Fin 355 Milestone Two Case Study Part A Health Insurance Joh

Fin 355 Milestone Two Case Studypart Ahealth Insurancejohns Company R

Fin 355 Milestone Two Case Study Part A Health Insurance John’s company recently changed their health insurance offering. Jenny’s dental office does not offer any health insurance options. John and Jenny can choose between the following two health offerings: Option 1 Option 2 Annual Deductible • $1,500 if you cover yourself only • $3,000 if you cover yourself plus one or more dependents • $2,500 if you cover yourself only • $5,000 if you cover yourself plus one or more dependents Medical Coinsurance • 10% of all covered in- network services other than certain preventive care • 30% up to MRC of all covered out-of-network services other than certain preventive care • 10% of all covered in- network services other than certain preventive care • 30% up to MRC of all covered out-of-network services other than certain preventive care Prescription Coinsurance • 15% of the cost of the generic (tier 1) drug up to the per-prescription maximum ($25 pharmacy, $63 home delivery) • 30% of the cost of the preferred brand name (tier 2) drug up to the per- prescription maximum ($100 pharmacy, $250 home delivery) • 50% of the cost of the non- preferred brand name (tier 3) drug up to the per- prescription maximum ($150 pharmacy, $375 home delivery) • 15% of the cost of the generic (tier 1) drug up to the per-prescription maximum ($25 pharmacy, $63 home delivery) • 30% of the cost of the preferred brand name (tier 2) drug up to the per- prescription maximum ($100 pharmacy, $250 home delivery) • 50% of the cost of the non- preferred brand name (tier 3) drug up to the per- prescription maximum ($150 pharmacy, $375 home delivery) Annual Out-of-Pocket Maximum total amount of deductible plus coinsurance for covered in- and out-of- network medical and prescription drug expenses you may pay in a calendar year • $3,000 if you cover yourself only • $6,000 if you cover yourself plus one or more dependents • $4,500 if you cover yourself only • $9,000 if you cover yourself plus one or more dependents Cost $750/month $280/month Long-Term Disability Insurance Both spouses have group disability insurance from their employers. John: Benefits equal 50% of salary subject to a maximum of $2,500 per month. Coverage benefits are limited to 5 years. John’s employer pays for this coverage. Jenny: Benefits equal to 50% of salary subject to a maximum of $2,000 per month. Jenny pays a premium for this, and she has a choice to pay with pre-tax dollars or after-tax dollars. She currently has the premiums paid with pre-tax dollars. Additional Client Notes Clients John and Jenny have a nice-size savings account with around $40,000 and a 401K through John’s work that has a balance of $265,000. Jenny does not have a retirement account. Part B John and Jenny also want your help in answering questions about Social Security, Medicare, Medicaid, and long-term care insurance. Below is information they have provided for your analysis. Demographics Family Members Age Occupation Health Jenny 54 Office manager Treated for mild depression. 5'4", 135 pounds. No other health issues. John 56 Sales manager Treated for high cholesterol. 6'1", 186 pounds. No other health issues. Emily (Child) 30 Married, lives in another state far away No health issues Tiffany (Child) 28 Single, attending a graduate program in England No health issues Incomes Income for the past three years and projected current year income for each spouse is shown below in Table 1: Table 1 Family Income Year John Jenny 2013 $64,000 $ $67,000 $ $71,000 $47, $74,000 $50,000 Table 1: Income for the past three years and projected current year income for each spouse Current Assets/Information Home valued at $550,000 is almost paid for. Six years remaining with a balance of $100,000. John has a 401K with an approximate value of $480,000. Jenny has a Roth IRA with an approximate value of $25,000. Joint savings of roughly $50,000. Both cars are paid for and in reasonable shape. John and Jenny expect to replace at least one car in the next 5 years. John has worked full-time as a sales manager for more than 30 years. Jenny has worked as an office manager for the last 2 years and did not work previously. Jenny is uncertain about her future with her current company and may not work much longer. She plans to work on some home improvements around the house should she stop working and is hoping to spend more time with some of her hobbies that she has missed over the years. John’s expected Social Security benefits are as follows: Age 62: $1,780/month Age 66 (full retirement): $2,456 Age 70: $2,914

Paper For Above instruction

The following comprehensive analysis delves into the health insurance options available to John and Jenny, evaluating their implications against their personal circumstances, future retirement plans, and overall financial stability. It also explores the interconnectedness of Social Security, Medicare, Medicaid, and long-term care insurance, providing tailored recommendations for maximizing benefits and ensuring adequate coverage in old age.

Introduction

Healthcare planning is a critical component of overall financial management, especially for individuals approaching retirement age. For John and Jenny, two active professionals with substantial assets but limited retirement accounts, understanding their health insurance options, Social Security benefits, and other related programs is essential to optimize their financial security and health outcomes. This paper evaluates their insurance choices, assesses their eligibility and benefits under key federal programs, and offers strategic recommendations.

Evaluation of Health Insurance Options

John and Jenny face two primary health insurance options provided by John's employer, each with distinct coverage and cost structures. Option 1 offers a lower deductible of $1,500 for individual coverage with minimized coinsurance fees—10% for in-network services outside preventive care—and an annual out-of-pocket cap of $3,000. Conversely, Option 2 significantly increases deductibles to $3,000, with higher coinsurance rates and an out-of-pocket maximum of $6,000 for individual coverage. The premium costs are $750 and $280 per month respectively, making Option 2 less economically attractive if assessed solely by premium costs.

From a health perspective, the lower deductible in Option 1 is advantageous for managing immediate healthcare expenses, especially given Jenny’s history of mild depression and John’s high cholesterol condition. With a reasonable annual out-of-pocket maximum, the financial risk of significant medical events is mitigated, which is crucial given Jenny's potential change in employment status and uncertain future health expenditures. On the other hand, the higher deductible and out-of-pocket maximum in Option 2 could lead to substantial costs in case of severe health issues, which might strain their finances despite the lower monthly premium.

Analysis of Prescription Benefits

Both options provide tiered prescription coverage, with their respective coinsurance rates and maximum per-prescription costs. Option 1 offers 15% coinsurance for generics, with maximum costs of $25 per prescription in pharmacy and $63 via home delivery, aligning with Jenny’s medication needs for mild depression. For preferred and non-preferred brand drugs, coinsurance increases accordingly, and maximum costs are specified. Option 2 mirrors these benefits, maintaining the same coinsurance and maximums, ensuring that prescription drug costs remain predictable and manageable under either plan.

Financial Impact and Long-term Planning

Although premium costs differ significantly—with Option 1 costing $750 per month ($9,000 annually) and Option 2 at $280 per month ($3,360 annually)—a comprehensive evaluation must consider total out-of-pocket expenses. Given their assets, including a paid-off home, substantial 401K, and joint savings, their capacity to absorb healthcare costs is relatively robust.

However, the choice of health plan intertwines with their broader retirement and financial plans. John’s retirement benefits, projected to peak at approximately $2,914/month at age 70, combined with his sizable 401K, provide substantial income in retirement. Jenny, who lacks a substantial retirement account, needs to prioritize her savings and benefits. Her existing Roth IRA, valued at around $25,000, and her uncertain employment future, make affordable health coverage critical.

Disability Insurance and Financial Security

Both spouses possess group disability insurance, which offers a safety net should health conditions prevent them from working. John’s employer-sponsored plan, providing 50% of his salary capped at $2,500/month for five years, complements Jenny’s similar benefits but at a different maximum, with Jenny paying her premiums pre-tax. This arrangement secures a level of income replacement during disability, reducing financial stress related to health issues.

Evaluation of Social Security, Medicare, and Medicaid

Social Security benefits projected for John indicate a full retirement benefit of $2,456/month at age 66, with early and late retirement benefits at varying levels. Jenny is not yet old enough for Social Security or Medicare but will need to plan for eligibility, which generally begins at age 65. The timing of her claiming benefits can significantly influence her income in retirement, especially considering her potential cessation of work and the need for health coverage.

Medicare eligibility typically begins at age 65; however, eligibility can be affected by health conditions and prior coverage. Jenny, currently 54, should plan for coverage when she turns 65, considering additional supplemental plans given her health status. Medicaid may serve as a secondary safety net if costs exceed her ability to pay or if she qualifies under asset and income thresholds, especially during periods of employment transition.

Recommendations

Given their financial profile, health status, and retirement plans, the following recommendations are appropriate:

  • Opt for the lower-premium health plan (Option 2) if their goal is to minimize monthly expenses, provided they maintain adequate savings to cover higher possible out-of-pocket costs in adverse health events.
  • Choose the higher-premium plan (Option 1) if they prefer predictable healthcare costs, reduced financial risk, and peace of mind against unexpected health emergencies.
  • Jenny should consider delaying her retirement and accumulating more assets or benefits for a more secure healthcare future, especially since she does not currently have a retirement account.
  • They should enroll in Medicare promptly when eligible, supplement with Medigap policies if necessary, to cover gaps in coverage and avoid significant out-of-pocket expenses.
  • Maximize their Social Security benefits by delaying claiming until full retirement age or beyond, especially John’s, to increase monthly benefits and ensure financial stability during retirement.

Conclusion

Strategic health insurance selections combined with effective utilization of Social Security, Medicare, and Medicaid can significantly influence John and Jenny’s quality of life and financial security in retirement. Their assets and income profile support multiple strategies, but mindful planning—considering both immediate healthcare needs and long-term financial goals—is essential. By balancing premium costs against potential out-of-pocket expenses, and optimizing their benefits, they can secure comprehensive health coverage aligned with their retirement aspirations.

References

  • Beleche, S. (2020). Navigating Health Insurance Options in Retirement. Journal of Financial Planning, 33(4), 24–31.
  • Friedman, B. (2017). Social Security: How Benefits Are Calculated and When to Claim. AARP Bulletin.
  • Kaiser Family Foundation. (2022). Medicare Benefits & Costs. Retrieved from https://www.kff.org/medicare
  • Lee, H., & Smith, R. (2019). Long-term Care Insurance: Planning for Future Needs. Journal of Aging & Social Policy, 31(2), 152–168.
  • Munnell, A. H., & Sass, S. (2019). Retirement Security and Savings Strategies. Brookings Institution.
  • Social Security Administration. (2023). Retirement Benefits. Retrieved from https://www.ssa.gov/benefits/retirement/
  • U.S. Department of Health & Human Services. (2022). Medicaid Overview and Benefits. https://www.medicaid.gov/medicaid/index.html
  • West, D. M. (2018). The Future of Aging and Healthcare. Brookings Institution.
  • Zajacova, A., & Stevens, G. (2018). Socioeconomic Health Disparities in Older Adults. The Journals of Gerontology.
  • Zhao, Y., & Liu, J. (2021). The Impact of Health Insurance on Healthcare Spending. Health Affairs, 40(6), 950–957.

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