Laurel's Le$$ons for the Loran Smith Center for Cancer Care

My family has had three strikes of cancer in recent years. It began in 2007 with my diagnosis of NH Lymphoma, earlier this year my aunt (my mother’s sister) was diagnosed with CLL and my mother was diagnosed this Mother’s Day with lung cancer (to be confirmed by biopsy later this month). Unfortunately this makes us pros at going through the process of diagnosing and treating cancer.

Instead of sharing stories of vacations and happy memories, our recent conversations are about scans, lab results and doctor’s bedside manners or lack thereof. We also discuss the mounting costs of these tests and the gratitude to have adequate insurance to mitigate personal financial loss.

I was fortunate to have wonderful health insurance coverage through my husband’s employer benefits, my aunt has coverage through her employee benefits offered by the state of Alabama and my mother has federal employee health benefits since she is currently still working. It has been very educational to see the stark difference between three different policies and the protocol for such similar situations.

Before the recent health care reform financial ruin was still looming overhead as lifetime maximums were easily reached. Fortunately, the health care reform has removed lifetime limits. Other positive changes for cancer patients in the form of the requirement to insure despite pre-existing conditions and the elimination of the fear of being dropped with the onset of a serious illness have also been brought about by health care reform. Even Medicare D will start closing the “donut hole” for prescription coverage.

There are many other benefits brought about by the health care reform for cancer patients and others with chronic health care concerns. Although these changes come at a cost, as a cancer survivor and now a caregiver, I am grateful for the benefits of the current health care reform.

Seeking the advice of a trusted physician is prudent when deciding where you should receive treatment for a medical condition. I am a financial planner and some might even consider me a writer, but I am absolutely not a physician. I mention this to remind my readers that this column is meant to start a conversation and is not advice about treatment.

Normally, as a financial planner, this topic would not be on my radar. However, I’ve found in my years of writing columns that some ideas come to me from all directions demanding to be written.

This one began with my son, Walker, coming down with what appeared to be a moderate asthma attack. His condition progressed with a fever and a chronic cough. After a visit to the pediatrician we discovered that his oxygen level was very low. Walker’s symptoms made him a good candidate for hospital admission.

We are fortunate that we have a long standing relationship with our pediatrician who is very familiar with our ability to stay on top of Walker’s condition. In addition, he is aware of my compromised immune system (a by product of my stem cell transplant in 2008) making the hospital a risky place for me to spend time. He allowed us to treat Walker at home. He clearly explained that any progression in his condition would require an ER visit. From there, we proceeded to treat Walker at home with great success.

My second hint that this was a column came as we sat around the house watching a ridiculous amount of TV while caring for Walker. During that time I caught the end of a show about cancer patients, living wills and the decision about in home care. The financial benefits were briefly mentioned, but the core of the issue had more to do with the comfort of being at home with loved ones at such a vulnerable time.

The benefits of in home care range from comfort to decreased exposure to new germs to dramatically lower medical bills for you and your insurance company. The hospitals benefit by not overextending their resources for patients who might be better served at home. Again, assuming that you and your physician agreed that in home treatment is a prudent option; there can be many benefits to you and your loved ones.

Group benefits are an important part of the total income package offered by employers. Health, disability and life insurance benefits can be the deciding factor for choosing one job over another. Group benefits can be particularly important to those of us with pre-existing conditions. The ability to offer an employee the ability to qualify for quality insurance, that would otherwise be inaccessible, is a tremendous benefit that builds loyalty and employee retention.

If you are lucky enough to be healthy, you should consider supplementing your group insurance with an individual policy. Losing a job, employers discontinuing group coverage and the desire to start a new business are situations that have become more prevalent in our new economy. Unfortunately, each of these scenarios can leave you exposed to a tremendous amount of risk if you do not have individual coverage.

An individual health, disability and life insurance policy is portable which means it stays with you even if you are in transition or if your employer can no longer afford to offer group benefits. Individual coverage can be customized to meet your specific needs and may even be less expensive than the coverage offered through your employer. Purchasing individual coverage can protect you from the risk of finding yourself uninsurable without any coverage.

The issue of insurance is delicate and personal. You may decide to take full advantage of your employer coverage, purchase individual coverage or both. Either way, it is very important to make sure you fully understand your insurance options and the impact of an unexpected transition in employment.

Generally speaking consumers understand their health insurance benefits. We usually focus on things such as which doctors are included in network, what co-pays will be due, as well as deductible and premium amounts. As I started my journey to fight cancer, I learned a few additional things about health insurance that I think are worth sharing.

First, I started to think about my lifetime maximum benefit. When we signed up for our health insurance, I can distinctly remember thinking that our maximum lifetime benefit would cover any health care emergency we might have over the working years. But as I started to receive the bills, I soon realized how quickly that maximum might be met if I continued to be sick. I advise consumers to consider whether or not your lifetime maximum is really sufficient for a major medical emergency.

Then, I was pleasantly surprised to discover that our total out of pocket maximum was quite low. Since we had historically been a very healthy family, we had never come close to meeting the out of pocket maximum. The out of pocket maximum usually includes the amount you pay toward your deductible plus any co-payments you might make up to the maximum listed on your policy. This amount resets every year.

Another pleasant surprise was the appearance of case worker that was assigned to me specifically. Out of the blue I received a call from someone from our insurer who was designated to help me navigate our policy and how our coverage worked in covering my specific disease. I learned that there was an allotted amount for travel and lodging for me and my caregiver. My case worker also educated me about the limits for specific treatments such as my stem cell transplant.

In order to know your health insurance benefits, it is financially prudent to know your lifetime and out of pocket maximum benefits. If you have questions about your coverage, don’t hesitate to call your insurer to find out more. As a healthy young woman, it never occurred to me to ask any questions beyond the basics. I hope my experience will help others become more acquainted with their own coverage.

New right to group health coverage for college students

“MICHELLE’S LAW” EXPANDS HEALTH PLAN COVERAGE AND NOTICE OBLIGATIONS FOR EMPLOYERS

July 7, 2009

By M. Brian Magargle
Columbia, SC

On October 9, 2009, an important new law affecting employer-sponsored group health plans will become effective. The new law is known as “Michelle’s Law” (Pub. L. No. 110-381) and expands employers’ coverage and notice obligations for eligible college students. You should begin preparing now to meet these obligations.

Why Was This Law Enacted? The law is named after a New Hampshire student, Michelle Morse, who was diagnosed with colon cancer while she was in college. Although Michelle had health coverage through her mother’s employer-sponsored group plan, that coverage required Michelle to be a full-time student with a full course load to qualify for dependent coverage. If Michelle took time away from school to fight her cancer, she would be dropped from dependent coverage and would have to elect significantly more expensive COBRA coverage. As a result, Michelle remained enrolled as a full-time student while receiving chemotherapy and other treatments. However, Michelle’s family believed that no student should have to face the financial hardship of COBRA premiums, or losing health coverage altogether, while trying to deal with a life-threatening disease.

Michelle lost her fight with cancer in November 2005. The following year, New Hampshire passed a state law to lessen the burden on families like Michelle’s. In 2008, Congress passed a similar federal law that will affect employer-sponsored group health plans throughout the United States, beginning in October of this year.

What Does the Law Require? All group health plans must allow a college student with a “serious illness or injury” to remain eligible for active dependent coverage for 12 months, even if he or she no longer qualifies as a full-time student. The law applies to both insured and self-insured health plans, and the only exception is for certain state or local government-sponsored self-insured arrangements, which may elect to opt out of its requirements. The specific requirements are

• The individual must be covered as a full-time student, as defined in the plan, at a postsecondary educational institution immediately before any serious illness or injury occurs.
• The student must experience a “serious illness or injury” that requires a medically necessary leave of absence or a medically necessary change in enrollment status from full-time to part-time. The term “serious illness or injury” is not defined.
• A physician must verify the illness or injury in writing and certify the leave of absence or change in enrollment status as medically necessary. The law does not contain a deadline by which this information must be provided.
• The health plan must allow the student to remain covered as an active participant/dependent for 12 months after the leave of absence begins. The regular premium will apply during these 12 months.
• The 12 months, however, does not extend coverage beyond another independent event that would end active/dependent status, such as the parent’s termination of employment or the student exceeding the plan’s age limit.
• COBRA coverage would not be offered until after the 12-month special period has expired, unless the student returns to full-time status and remains eligible under other terms of the plan.

Are There Any New Notice or Disclosure Requirements? If a health plan requires employees to certify the full-time student status of any dependent, then any description of that requirement must include a notice about the 12-month extension. The notice must be written in a manner that is understandable by the typical plan participant.

When Do These Requirements Become Effective? The law is effective on October 9, 2009, for plan years that begin on or after that date. For calendar-year plans, the law will apply as of January 1, 2010.

Also, several states already have some variation of Michelle’s Law in effect. These states include California, Illinois, Maine, New Hampshire, New York, Pennsylvania, Vermont, Virginia, and Wisconsin. If your plan covers dependents in any of these states, you should consult with a benefits professional about whether it is in compliance with the applicable state law(s).

What Do You Need to Do Now? In the coming months, you should review your plan document and summary plan description to update and clarify any provisions related to dependents who are full-time college students, including the addition of language about the special 12-month period. Then, before the appropriate date, your benefits and human resources personnel should be trained on how to recognize situations that will trigger these new requirements.

If you need assistance in interpreting or applying Michelle’s Law, please contact any member of Constangy’s Employee Benefits practice group,

It is often assumed that donors approach an estate plan with the ultimate goal of minimizing their estate tax obligation. In my experience, minimizing taxes is really secondary to the altruistic benefits once a donor has achieved financial security. This has become more and more apparent as donors continue to make meaningful charitable gifts despite the current estate tax phase out.

We are fortunate in Athens to have so many wonderful local non profits providing meaningful services to our community. Personally, I have an affinity for ARMC and the LSCC. Thanks to the thoroughness of Dr. Cassity, an ER doctor at ARMC, my cancer was diagnosed and treated. And the LSCC provided our family with the tools to talk to our then 3 year old son about my diagnosis without scaring him. So naturally our family donates annually to the ARMC foundation, and we have even provided for the foundation through our will.

No one knows for sure what the future tax law will be, but it doesn’t seem to matter for those who want to leave a legacy by providing a much needed benefit to their favorite charities.

In my last column, we discussed two strategies everyone should implement in an effort to be prepared for unexpected medical bills: funding an emergency savings account and a flexible spending account (FSA). These strategies should provide a sturdy foundation for defraying the costs of unexpected medical bills.

It may also be wise to consider a catastrophic policy or a high deductible health plan (HDHP). These policies typically offer reasonable premiums and a large lifetime cap on benefit payments from $1 – $5 million, but require a high deductible often ranging from $2,000 – $5,000.

If you participate in a high deductible health plan, you are also eligible to open a health savings account (HSA). Similar to the FSA, an HSA has tax favorable treatment with the added benefit that you don’t lose it at the end of the year if you haven’t used it. HSA funds can accumulate and grow, and are used to pay eligible medical expenses.

Health care is expensive and certain medical conditions can easily deplete your emergency and health care savings accounts. Unfortunately, you may find yourself needing to spend retirement savings or accessing your home equity. There are some strategies that can help you minimize your tax liability and penalties associated with a premature distribution.

If you have a ROTH IRA, distributions of principal can be made penalty and tax free. The liquidation of growth and income from a Roth IRA or a premature distribution from a Traditional IRA, will incur income taxes and a 10% penalty. However, the amount penalized can be offset by the amount of your medical expenses, which is a little known fact that is a small bright light in an otherwise bad situation.

Another alternative is to access your equity through a line of credit. This type of credit works similar to a credit card but often comes at a lower rate with the added benefit of tax favorable treatment of the interest.

Liquidating your retirement accounts and accessing your equity are not ideal strategies for unplanned medical expenses, but are a favorable alternative to high interest credit cards. More importantly, any or all of these strategies are certainly favorable to not taking advantage of medical treatments that may improve or prolong the quality of life.

Being diagnosed with a life threatening illness is stressful to put it mildly. Unfortunately, the treatment of such an illness usually comes with a big price tag. The last thing you need when you are sick and trying to navigate the health industry is a pile of bills and no clear plan for how to pay them.

The sad reality is that the inability to pay these bills often results in patients refusing treatment in an effort not to further burden their family. Refusing treatment can result in an untimely death and/or suffering that is unnecessary and unacceptable.

Developing a plan to pay unexpected medical bills can alleviate some of the stress. Implementing a plan to pay your bills as soon as they come in at the start of your illness will establish a track record that might make the health care providers more willing to help you when your resources become limited.

The first strategy for being financially prepared to pay unexpected medical bills is to fund a flexible spending account (FSA). Money is contributed to this type of tax favorable account to be used for medical expenses over the year. Since you cannot predict the expense or onset of a major medical condition, it is wise to fund this account based on your prior year’s medical expenses. You must use the money or lose it by the end of the year, so it is important not to overfund it.

The next line of defense should be an emergency fund. This type of account is meant for exactly this type of situation. It is recommended to save 3 months expenses in a dual income family and 6 months expenses in a single income family. These funds should be invested in a cash equivalent investment (cash, money market, cds, etc.). Therefore, the money is readily accessible when unexpected bills arrive. Some financial planners suggest doubling the savings in this uncertain economic environment.

These are just two prudent saving strategies to provide your family with a sound financial foundation that will protect against an unexpected major illness. In next month’s column, we will cover utilizing equity and retirement accounts to pay bills that exceed your savings accounts’ balances.

Not naming a beneficiary to your qualified accounts (IRA, 401k, 403b, etc.) can generate a large tax bill for your heirs. Leaving the beneficiary designation blank or listing your estate as the beneficiary of your qualified accounts will accelerate the distribution of these accounts. Since these types of accounts are subject to income tax at the time of distribution, an accelerated distribution will result in an increase in taxes due.

If the beneficiary is a non person, the account must be distributed over 5 years and income taxes are due accordingly. If the beneficiary is a person, the account is distributed based on a formula associated with the person’s life expectancy thereby minimizing the required distribution as well as the income taxes.

As if the income tax burden were not enough motivation, the sunset provision of the EGTRRA will bring back the estate tax to more of the general population. Combining the potential income and estate taxes due can bring the effective tax rate to a whopping 70%.

The solution to this problem is not only simple, but it is also free. Consider naming a person as a beneficiary to your qualified accounts.

In last month’s column, I mentioned that a cancer diagnosis will change one’s perspective on their directives. I personally made sweeping changes to my legal documents literally 24 hours before getting on the plane for my stem cell transplant.

When I was in my twenties, as a financial planner, I knew I needed to have a power of attorney for business and for health care as well as a living will. My husband and I were newlyweds and it was time to have our documents drafted. Our attorney, Bert Whitmire, took us through the process (one I had been through many times with clients). It was strangely different to go through it myself making these tough decisions about living and dying.

With the stroke of a pen I easily chose not be nourished or resuscitated. I made every choice for myself from a young twenty-something perspective. Not wanting to leave the burden of such choices with my husband or even my parents, who I figured would be long gone before these documents were ever presented. There it was on paper, my wishes to pull the plug.

Ha, in retrospect how brave or naïve was I? So when the day came that these decisions were potentially in the very near future, I realized I needed to make some serious changes to my documents. I DO want nourishment and assistance breathing, whatever it takes to stay alive. I have a child (he was three at the time of my diagnosis) and that changed how I felt about everything.

I went from controlling everything to putting it all in the hands of my husband and my parents who were not only alive and well but also major participants in my health care. I wanted them all to make informed decisions knowing that I did not want to be in a coma for years and years, but that I was open to reasonable care with life sustaining methods. These are all very personal choices, but it is so important to revisit these decisions at the time of any major life change.