,460
  • Assisted living facility: 35,544
  • In-home care: 31,207$$