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Health Care Reform or “Obamacare”: What’s In It for Me? (The Pros)

Since the very beginning of President Obama’s term, fixing the broken health care system of this country has been top priority for his administration. He signed a bill into law March 23, 2010, which could potentially change the way health services are delivered in the U.S. There is a lot of confusion in the market as no one really understands the full scope of the bill; things keep changing in Washington almost on a weekly basis; and people like me, who make a living in the health care industry, are not sure about what the future really holds for us.
I want to explain this in simple words — “What’s in it for you” — so that it makes some sense.

1) Graduating Students: The job market is tough for new college graduates. Before, you had to be a full time student if you wanted to stay on your parents plan after age 19. Also, you could only stay on their plan till age 24. With the new reform, an adult child can stay on his/her parents’ plan till they turn 26, irrespective of whether they are full time students or not. That should provide some relief to many families as their children leave college and hunt for jobs in a tight market.

2) Rescinding Coverage: The insurance industry recently announced that companies would honor a new ban on canceling the coverage of sick policyholders. Many insurance companies were blamed that they cancelled coverage for sick policyholders. Even if the change is designed to improve reputation, it is another indication that reform is taking hold and benefiting Americans.

3) Preventive Care (Annual Physical): All insurance companies now are required to offer the preventive services i.e. annual physical exams and tests related to the physical such as Glucose, blood pressure, cholesterol screening, etc. at no cost to the insured. Yes, that’s right — “no co-payment.” Be careful though as some employers are allowed to opt out of some of these benefits. So, please check with your employer.

4) Guaranteed Child Only Coverage: Children cannot be denied any more. In the past, children suffering from pre-existing conditions were not able to get coverage in the individual market. This left children really venerable and often they had to use government plans or visit emergency rooms as uninsured patients. Starting Oct. 23, 2010, a child applying for coverage cannot be denied for pre-existing conditions. Unfortunately, for adults this law does not go into effect till 2014.

5) California Pre-Existing Coverage Plan: The State of California has established a pre-existing insurance plan (PCIP). The plan caters to adults with pre-ex conditions who cannot get any other coverage elsewhere. As I help clients, I find it quite difficult for them to qualify for the plan because of the strict eligibility requirements. At least there is an option available.

6) Small Business Health Tax Credit: Employers with fewer than 25 workers and an average salary of less than $50,000 can receive up to 35% in tax credits. But some small employers say they are reluctant to offer coverage because they fear the law might be changed.

Some of you reading this column may wonder why it all sounds so good. What’s bad about this law? How does it affect your taxes? How does it affect the already struggling economy of this country? We shall tackle all these questions in my next blog. Until then, so long…

Life Insurance: Whats the difference?

Buying life insurance these days is liken to buying another product on the shelf. In a LIMRA study, it was determined that 35 million US households have no insurance at all.

LIMRA’s 2010 Life Insurance Ownership Study has found that 30 percent of U.S. households (35 million) have no life insurance protection at all.

In another starling statistic, LIMRA study shows 44% of US households have individual life insurance.

Only 44 percent of U.S. households have individual life insurance. This is a 50-year low.

It is most unfortunate that consumer concern themselves with insurance that are not protecting their most important asset, which is themselves. People buy insurance for their car, home and appliances (TV, computers).

It is more important how one view the importance of life insurance. I am of the opinion it is our moral and fiscal responsibility to protect our biggest asset. Life insurance should be a core fundamental in our fiscal planning along with saving and retirement.

I frequently asked my client what is their value to their family. A good number of times they scratched their head and looking to utter some good answers. They blurted out some numbers like a million here or there. It seems amazing that people don’t seem to value themselves like they valued some of their own possessions.

I believe the answer should be along the line of priceless. Unfortunately life insurance companies cannot underwrite a priceless policy. It can, however, underwrite the economic loss using the current income and other liabilities a person might have. A good way of estimating the amount of life insurance need is to use a factor between 10-20 times of annual income.

There are many ways to purchase life insurance. There is the option to purchase them through an employer that is termed as group life insurance. Typically the employer provides every employee a minimum of 1-2 times of salary or a flat dollar amount of coverage like $20,000 or $30,000.

There is no medical underwriting and there is one rate class that is based on age-band. In this instance, an employee who might not typically enjoyed such a preferred rate due to possible pre-existing conditions, will get a rate better than an individual policy.

One has to be aware of the portability issue that comes with group life insurance. Not all group life policies come with portability clause.

Another option is to purchase individual life policy. Typically the application is subject to medical underwriting requirement as well as other company’s specific requirements.

There are two ways to buy individual life insurance; term and permanent. Term life insurance is a contract that is purchased for a certain time period like 10-, 15-, 20- or 30-years. At the end of the agreed term period, there is no further protection offered. If something happens during the contractual period and premium payment is current, the life insurance company will pay out the death benefit to the beneficiary income tax free.

There is another option to term insurance and it is termed as Return of Premium. In this policy, the premium is more than a level term policy. At the end of 20- or 30-years policy, assuming there is no death claim, the insurance company will refund the total premium paid to the owner.

The permanent life insurance has an additional component that is the cash value. The premium paid into a permanent policy will have a typical sale charge deducted and then the net premium is credited to the cash value. From the cash value the cost of insurance, administrative charges and policy charges are then deducted.

The cash value in a permanent life insurance can potentially grow in value and it grows tax-deferred. It can earn a guaranteed interest as declared in a policy (whole or universal life) or earn an interest based on a specific market index (S&P 500) (indexed universal life) or a mutual fund like account which can earn or lose value (variable universal life).

The gain portion of the cash value can be accessed via a loan without current tax consequence. The loan does not have any usage stipulation and one can use it for any purpose. There is a cost associated with this loan provision. The interest rate charged for this loan is typically around 2-8% (dependent on policy). However, once the loan is repaid, the insurance company will credit your cash value with interest rate close to or equal to your initial interest rate charged.

There is a myriad of life insurance choices out in the market place. A good life insurance agent is indispensable to building your financial future. Good agents understand a client’s financial needs and design a program with various options to meet the client’s goal and objectives. They then go about shopping for comparable products that can meet the goals and challenges of the client. Shop around and have a good life agent be part of your financial team.

Albert K. Law

Health Care Reform aka ‘OBAMACARE”: What’s in it for me (The CONS):

Since the very beginning this bill attracted a lot of attention from political parties, businesses and media because of the huge impact it could have on the economy of this country. During the last edition, I wrote about the “good things” the new health care law had to offer. So here I am back discussing about the “not so good” affects of the heath care reform. Is this law really worth the hassle? I will let you be the judge of that. Here are some so called “Cons” in a simple language:

Cost – Anyway you look at it, adding about $1 trillion over a decade to the deficit can not be a good thing for US economy. Approx. $100 billion/year, this is about annual cost of Iraq war. May be its about time for government to start focusing on the internal issues now. Despite this huge cost, most experts claim that cost of health insurance will keep rising and quality of care will go down as the number of people that need to be treated will increase.

Medicare cuts – The seniors will be among the worst hit population by this law. They will see their benefits change dramatically. Congress is reducing Medicare benefits by $500 billion. This is particularly concerning to about 76 million baby boomer population that is about to hit retirement over the next decade.

Individual mandates – Starting 2014 government will require each individual to purchase the basic health insurance or pay an income tax penalty. The people who do not carry health insurance will pay $695 fine every year with the exception of some low income individuals. Many states have filed lawsuits stating that it is unconstitutional for the Federal government to require individuals to purchase insurance.

Higher premiums – Over the past decade, we have seen the insurance premiums double. Unfortunately, introducing an additional 30 million people into the insurance pool will result in higher insurance premiums for the 80% of Americans that currently have insurance. The average person can see premium increases of 8-12% each year due to the healthcare reform bill.

Higher taxes – Most businesses and high net worth individual and families earning more than $250K per year will see their Medicare tax increase in an effort to support some of the costs of this health care reform law. So now apparently, you will be punished for being successful while most illegal’s without insurance continue to fill the emergency rooms as they find convenient. Medical device makers will see a new 2.9% excise tax. Think, You are not affected yet? Wait till the costs eventually will be passed on to every single one of us.

Excise tax on Cadillac health plans – Many large employers offer so called “Cadillac” insurance plans — those with a value of $10,200 or more for an individual and $27,500 for a family . Starting 2018, these employers will be forced to reduce these benefits as they will be charged a 40% excise tax for offering these plans. This will lead companies to reduce their insurance offerings to avoid these taxes.

Employer mandates – Many employers are concerned as by 2014, employers are required to offer health plans to all employees who work more than 30 hours per week, or pay a $2,000 per employee penalty to the government. Many companies I work with has been telling me that they will not be able to afford this and may end up closing locations or laying off even more people. Is this what we really need at these times?

HSA withdrawal tax – For the past decade, Health Savings plan have gained popularity. Government has decided to increase the penalty from 10% to 20% for any withdrawals made for non-health expenses.

So you have read about both sides of the story. As I mentioned, the real effects of the health care reform bill is yet to be seen. At this point, it just seems like a huge gamble taken by our dear government. At last, I can just hope for the best for us, so called “Middle Class” who usually suffers.

Sunny Sethi


Got Umbrella Insurance?

Recently one of our clients child got into an car accident and it was the child fault. The other party was hospitalized. A few weeks later, the claimant filed a claim for $850,000.

If this happened to you, do you

(a) know your liability coverage limit?

(b) do you have enough insurance coverage limit to cover this claim?

Most people auto insurance policy carry a $100,000/$300,000 bodily injury limit. In this case that will not be sufficient to cover the claim. Once your insurance limit has exhausted, the claimant can go after your other assets and your incomes. So what can you do to protect yourself and your family from this situation? That is where personal umbrella Insurance comes into the picture. In this situation if the insured auto policy has a $250,000 bodily injury limit with a $1,000,000 personal umbrella policy, the insured total liability limit is $1,250,000. Hence the insured policy has enough coverage for the $850,000 claim. So what is a personal umbrella insurance?

Personal umbrella insurance is a excess liability insurance policy that provide excess protection on the policy holder assets and future income beyond the standard limits on their primary policies. It gets trigger when all the underlying policies such as auto insurance, homeowners insurance, boat insurance liability limits are totally exhausted. An umbrella insurance is the most cost effective way to protect your assets and future income. However, most personal umbrella policies do not cover punitive damages, intentional actions or liability incurred in connection with your business activities.

Typically, a personal umbrella policy is sold in increments of one million dollars and usually starts from one million dollars limit and max out at five million dollars. There are some insurance companies that offers personal umbrella limit over five million dollars for wealthy clients.

All insurance companies that sell umbrella insurance require a minimum liability limit on the primary policies such as auto insurance and homeowner insurance.

Most insurance companies require the following minimum liability limits in CA:

  • Auto & watercraft insurance: $250,000/$500,000 on bodily injury and $100,000 on property damage, or $300,000 combined single limit (CSL).
  • Homeowner insurance: $300,000 on liability.

The yearly premium for a personal umbrella insurance usually start from $180 and depends on the coverage limit, your claim/violation history, number of drivers and properties owned. To get a quote, please contact your insurance agent.

Teck Wong


Health Savings Accounts (HSA): The Basics

What is a Health Savings Account?

An HSA is a tax-sheltered trust account you own for the purpose of paying qualified medical expenses for yourself, your spouse, and your dependents. When you enroll in an HDHP, the health plan determines whether you are eligible for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) based on the information you provide.

What are the general features of an HSA?

  • Your own HSA voluntary contributions are tax-deductible. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969 .
  • Interest earned on your account is tax-free
  • Tax-free withdrawals may be made for qualified medical expenses
  • Unused funds and interest are carried over, without limit, from year to year
  • You own the HSA and it is yours to keep – even when you change plans or retire
  • Your HSA is administered by a trustee/custodian

How will an HSA plan save me money?

An HSA plan may save you money through lower premiums, tax savings, and money deposited in your account that can be used to pay your deductible and other out-of-pocket medical expenses in the current year or in the future.

What is a qualified medical expense?

Generally qualified medical expenses will be determined by the plan in conformance with FEHB law and Section 213. See IRS Publication 502 for a list of qualified medical expenses. Please note some insurance premiums cannot be paid for by HSA funds.

Please clarify with examples: “Tax-free withdrawals for qualified medical expenses.”

The IRS defines qualified medical expenses. See IRS Publication 502 for a list of eligible expenses. However, not all insurance premiums are qualified medical expenses even though they are stated in the IRS Publication 502.

Does the money in my HSA earn interest?

Yes. Your HSA funds are invested. Depending on which HSA plan you are enrolled in, the interest rate and payment of interest will vary. Your earnings are tax free

Can the unused funds in my HSA be rolled over each year?

Yes. Your funds will accumulate without a maximum cap. However, the annual limit you can contribute to the HSA may not exceed the maximum contribution amount set by the IRS plus “catch up” contributions for those ages 55 to 65.

What happens to my HSA if I leave my health plan or job or switch to a traditional plan?

You own your account, so you keep your HSA, even if you change health plans or leave Federal Government. However, if your HSA was fully funded and you leave the HDHP during the year, then you will have to withdraw some of the contribution from the account. You must pay income tax on your excess contributions and income tax on any earnings of the excess contribution. There is no 10% penalty on excess contributions.

If you no longer are enrolled in an HDHP you are not eligible to make contributions to your HSA, but you may request withdrawals for qualified medical expenses.

Are there any fees associated with the Health Savings Account?

Yes, there are administrative fees that can vary by plan.

What is the process for setting up an HSA?

First, you must elect a high deductible health plan. Generally, once the plan receives your enrollment, the plan will mail you an information packet that includes banking forms for you to complete and return to the plan. When the plan receives the completed forms, the plan will notify its administrator of the HSA. The HSA administrator will then set up your account and your health plan will deposit “premium pass through” payments into the account. You are not required to use the bank offered by insurance company, you can go with any bank you like.

To get more details, Please contact us at 888-704-8243 or visit

Visitors Insurance – Limited Vs Comprehensive Coverage

There are many visitors insurance plans available in the market. Getting a good insurance plan for your parents or relative can be quite confusing. Many times clients ask me if visitors insurance really pays as they have read many negative comments on the Internet. Well, the good news is that YES, insurance companies do pay up to the policy maximums.

Many time people may get the cheapest plan they see online without understanding the coverage in the plan. One main thing to understand when you are shopping is the difference between Limited Vs Comprehensive coverage.

Fixed Benefits also knows as Limited coverage plans have specific benefit limits for different covered medical expenses. These benefit limits are not the same as the plan medical maximum.

For example, a plan with a $50,000 maximum limit may have a maximum of $3000 for surgery, and a maximum of $500 for diagnostic services (X-rays, scans etc). These fixed limits for different situations are detailed in the plan brochure.
The customer is required to pay an initial deductible for each injury or sickness and the plan pays for the rest of the covered expenses.These are the most affordable plans but usually recommended if family members are very healthy.

Comprehensive Coverage:

These plans do not have benefit limits based on the type of medical expense. Benefits for covered medical expenses go all the way up to the plan maximum (less deductible and co-insurance).

Typically for all covered medical expenses during the plan period the insured pays the deductible plus 20% of the first $5,000 in bills; and then the plan pays 100% of the eligible medical expenses up to the plan maximum. Some of these plans tend to have a minimal coverage for pre-existing conditions like $20K. These are a bit expensive but have better coverage for major catastrophic bills.

If you have any questions, please contact Sunny Sethi of Matrix Insurance Agency at 408-986-8506. You can also visit website

Tips for getting Small Business Health Insurance

You think it is tough to open a business and putting yourself to the path of achieving your dreams. Wait, till you have to offer employee benefits, it gets tougher…

Here are few tips to make shopping for employee health insurance easier:

You need “2”: Make sure that you have at least 2 employees/owners in the company before you start shopping for group insurance. Husband and Wife businesses are eligible to get a group plan as long as they can be linked to company as an employee or owners.

You must be in business for at least 6 weeks before you can get a CA group plan.

Payroll: It is much easier for companies that have a proper payroll to get a good group health insurance plan. Insurance companies look at small businesses very strictly to make sure they are eligible for group plans.

Legal Structure: Make sure that the company is set up properly as a LLC, C-corp, S-Corp or partnership. If you have a corporation from Delaware, make sure you have applied for business license in CA and also filed Statement of information with CA Secretary of state.

Pre-existing Conditions: Most HMO plans do not have any pre-existing condition waiting periods in CA. Also, there are no pre-existing exclusions on PPO plan if you have a continuous coverage with no more than 63 days gap. If you have a medical problem and do not have any prior coverage then it will be best to go on HMO plan. Maternity in group plans in not considered a pre existing conditions.

Employer Contribution:
Insurance companies in CA require employers to pay at least 50% of the employee only premium or minimum $100 whichever is less. It is always good to offer few plans to employees so they have choice and can pick plan as per their family requirements. You can offer a basic plan and employee can pay the difference if they want to upgrade.

Use of Pre-Tax dollars: One of the biggest advantages of having a group plan is that both employer and employees make their contributions from pre-tax dollars deducted through their payroll. Make sure to ask about Section 125 POP plan

Find an experienced broker:
More than 70% of the small business underwritten by insurance companies in CA comes from a broker community. Brokers are equipped to quote and compare several insurance companies at one spot. You do not need to go deal with several insurance companies to get a quote. Brokers are paid by insurance companies and there is no additional charge to your business if you use the services of brokers.

If you have any questions, please feel free to contact Sunny Sethi of Matrix Insurance Agency @ 888-704-8243 extn 101. Email:

Tips to buy Visitors Insurance

So your parents or relatives are planning to come and visit you in USA or you are planning to go on that Europe trip that you always dream of. Don’t forget to get the proper protection right after you get the visa.

Lately I always hear that rising cost of medical treatment in USA has been discouraging lot of seniors to visit USA. Some of these expenses could be easily avoided by purchasing proper visitors medical insurance.

Here are few tips to keep in mind:

• TRIP Insurance: If you have planned an expensive trip, make sure to buy TRIP insurance that will pay if the trip is cancelled for some reason. e.g. if you have non-refundable flight ticket and you get sick on the day of your flight, the coverage will cover the lost money for the flight.

• Direct Billing or Reimbursement: Most insurance companies will have a PPO network that they have leased. Its always better to go to in-network providers as you will get a must better negotiated rates. Check to see if your expenses are covered up front or if you pay and get reimbursed later.

• Deductible: Deductible is the amount you pay upfront before the insurance company pays anything. Usually you can get higher deductible to keep premiums lower. Most common deductibles for people purchasing visitors insurance for their parents are $250 or $500. Make sure you understand the deductible and any coverage limits.

• Coinsurance: Most travel insurance plans have coinsurance usually its 80% which means that insurance company will pay 80% and you pay 20% up to a max amount usually $5K.

• Medications: Its always recommended that people traveling carry their medication for the whole trip. If you’re on medications, be sure your policy covers replacement costs.

• Pre-existing conditions: Most visitors insurance do not cover pre-existing conditions. They cover something called “Acute onset of pre-existing conditions” which means that if there is a sudden reoccurrence of symptoms or disease you will be covered for a amount that is usually much less than total coverage. E.g. if you buy a policy for $100K coverage, your coverage for “Acute onset of pre-ex conditions” might be $15K only.

• Beware of policies bundled with your trip by your travel agent. They’re often substantially more expensive.

Medical Evacuation: Most policies with travel insurance and visitors medical insurance has this coverage included.

• Find out what hazardous activities are covered and weigh that against your recreation plans.

• In Flight coverage: Most claims happen during the first few days of the travel. Maximize your coverage by buying at least two weeks before your trip and make sure that you are covered during the trip.

All Individual & Family Health Insurance Plans California are required to cover Maternity care

On October 6, 2011 California Governor Jerry Brown signed a law that starting July 01, 2012 all Individual and Family health Plans (IFP) must cover maternity care regardless the individual need the maternity care coverage such as woman over 50 years old or male applicant. This law also affects those individual with discontinued Individual and Family Plan. Under this law individual no longer has a choice to choose plan without maternity care in order to lower the insurance premium. The insurance company can still decline coverage for those under 19 if the applicant is

  • currently pregnant or
  • an expectant parent, such as in the process of adopting a child, or planned surrogacy, or spouse/domestic partner is currently pregnant.

If you need California health insurance, please visit or Call Teck Wong 408-394-1657