by Colleen King, LA Insurance Examiner

Most people hear the word annuity and either 1. Don't know what it is or 2. Are afraid of it because of something they heard about annuities or 3. Their stock broker can't sell it so they are talked out of it or it's not even brought up.

Don't get me wrong, annuities are not a 'one size fits all' product. They are an insurance product and they used to be very limited in how they were designed. You had either a fixed or a variable annuity (fixed have a specified interest rate and variables are invested in the stock market) and once upon a time, you had to have a minimum of $100,000 to start with. Then, once you 'annuitized' your annuity, meaning you started life time payouts of a specified amount per month, if you passed away six months later, too bad--the money was gone.

Now, you can open some with as little as $2000, some products you have the option of adding to (flexible premium products) and for some they can be a great option to move your old job's 401k or 403b to if you leave the company. Lots of people are using them for IRAs if they can't stomach the risk with the stock market.

Bottom line is you need to know the particulars of what you are looking at.

1. Is your principal guaranteed? in a fixed or fixed indexed annuity it is. In a variable annuity, it generally is not unless you buy a specific rider.
2. What is the surrender period? The surrender period is how long you have to leave your money in this before you can take it without being hit with penalties. I generally don't go over 10 years, depending on the person's situation. But there are some with 15-17 year surrender periods, and unscrupulous agents are selling them to people in their late 70s or older. Totally inappropriate!
3. Can I get any of my money if I have an emergency? I always advise my clients that this is NOT the place to put your emergency fund, but if you really miscalculate and it's imperative you break into that, most annuities allow you to access 10% of your principal per year without triggering the annuitization or payout flow.

There are other considerations, but annuities are being looked at by many when looking for a conservative component to add to their retirement portfolio. They can provide a steady income stream in your 'golden' years over your remaining lifetime or now there are variations on how these can work when taking payments. I've integrated them into my own strategy and good thing I did. Too bad I didn't move more money into these before the latest market debacle.

Finally, someone with huge credibility in health care reform talks about the selling across states

LA Insurance Examiner Colleen King

I recently brought up in an Examiner article the problem with being able to buy plans from other states. I've not seen anyone else really talk about this as yet. Finally, one of the leading authorities on health care reform and the insurance industry in general has brought the 800 pound gorilla into the room as well. To review, here's the problem.

Robert Laszewski writes about the problem in his December 8 blog article, so check it out here. This is one of the main cost saving mechanisms existing in keeping insurance costs down today and it would be blown out of the water almost immediately if you could buy across state lines. The other thing that comes into play are state mandated services. Because insurance is regulated state by state, plan structures vary. Some states have very few required services, some have more than 50.

So PLEASE take a moment to review Robert's article, he puts it so well.

Extending the Good News for Homebuyers

Printed in Real Estate and Living

By Lawrence Yun, Chief Economist, NAR Research

Let’s first turn to the terrific news regarding the housing stimulus.  Earlier this month, the U.S. Congress overwhelmingly passed and the president signed into law new measures to maintain the momentum for a housing market recovery. The homebuyer tax credit, originally scheduled to expire at the end of November, will now be available through the middle of next year and more potential buyers will be able to take advantage of it. The income limit was also increased, and many move-up buyers—not just first timer purchasers— also will qualify. Furthermore, loan limits will not shrink as was planned for next year; in high-cost areas, the loan limit will remain at near $730,000 in 2010, thereby permitting more consumers to tap into the historically low mortgage rates.

As most of us are aware, the housing market recovery to date has been concentrated in the lower-end starter home segment. While the mid-priced market has begun to show signs of life, it is still far below normal activity. The upper-end remains sluggish. Therefore, enlarging the tax credit to include move-up buyers will add the necessary “juice” to broaden the recovery. The accompanying increased velocity in home sales will mean more economic activity. Also, even though there may be less impact in the overall net inventory (a person sells before buying so it looks as a “wash” on inventory), the months’ supply will fall because of rising sales.

Adding it all up, home sales are now expected to get a boost by roughly 15 percent next year. Existing-home sales are forecast to post 5.7 million units in 2010 (up from 5 million units in 2009). New home sales will also rise, reaching 550,000 (from 400,000). More importantly, inventory will likely fall to a 6-7 months’ supply by the middle of next year. That draw down of inventory means that that there are likely to be modest home price gains. Roughly speaking a 2-5 percent price gain is likely in many parts of the country in the next year.

Rising home values will prevent home prices from overcorrecting even further. Home prices have, indeed, been overcorrecting and have led to sizable destruction in middle-class housing related wealth. By contrast, stock market and financial wealth have experienced spectacular gains in the past nine months. Despite those gains, however, consumer confidence still continues to tread near historic lows.

As always, there are some caveats. Despite the very positive news on the housing stimulus, there remain significant risks to the forecast. Mortgage rates will rise from their rock-bottom points as we move into the next year. The Federal Reserve will slowly start the unwinding of its mortgage-backed security purchases. Also, consumer prices will be watched for any sign of accelerating inflation. Bond investors, therefore, will be cautious about lending at such a low rates. The labor market is another worry. Though anticipated, the rising unemployment rate is a painful reminder that not all is well. The unemployment rate in October zoomed into double digits - 10.2 percent, its highest level since 1983. And the climb is not over yet – look for unemployment to hit 10.4 percent before reversing.

Despite the risks of rising mortgage rates and rising unemployment, the housing outlook has significantly improved. As the fear of falling home values disappears, that one key negative factor that has held back home sales will no longer be in play. Happier days are ahead.

For more insights from Dr. Yun, please visit www.realtor.org/research.
Information provided by the National Association of REALTORS. For more
information on these stories and more, go to www.realtor.org

The big health care reform story seems to always revert to the number of 'uninsured' both in California and the entire country. And the number we hear nationally is about 47-48 million. What's the real story?

Well, on a national perspective, here's the breakdown:

• 17 million, or 34%, are eligible for public/government programs but aren't enrolled.
• 15 million, 31%, are make enough money to afford coverage, either through their job related plan or an individual plan, but don't want to spend the money.
• 7 million, or 16%, are 'short term' uninsured, which means either in between jobs or in the waiting period for their group health plan.

That leaves 9 million, or 19%, that are truly uninsured or insurable. That's where we need something to help people out. 

The proportions are similar in California--of the 6.7 million uninsured here:

• 3 million, or 44%, are eligible for public programs but not enrolled.
• 2 million/29%, have the money to pay for coverage but don't want to pay for it.
• 7 million are in that short term category again. 
•  Leaving 1 million, or 14% of Californians that are referred to as the 'hard core uninsurables.'

According to Aetna, 3.8 million of these uninsured people on average earn over $75,000 per year. On top of that, 60% of these uninsured people are full time employees. What their data didn't indicate was the differentiation between whether or not their employers offered coverage or not, and how much the employees' portion would be. Some times group health coverage can be too expensive, even when the employer is paying the minimum 50%, or a defined contribution of a specific dollar amount.

Personally, if you can't eat it or wear it, I don't like to spend money on it either. But, not having health insurance is going to impede my ability to buy things I can eat and wear if something big happens. Guess you have to pick your priorities at some point. I know not everyone can afford extensive coverage right now, but there are affordable plans that would protect many of you from huge bills if something major happened, so you need to consider it.

Colleen King Insurance 

Well, it squeaked by, 220-215, but the House bill 3962 passed. What does this all mean? And who does Nancy Pelosi think she's kidding when she celebrates the 'bi-partisan' passage--only one Republican voted for it, so I think she's stretching it a bit, don't you?

Well, if the Senate figures out a way to come up with their version of a bill, then we will see something potentially, but most of what is included in this bill would not take effect until 2012 or 2013. For a quick synopsis of some of HR 3962's more interesting points, check it out here. You can also click on a link in this article for the full text if you aren't busy.

I've yet to understand why it take 1,990 pages and I'm pretty sure most people voting didn't read it all. How could they? Here are some points from Arthur D. Postal's article on the Life and Health National Underwriter site that you need to know about:

"H.R. 3962 would:

- Forbid plans from basing premiums or denials of care on factors such as pre-existing conditions, race, or gender.

- Limit use of age rating.

- Cap patients' out-of-pocket expenses.

- Require health plans for children to cover dental, hearing and vision care.

- Require health plans offered through the exchange system, and, eventually, employer plans, to cover preventive care at no cost to the patient.

- Close the Medicare Part D prescription drug program “doughnut hole" -- the coverage gap that enrollees experience when coverage for routine prescription expenses has run out but catastrophic coverage has not yet kicked in.

- Provide “affordability credits” to help individuals and families who meet income requirements pay their health insurance premiums, and provide health insurance subsidies for small businesses.

- Require the Secretary of Health and Human Services to negotiate drug prices on behalf of Medicare beneficiaries.

- Expand Medicaid.

House Democratic leaders say they will pay for the new costs in the bill by making Medicare and Medicaid more efficient; imposing a 5.4% tax surcharge on individuals with adjusted gross incomes over $500,000 and married couples with adjusted gross incomes over $1 million; and adopting “other tax measures.”

Now remember, the more you want a plan to cover, the more it's going to cost--this is crucial for people to understand. Just like insurance now, if you buy it with the idea of it covering the bigger things, and not every office visit, your monthly premium will be more affordable. The current talk is that the upcoming plans will have a lot of mandated services covered, and that will drive up the cost. Does everybody really need everything? Stay tuned!

By Colleen King, LA Insurance Examiner

I had the pleasure of attending Warnerfest, an industry event put on annually by Warner Pacific. This year it was held at the Reagan Library. WP is a wonderful general agency that helps agents in the field with their group health insurance business. This event usually has a motivational speaker and is more sales oriented, but this year, given the anxieties of the unknown in health care reform co-CEOs John and David Nelson were able to bring out former Senator Tom Daschle to speak. He's still involved on a near daily basis on the discussions in Washington on how the eventual reform is to be shaped.

With about 700 agents in the room, we were happy to hear he fully feels that the independent agent will have a role going forward, including being able to sell the 'public option,' whatever that ends of up being, if that ends up being. In the two main bills out, that provision is included. Sen. Daschle says that the public option that is now being discussed will be a 'Medicare look alike.'  The question then came up that geez, Medicare is underfunded and going broke, how is this going to work? That remains to be seen. He presented some very interesting facts:

There are 43 million beneficiaries on Medicare. When Medicare was first created in 1965, the average life expectancy was 65, now it's up to the late 70s. The original price tag was estimated to be $9 billion a year, it's actually $90 billion. 1% of the population accounts for 30% of expenditures, and 5 chronic diseases account for 70% of the expenses. Diabetics account for 35% of the Medicare expenses.

So why not more focus on preventive in the current Medicare structure? There will be more focus on preventive in the 'public option' if that comes to pass. Go figure--an ounce of prevention being worth a pound of cure? Carriers are trying to do more in that direction, so if there ends up being a public option, i hope that will be taken into consideration as well.

One reason a public option is being considered is to present 'competition' and keep the insurance companies 'honest.'  Well, the Senator brought up some great points. How do you compete with the government, which can print money, make the rules, doesn't have to negotiate with doctors on rates and then on top of it, is the regulator/referee of the system? Rumor has it that Medicare may need to contract and negotiate with physicians and hospitals at some point; good luck with that.

So overall, he felt before that there was a 60/40 chance of reform passing this year, he now feels is about 55/45. He feels agents are an integral part of the chain, that private insurers have to remain viable and that there will NEVER be a single payer system. Pre-existing condition exclusions will need to go away, there needs to be an individual mandate, i.e. personal responsibility, that people take look out for themselves somewhat rather than relying on the government or their employer.  So stay tuned!

Colleen King Insurance

By Colleen King LA Insurance Examiner

As if there isn't enough to look at and listen to these days when it comes to health care! This is the last of the regular Medicare Advantage (MA) articles I'm going to do for now, and it will deal with an odd plan called thePrivate Fee For Service (PFFS) plan.

We don't need to spend a lot of time on them because as of last year, these are on their way out; even the government has figured out these are weird.

Here's why. When you sign up for a PFFS plan, the government no longer pays your Medicare related claims, the carrier you enroll with does. And there's no contracted network like you would have with the regional PPOs. The carrier basically determines the amount they will pay. And get this, each time you see your doctor, unless it's an emergency, they have the option to not see you because of what they will get paid. Or not paid, is probably more like it.

Now, when you talk about government interruption in the doctor-patient relationship, this one takes the cake for me. That's why at this point these are being phased out in 2011. And not very many insurance companies offer them, because of the hassles. So in my opinion, you are better off with the Medicare HMOs, a regional PPO or looking at Medicare Supplements if you can. These do not fall under the MA series of plans, so that will be a separate article.

If you are in the market to make a change this Medicare season, do yourself a favor and contact an independent agent that sells Medicare products. Not all do because of the multiple certifications you need to redo each season. But this way they can tell you the pros and cons of each plan, and what potentially could work best for you.

Medicare.gov for more info

Five reasons to buy long term care insurance, including some you may not have thought of, part 1

By Colleen King, LA Insurance Examiner

No one wants to think about getting old, possibly passing away, etc. Especially when they want you to spend money on it that you could spend having fun now--who are we kidding?

I think by now most people have heard that care for us in our 'golden' years will be expensive, that they should plan, but here are some thoughts as to why it helps to buy Long Term Care (LTCi) coverage as it related to your family. As far at what age should you buy it.

These well delineated points came from an article by Harry Crosby in the trade publication Agent's Sales Journal. It will debunk a few myths that some people have, where their children will take care of them....

1. You will have a professional available to help plan the care that you need. Many times the company providing your coverage will have a case manager available to help coordinate services and find the services you need--that can be tough!
2. Your family can still help take care of you but not have to do all the planning. Having Long Term Care insurance does not mean they can't take care of you, it actually can help stretch your policy out longer.
3. Once you need care, your family will be able to maintain a more normal life, not juggling things to take on all aspects of your care due to finances.
4. With coverage, your family will be able to take care of you out of love, not guilt or obligation. This can be a huge strain on a family dynamic, believe me!
5. Because of the 'pool of money' your long term care policy affords you, there are more options for your care particularly when it comes to a facility. Certainly more options than a straight cash pay or MediCal patients. Money runs out--with LTCi it will stretch your funds out longer. AND, if you do end up needing to go on MediCal if you are in a facility, they can't boot you out if you end up on MediCal and they don't have enough MediCal designated beds.