INSURANCE COMPANY RATINGS
On all insurance policies, one must always consider an insurance company’s “financial” rating before purchasing. You are depending on the insurer to be around and have enough assets to pay your claim. While few companies go into default, assets can be frozen during reorganization or have reduced benefits. There are several independent rating agencies that review the insurance companies’ financial reports and, in some cases, management to come up with a grade that describes the company’s financial strength.
SECURE RATINGS – Life Insurance |
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A.M. Best |
Duff & Phelps |
Moody’s |
Standard & Poor’s |
Weiss |
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A++, A+ |
AAA |
Aaa |
AAA |
A+ to A- |
|
A, A- |
AA+ to AA- |
Aa1 to Aa3 |
AA+ to AA |
B+ to B- |
|
B++, B+ |
A+ to A- |
A1 to A3 |
A+ to A- |
C+ to C- |
|
B, B- |
BBB+ to BBB |
Baa1 to Baa3 |
BBB+ to BBB- |
|
|
|
|
|
|
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VULNERABLE RATINGS |
|
C++, C+ |
BB++ to BB- |
Ba1 to Ba3 |
BB+ to BB- |
D+ to D- |
|
C, C- |
B+ to B- |
B1 to B3 |
B+ to B- |
|
|
D |
CCC+ to CCC- |
Caa, Ca, C |
CCC |
E+ to E- |
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E, F |
DD |
|
R |
F |
HOSPITALIZATION AND MEDICAL INSURANCE.
While we were not provided with details of your hospitalization and major medical coverage, the following will provide basic guidelines for medical coverage:
1. Beware of canceling current medical coverage if you may have a preexisting condition, since there may be exclusions.
2. Look for a lifetime maximum benefit of at least $1 million.
3. Watch out for “usual, customary, and reasonable” or UCR, charges. When a plan says it reimburses 80 percent of physician’s bills, it means “80 percent of what’s reasonable”. When your doctor recommends a procedure, ask how much it costs, then find out what your plan’s UCR is for the treatment. If there is a big discrepancy, you may be able to get your doctor to accept a fee closer to the UCR.
4. Medical insurance should be irrevocable. Guaranteed renewable is the term you need in your policy. Premiums may go up as you get older, but they will rise for all the company’s policies, not just yours.
5. The provider should be a stable company financially. Look for an insurer with a rating of A or A+ from ratings companies such as A.M. Best, Standard & Poors, Moody’s Investors Service or Weiss.
6. Coverage should be for “major-medical”, rather than hospital-surgical, coverage. Hospital-surgical policies cover only hospital services and surgical procedures. Preferable is a major-medical policy that takes care of all hospital costs, including room, emergency-room treatment, nursing care, anesthesia, tests and X rays, and drugs.
7. A policy should also have at least partial coverage for other medical services: physician’s bills, skilled nursing-home care for recovery and rehabilitation periods, prescriptions, medical equipment and supplies.
8. Choose the highest deductible (at least $1,000) and co-payment (at least 20 percent of costs) affordable. The insurance with a low deductible comes with a high price tag. As long as you have a reasonable out-of-pocket maximum, you don’t have to worry about medical care costs getting out of hand.
9. Avoid single-disease coverage. Comprehensive health insurance coverage provides coverage no matter what the cause of the illness.
MEDICARE SUPPLEMENTAL INSURANCE. Medigap coverage is private supplemental insurance to plug the holes left by traditional Medicare. Congress established ten standardized plans, A through J that are available in most states. The most basic plan covers Medicare Part A and B coinsurance and 365 days of hospitalization after Medicare benefits end. Other plans cover additional benefits, such as Part A deductible, coverage in foreign nations, skilled nursing coinsurance and prescriptions. However, only three of the ten plans provide drug coverage, and that’s with a deductible, coinsurance and maximum annual benefit.
Features in a given plan will be the same regardless of the company offering that plan. The main differences in the coverages are cost and the soundness of the company.
MEDICAID
Recent legislation changed the look-back period during which asset transfers must be documented and explained to Medicaid authorities, from three years to five. Previously, only transfers to a trust were subject to a five-year look-back.
In addition, the “penalty” period, during which people aren’t eligible for Medicaid because of an asset transfer, now won’t start until after they’ve entered a nursing home and spent down their savings. The ineligibility clock used to begin ticking within a month of a transfer.
Suppose Joan Smith gave $50,000 to charity in January, 2008. If, in 2010, she needs nursing home care and is officially “impoverished”, she or her family will still be on the hook for the amount of care that gift would have funded. Nationally, a nursing home stay averages $6,000 a month, so it would be 10 months before Medicaid benefits kicked in. Under the old law, the transfer wouldn’t have mattered, because the ineligibility period would have started when smith made the gift.
Individuals must own less than $2,000 in non-exempt assets to be eligible for Medicaid.
Changes in Medicaid law and proposed federal cutbacks portend higher health costs for individuals and more need for financial planning to protect assets from these rising expenses.
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