What would you do if you were laid off from your job today? This question isn’t meant to make you want to hide under your desk, but to encourage you to evaluate your circumstances. What would happen to your financial situation if you suddenly didn’t have an income to rely on?
While it’s not exactly fun to plan ahead for life’s hardshipsâsay, your car breaking down or losing a jobâdoing so can help you stay afloat financially and avoid taking on debt to remedy an already tense situation.
What can you do to prepare your budget for a layoff? These four steps will help you prepare your budget for a layoff and survive a layoff financially:
1. Put some of your paycheck into savings
In order to prepare your budget for a layoff, one of the best things you can do is learn to live on less when you have your typical paychecks coming in. Living paycheck to paycheck is a reality for many, and a habit many promise to break once they earn more. If you can afford it, consider trying to live off only a portion of your paycheck. That way, you can always depend on having extra money to fall back on in the event of a hardship, like a layoff.
Jill Caponera, a consumer savings expert at coupon platform Promocodes.com, suggests paying yourself firstâputting some of each paycheck into savings before you spend any of itâin order to save for an unexpected job loss.
“Put money directly into your savings account the moment you get paid so that you’re never in a position where you’re strapped during a true financial emergency,” Caponera says. Try scheduling an automatic recurring transfer from checking to savings that hits after each payday, or create a direct deposit to savings from each paycheck through your employer.
If living on less isn’t feasible for you right now, start small and focus on taking baby steps to prepare your budget for a layoff. You could start with a money savings challenge and a more attainable goal, like living off of 97 percent of your paycheck and saving the remaining 3 percent. This means that if your take-home pay is $4,000 a month, your goal is to put 3 percent, or $120, into savings monthly and then limit your bills and spending to $3,880. As you get accustomed to that amount, gradually increase the percentage of your paycheck you save each period. Some budgeting experts suggest saving at least 20 percent of your income and living off of the other 80 percent.
If you devote even a small percentage of your paycheck to savings before the bills and discretionary expenses roll in, saving will eventually become habit. You’ll get used to budgeting only with your post-savings take-home pay, and you won’t miss the savings portion of your paycheck.
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âPut money directly into your savings account the moment you get paid so that you’re never in a position where you’re strapped during a true financial emergency.”
2. Save 3 to 6 months of expenses in an emergency fund
Once you’ve gotten used to regularly saving a portion of your income, you can save for an unexpected job loss by building up a solid emergency fund over timeâespecially if you are using an online savings account with a high interest rate. An emergency fund is a dedicated savings account that you only touch in the event of financial hardship, such as a medical emergency or job loss.
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Christian Stewart, founder of financial coaching site Do Better Financial, recommends having an emergency fund of three to six months of expenses to help you survive a layoff financially.
“The goal is to make sure all your bases are covered, meaning you can pay the bills and proceed with a relatively normal life until you find another job,” Stewart says. She notes the actual amount of money you need to save for an unexpected job loss will vary based on your lifestyle, employment industry and willingness to relocate, since this can dictate how long it could take to find another job.
To build an emergency fund and save for an unexpected job loss, Stewart recommends starting a zero-based budget. This form of budgeting gives every dollar you earn a job, such as paying a bill, funding your emergency account or financing fun and discretionary expenses. In addition to making your emergency fund a priority, this budgeting strategy helps you identify exactly how much you spend within each budget category each month. You can then find areas of careless spendingâperhaps an unused subscription serviceâwhere you could stand to cut back. You could redistribute those dollars to your emergency fund.
“In the event of a layoff, you will have a clear line of sight to regular areas of your spending that can be cut if it takes longer to find a new job,” Stewart says.
After you’re comfortable with the size of your emergency fund and feel like you can survive a layoff financially, you can use any extra savings for a different financial goal, such as saving for retirement or a down payment on a car or home.
3. Find income from a side hustle
Another way to survive a layoff financially is to have a side gig in place. Contrary to what some believe, side hustles do not have to take up an onerous amount of your time. There are actually many side hustles you can do while working full time, such as freelancing in your current field, driving for a rideshare app or tutoring.
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Not only do side jobs create extra cash flow to devote toward savings or debt repayment when you have a full-time job, they also give you an added layer of security to help you save for an unexpected job loss. You might not be able to replace your full-time earnings with your music lesson business, but it can provide you with some predictable cash flow while you interview for a new position.
You could even turn your side hustle into a full-time job if you have a passion project you’ve been wanting to turn into a career. Alternatively, your side hustle turned full-time gig could help maintain your income stream if you plan to take additional time off after a layoffâif you decide to go back to school or make a move to a new industry, for example.
4. Know where to turn for assistance
Being laid off can be a traumatic experience, and if it does happen, it is important to know where to turn and how to make decisions that aren’t rooted in fear or emotion.
“Sit down with a level-headed friend, spouse and/or counselor to process your new financial reality,” Stewart of Do Better Financial says. “If you’re receiving a compensation package, do yourself a favor and work out beforehand where the money will be spent and how long you need it to last.”
Speaking of work benefits, make sure you utilize all of the benefits possible before your layoff goes into full effect, such as getting an annual physical through your health insurance plan.
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âSit down with a level-headed friend, spouse and/or counselor to process your new financial reality. If you’re receiving a compensation package, do yourself a favor and work out beforehand where the money will be spent and how long you need it to last.”
“If you’ve been laid off, or are expecting an upcoming layoff, you should immediately contact your state’s unemployment office to set up your account and start receiving your compensation,” consumer savings expert Caponera says. “While these benefits won’t pay as much as your full-time salary, these funds will certainly help to cover your monthly bills and living expenses while you continue to look for work.”
Each state has different benefits and paperwork requirements, so make sure you’re using your state’s government website to learn more and to survive a layoff financially.
Prepare your budget for a layoff
Facing a layoff can be emotionally and financially draining, especially if you don’t see it coming. The most important thing is to start planning ahead, and prepare your budget for a layoff before it happens.
The post A Step-by-Step Guide to Prepare Your Budget for a Layoff appeared first on Discover Bank – Banking Topics Blog.
Source: discover.com
10 Financial Steps to Take Before Having Kids
According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and thatâs for each child. This figure doesnât even include the cost of college, which is growing faster than inflation.
CollegeBoard data found that for the 2019-2020 school year, the average in-state, four-year school costs $21,950 per year including tuition, fees, and room and board.
Kids can add meaning to your life, and most parents would say theyâre well worth the cost. But having your financial ducks in a row â before having kids â can help you spend more time with your new family instead of worrying about paying the bills.
10 Financial Moves to Make Before Having Kids
If you want to have kids and reach your long-term financial goals, youâll need to make some strategic moves early on. There are plenty of ways to set yourself up for success, but here are the most important ones.
1. Start Using a Monthly Budget
When youâre young and child-free, itâs easy to spend more than you planned on fun activities and nonessentials. But having kids has a way of ruining your carefree spending habits, and thatâs especially true if youâve spent most of your adult life buying whatever catches your eye.
Thatâs why itâs smart to start using a monthly budget before having kids. It helps you prioritize each dollar you earn every month so youâre tracking your familyâs short- and long-term goals.
You can create a simple budget with a pen and paper. Each month, list your income and recurring monthly expenses in separate columns, and then log your purchases throughout the month. This gives you a high-level perspective about money going in and out of your budget. You can also use a digital budgeting tool, like Mint, Qube Money, or You Need a Budget (YNAB) to get a handle on your finances.
Regardless of which budgeting tool you choose, create categories for savings (e.g. an emergency fund, vacation fund, etc.) and investments. Treat these expense categories just like regular bills as a way to commit to your familyâs money goals. Your budget should provide a rough guide that helps you cover household expenses and save for the future while leaving some money for fun.
2. Build an Emergency Fund
Most experts suggest keeping three- to six-months of expenses in an emergency fund. Having an emergency fund is even more crucial when you have kids. You never know when youâll face a broken arm, requiring you to cover your entire health care deductible in one fell swoop.
Itâs also possible your child could be born with a critical medical condition that requires you to take time away from work. And donât forget about the other emergencies you can face, from a roof that needs replacing to a job loss or income reduction.
Your best bet is opening a high-yield savings account and saving up at least three months of expenses before becoming a parent. Youâll never regret having this money set aside, but youâll easily regret not having savings in an emergency.
3. Boost Your Retirement Savings Percentage
Your retirement might be decades away, but making retirement savings a priority is a lot easier when you donât have kids. And with the magic of compound interest that lets your money grow exponentially over time, youâll want to get started ASAP.
By boosting your retirement savings percentage before having kids, youâll also learn how to live on a lower amount of take-home pay. Try boosting your retirement savings percentage a little each year until you have kids.
Go from 6% to 7%, then from 8% to 9%, for example. Ideally, youâll get to the point where youâre saving 15% of your income or more before becoming a parent. If youâre already enrolled in an employer-sponsored retirement plan, this change can be done with a simple form. Ask your employer or your HR department for more information.
If youâre self-employed, you can still open a retirement account like a SEP IRA or Solo 401(k) and begin saving on your own. You can also consider a traditional IRA or a Roth IRA, both of which let you contribute up to $6,000 per year, or $7,000 if youâre ages 50 or older.
4. Start a Parental Leave Fund
Since the U.S. doesnât mandate paid leave for new parents, check with your employer to find out how much paid time off you might receive. The average amount of paid leave in the U.S. is 4.1 weeks, according to a study by WorldatWork, which means you might face partial pay or no pay for some weeks of your parental leave period. It all depends on your employerâs policy and how flexible it is.
Your best bet is figuring out how much time you can take off with pay, and then creating a plan to save up the income youâll need to cover the rest of your leave. Letâs say you have four weeks of paid time off, but plan on taking 10 weeks of parental leave, for example. Open a new savings account and save weekly or monthly until you have six weeks of pay saved up.
If you have six months to wait for the baby to arrive and you need $6,000 saved for parental leave, you could strive to set aside $1,000 per month for those ten weeks off. If youâre able to plan earlier, up to 12 months before the baby arrives, then you can cut your monthly savings amount and set aside just $500 per month.
5. Open a Health Savings Account (HSA)
A health savings account (HSA) is a tax-advantaged way to save up for health care expenses, including the cost of a hospital stay. This type of account is available to Americans who have a designated high-deductible health insurance plan (HDHP), meaning a deductible of at least $1,400 for individuals and at least $2,800 for families. HDHPs must also have maximum out-of-pocket limits below $6,900 for individuals and $13,800 for families.
In 2020, individuals can contribute up to $3,550 to an HSA while families can save up to $7,100. This money is tax-advantaged in that it grows tax-free until youâre ready to use it. Moreover, youâll never pay taxes or a penalty on your HSA funds if you use your distributions for qualified health care expenses. At the age of 65, you can even deduct money from your HSA and use it however you want without a penalty.
6. Start Saving for College
The price of college will only get worse over time. To get a handle on it early and plan for your future childâs college tuition, start saving for their education in a separate account. Once your child is born, you can open a 529 college savings account and list your child as its beneficiary.
Some states offer tax benefits for those who contribute to a 529 account. For example, Indiana offers a 20% tax credit on up to $5,000 in 529 contributions each year, which gets you up to $1,000 back from the state at tax time. Many plans also let you invest in underlying investments to help your money grow faster than a traditional savings account.
7. Pay Off Unsecured Debt
If you have credit card debt, pay it off before having kids. Youâre not helping yourself by spending years lugging high-interest debt around. Paying off debt can free-up cash and save you thousands of dollars in interest every year.
If youâre struggling to pay off your unsecured debt, there are several strategies to consider. Here are a few approaches:
Debt Snowball
This debt repayment approach requires you to make a large payment on your smallest account balance and only the minimum amount thatâs due on other debt. As the months tick by, youâll focus on paying off your smallest debt first, only to âsnowballâ the payments from fully paid accounts toward the next smallest debt. Eventually, the debt snowball should leave you with only your largest debts, then one debt, and then none.
Debt Avalanche
The debt avalanche is the opposite of the debt snowball, asking you to pay off the debt with the highest interest rate first, while paying the minimum payment on other debt. Once that account is fully paid, youâll âavalancheâ those payments to the next highest-rate debt. Eventually, youâll only be left with your lowest-interest account until youâve paid off all of your debt.
Balance Transfer Credit Card
Another popular strategy involves transferring high-interest balances to a balance transfer credit card that offers 0% APR for a limited time. You might have to pay a balance transfer fee (often 3% to 5%), but the interest savings can make this strategy worth it.
If you try this strategy, make sure you have a plan to pay off your debt before your introductory offer ends. If you have 15 months at 0% APR, for example, calculate how much you need to pay each month for 15 months to repay your entire balance during that time. Any debt remaining after your introductory APR period ends will start accruing interest at the regular, variable interest rate.
8. Consider Refinancing Other Debt
Ditching credit card debt is a no-brainer, but debt like student loans or your home mortgage can also weigh on your future familyâs budget.
If you have student loan debt, look into refinancing your student loans with a private lender. A student loan refinance can help you lower the interest rate on your loans, find a manageable monthly payment, and simplify your repayment into one loan.
Private student loan rates are often considerably lower than rates you can get with federal loans â sometimes by half. The caveat with refinancing federal loans is that youâll lose out on government protections, like deferment and forbearance, and loan forgiveness programs. Before refinancing your student loans, make sure you wonât need these benefits in the future.
Also look into the prospect of refinancing your mortgage to secure a shorter repayment timeline, a lower monthly payment, or both. Todayâs low interest rates have made mortgage refinancing a good deal for anyone who took out a mortgage several years ago. Compare todayâs mortgage refinancing rates to see how much you can save.
9. Buy Life Insurance
You should also buy life insurance before having kids. Donât worry about picking up an expensive whole life policy. All you need is a term life insurance policy that covers at least 10 years of your salary, and hopefully more.
Term life insurance is extremely affordable and easy to buy. Many providers donât even require a medical exam if youâre young and healthy.
Once you start comparing life insurance quotes, youâll be shocked at how affordable term coverage can be. With Bestow, for example, a thirty-year-old woman in good health can buy a 20-year term policy for $500,000 for as little as $20.41 per month.
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10. Create a Will
A last will and testament lets you write down what should happen to your major assets upon your death. You can also state personal requests in writing, like whether you want to be kept on life support, and how you want your final arrangements handled.
A will can also formally define who youâd like to take over custody of your kids, if both parents die. If you donât formally make this decision ahead of time, these deeply personal decisions might be left to the courts.
Fortunately, itâs not overly expensive to create a last will and testament. You can meet with a lawyer who can draw one up, or you can create your own using a platform like LegalZoom.
The Bottom Line
Having kids can be the most rewarding part of your life, but parenthood is far from cheap. Youâll need money for expenses you mightâve never considered before â and the cost of raising a family only goes up over time.
Thatâs why getting your money straightened out is essential before kids enter the picture. With a financial plan and savings built up, you can experience the joys of parenthood without financial stress.
The post 10 Financial Steps to Take Before Having Kids appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Where to Find Insurance for Freelancers
Source: goodfinancialcents.com
How to Prevent Your Health Insurance Provider from Denying Your Claim
You need pre-authorization or a referral
Did you need to undergo a medical procedure such as an MRI or a CT scan? If so, your insurance provider may require a referral or pre-authorization from your physician.
Even if the facility agrees to provide the procedure without a referral or pre-authorization, your insurance provider may not agree to cover the cost. To rectify the situation, see if your doctor can reach out to your insurance carrier and let them know about ordering the procedure for you. (Physicians and other healthcare specialists using services like Fortis Medical Billing may have an easier time working with your insurance carrier.)
Your policy does not cover the procedure
Even with proper pre-authorization or a referral, you must check with your insurance provider or look over your policy to ensure your plan includes the procedure. Even if your carrier previously covered the procedure, your latest plan may not include it.
You used an out-of-network provider
Something else to double-check on your insurance plan is whether the provider you want to see is in your current provider network.
Provider networks are common for exclusive provider organizations and health maintenance organizations. If you do not use an approved provider who agrees to your carrier's payment terms, your insurance carrier may deny your claim. Occasionally, insurance companies will accept a claim from an out-of-network provider, but you may have to pay a higher percentage of the costs than you normally would.
If you want to have the option of using out-of-network providers, ask your current carrier if you can include out-of-network benefits on your current health insurance plan. That way, you receive non-emergency and/or elective treatment.
Your claim contains typos
A clerical error on your part may be the reason for your denial. Check to see whether you listed your birth date, name, address, and all other personal information correctly on your claim. If you notice a typo, reach out to your provider's customer service department to correct it.
Your physician billed the wrong provider
Perhaps the mistake was your doctor's and the wrong insurance carrier received your claim. This sometimes happens if you go to a doctor or another healthcare provider you have not been to in a while. They may have outdated or inaccurate policy information on file.
Do you have multiple health insurance policies? Maybe you and your spouse have separate plans through your employers but see the same physician. If so, your doctor may have sent the bill to your spouse's carrier rather than yours.
If your physician billed the wrong provider, see that the office sends the bill to the right company as soon as possible. Waiting too long could result in a denial because the bill did not arrive on time to qualify for approval.
Your service was not considered medically necessary
Another reason insurance companies deny claims is that they do not feel the requested service qualifies as medically necessary. Even though you may need a procedure, treatment, or service, you may have to make your policy provider understand why you need it.
Team up with your doctor to supply your carrier with adequate evidence of your medical need. Also, ask yourself if you truly need the service to improve your health or if you only want the service for vanity or nonessential reasons.
You did not choose the less-expensive option
Insurance companies are a business, which means they want more money coming in than they do funneling out. If you opt for a more expensive medical option when a less expensive one achieves the desired result, your carrier may deny your claim based on cost-efficiency.
Always choose the less-expensive procedure or treatment first. If results do not work the way your physician would like, then you can see if your provider would cover the more expensive option.
Do not lose hope if your carrier denies your claim. A phone call and the right information could change everything for the better.
Source: quickanddirtytips.com
How Much Does Long-Term Care Insurance Cost?
A 55-year-old can expect to pay a long-term care insurance premium of $2,050 per year on average, according to a 2019 price index survey of leading insurers conducted by the American Association for Long-Term Care Insurance (AALTC). That will cover $164,000 in benefits when the policyholder takes out the insurance and $386,500 at age 85. (Policies often include an inflation rider.) However, long-term care insurance costs vary widely, depending on factors like your age, health condition and the specific policies of your insurance carrier. The AALTC estimates that a single 55-year-old can pay around $1,325 to $2,550 a year for a policy. Thatâs why itâs important to shop around to find the best rates and terms. You should also speak with a financial advisor who can help you plan the future.
How Much Does Long-Term Care Insurance Cost?
The AALTC provides the following estimates of annual premiums based on its 2019 study of different long-term care insurance carriers.
Annual Premium Estimates Status Age Premium Single Male 55 $2,050 Single Female 55 $2,700 Couple 55 $3,050 (Combined cost)
Keep in mind, though, that these are only averages based on a pool of data gathered from leading insurance carriers. The costs of long-term care insurance can vary widely, depending on several key factors. We explore some of these below.
Health: Some medical conditions will disqualify you from even being able to purchase a policy, including muscular dystrophy, cystic fibrosis and dementia. Thatâs because insurers will likely lose money on those policies. Generally, the healthier you are, the less likely youâll ever need to file a claim â and so the lower your premium.
Age: In general, youâll pay more in long-term care insurance if you take out a policy when youâre older, since youâre probably less healthy and youâre closer to needing the assistance the policy covers. This is why the AALTCI recommends you begin shopping for long-term care insurance between the ages of 52 of 64.
Marital status: When combined, premiums tend to be lower for married couples than they would be for individuals paying for a personal policy.
Gender: Because women tend to live longer than men and make claims more frequently than their male counter parts, women tend to pay more for insurance premiums. The AALTCI study showed that a single female pays an annual premium of $3,050 on average while the single man that age paid $2,050.
Carrier policies: Each insurance carrier sets its own rates and underwriting standards. In fact, costs for the same services can vary widely from one company to another. This is why you should gather quotes from various carriers. You can also work with an experienced long-term care insurance agent who can gather these for you and help you understand the differences between insurance policies. They can also help you determine the kind of coverage youâre likely to need, so you donât over-insure.
Should I Get Long-Term Care Insurance?
The average 65-year-old today has a 70% chance of needing some kind of long-term care eventually, according to the Urban Institute and the U.S. Department of Health and Human Services. Of those who need it, most would use it for about two years, but around 20% would require it for more than five years.
The smart money, then, would prepare for this significant cost. To give you a sense of how much bills can run, below are the estimated annual costs of different types of long-term care services, according to Genworth Financial, which has been tracking them since 2004.
Estimated Annual Costs Type of Services Price Private room nursing home $102,000 Assisted living facility $48,612 Home care aide $52,624 Home care homemaker $51,480
Whatâs more, costs have been rising faster than even inflation. Genworth found that the average cost of home-care services increased about $892 annually each year between 2004 and 2019. The average cost for a private room in a nursing home jumped by about $2,468 each year during the same time period, currently putting the average cost of a semi-private room in a nursing home at $89,297 per year. As noted before, about 20% of Americans will require more than five years of care.
Unfortunately, with these costs, many retirement nest eggs will come up short. And contrary to popular belief, Medicare covers only limited medical costs, e.g., brief nursing home stays and narrow amounts of skilled nursing or rehabilitation services. The scope for Medicaid is even smaller. On average, it covers about 22 days of home care services if you meet very low income thresholds.
Of course, thereâs no way of knowing how much long-term care coverage youâll need. But knowing what long-term care insurance does and doesnât cover is key to making sure youâre not over- or under-protected.
What Does Long-Term Care Insurance Cover?
Long-term health insurance typically covers services not provided for by regular health insurance. This can include assistance with completing daily tasks like eating, bathing and moving around. In the industry, these are known as activities of daily living (ADLs). Long-term care insurance policies generally would reimburse you for these services in such locations as:
- Your home
- Adult day care center
- Assisted living facility
- Nursing home
Some policies also cover care related to chronic medical conditions such as Alzheimerâs disease and other cognitive disorders.
But keep in mind that these are generalizations. There is no industry standard that sets ADL requirements for claim eligibility or what kinds of illnesses long-term care insurance will cover. Each insurance carrier makes its own rules.
So itâs essential to understand when coverage kicks in â and for how long. Policies used to provide coverage for life, but now most cap benefits at one to five years. If possible, some experts recommend extending the initial period when you are not compensated for costs (itâs often 90 days) in exchange for a longer period on the other end of receiving benefits. You also will want to know how premiums may increase over time and whether the cap on benefits will, too. Some carriers allow you to place an inflation rider that increases your daily benefit every year. That increase can be up to 3%.
How Does Long-Term Care Insurance Work?
After you apply for long-term care insurance, the insurer may request your medical records and ask you some questions about your health. You can choose the type of coverage you want, but the insurer must approve you.
When the company issues you a policy, you begin paying premiums every year. Once you qualify for benefits, which is often defined by not being able to perform a set number of ADLs, and the required waiting period has passed, you can file a claim. The insurance company then reviews your submitted medical records and may send a nurse to perform an evaluation before approving a payout. Once approved, you will be reimbursed for paid services, up to the cap on your policy.
Ideally, youâll stay healthy and your long-term care needs will be minimal. Though your premiums will add up over time, this is one situation where you hope not to get your moneyâs worth. On the bright side, to lessen the hit to your wallet, the government may give you a tax break.
Tax Relief for Long-Term Care Premiums
Some or all of the long-term care premiums you pay may be tax deductible at the federal and state level. But you must make these payments toward a tax-qualified insurance policy. Also, you must meet certain income thresholds.
Maximum Deductible Premium
Age Maximum Deduction 40 or under $420 41 to 50 $790 51 to 60 $1,580 61 to 70 $4,220 71 and over $5,220 How to Buy Long-Term Care Insurance
You can purchase long-term care insurance directly from carriers or through a sales agent. The agent can help you shop around for comparable rates. This professional can also help you understand how different policies work and what they offer.
Also, you may be able to get long-term care insurance through your employer. Some allow you to purchase policies at discounted group rates. However, you should get quotes from multiple insurance companies. In some cases, you may find better rates for more suitable policies that arenât through your employer.
How to Calculate Your Long-Term Care Insurance Costs
Some websites such as Genworth Financial provide interactive calculators that can estimate what long-term care premiums may be like in your area. Prices and policies can vary, depending on the state.
Tips on Paying for Long-Term Care
- If you have a health savings account (HSA), you may want to start socking away more money in it for long-term care. Also called health IRAs, these plans allow your money to grow tax deferred. (But you have to have a high-deductible health plan to open an HSA). To find out more, check out our report on the best HSAs.
- Donât go it alone. A financial advisor can help you devise an insurance plan and figure out how youâre going to pay for it. If you are in the market to buy insurance now, some advisors are also licensed insurance agents. Use our matching tool to find the right advisor for you.
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The post How Much Does Long-Term Care Insurance Cost? appeared first on SmartAsset Blog.
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HIPPA (Health Insurance Portability and Accountability Act)
With the growing use of paperless forms, electronic information transfers and storage has become the norm. This is true about our medical information as well. So, how do we know that our sensitive medical records are being kept private? Thanks to a federal law entitled Health Insurance Portability and Accountability Act (HIPAA), health plans, health care providers, and health care clearinghouses are required to abide by a set of standards to protect your data. While this law does offer protection for certain things, there are some companies that are not required to follow these standards. Keep reading to find out where the loopholes are and how you are being protected by this law.Â
What is the HIPAA Law and Privacy Rule?
Although HIPAA and Privacy and Security Rules have been around since 1996, there have been many revisions and changes over the years so to keep up with evolving health information technology. HIPAA and the HIPAA Privacy Rule set the bar for standards that protect sensitive patient information by making the rules for electronic exchange as well as the privacy and confidentiality of medical records and information by health care providers, health care clearing houses, and health plans. In accordance with HIPPA, Administrative Simplification Rules were created to safeguard patient privacy. This allows for information that is medically necessary to be shared while also maintaining the patientâs privacy rights. The majority of professionals in the health care industry are required to be compliant with the HIPAA regulations and rules.Â
Why do we have the HIPAA Act and Privacy Rule?
The original goal of HIPAA was to make it easier for patients to keep up with their health insurance coverage. This is ultimately why the Administrative Simplification Rules were created to simplify administrative procedures and keep costs at a decent rate. Because of all the exchanges of medical information between insurance companies and health care providers, the HIPAA Act aims to keep things simple when it comes to the healthcare industryâs handling of patient records and documents and places a high importance on maintain patientsâ protected health information.Â
HIPAA Titles
The Health Insurance Portability and Accountability Act, a federal law which was designed to safeguard healthcare data from data breaches, has five titles. Here is a description of each title:
- Title I: HIPAA Health Insurance Reform: The objective of Title I is to help individuals maintain health insurance coverage in the event that they lose or change jobs. It also prevents group health plans from rejecting applicants from being covered for having specific chronic illnesses or pre-existing conditions.Â
- Title II: HIPAA Administrative Simplification: Title II holds the U.S. Department of Health and Human Services (HHS) responsible for setting national standards for processing electronic healthcare transactions. In accordance with this title, healthcare organizations must implement data security for health data transactions and maintain HIPPA compliance with the rules set by HHS.Â
- Title III: HIPPA Tax-Related Health Provisions: This title is all about the national standards regarding tax-related provisions as well as the general rules and principles in relation to medical care. Â
- Title IV: Application and Enforcement of Group Health Plan Requirements: Title IV elaborates further on issues related to health insurance coverage and reform, one key point being for patients with pre-existing conditions.Â
- Title V: Revenue Offsets: Â This title has provisions regarding company-owned life insurance policies as well as how to handle situations in which individuals lose their citizenship due to issues with income taxes.Â
In day to day conversations, when you hear someone bring up HIPAA compliance, they are most likely referring to Title II. To become compliant with HIPAA Title II, the health care industry must follow these provisions:
- National Provider Identifier Standard: Every healthcare entity is required to have a 10-digit national provider identifier number that is unique to them, otherwise known as, an NPI.Â
- Transactions and Code Sets Standard: Healthcare organizations are required to follow a set of standards pertaining to electronic data interchange (EDI) to be able to submit and process insurance claims. Â
- HIPAA Privacy Rule: This rule sets national standards that help to protect patient health information.
- HIPAA Security Rule: This rule establishes the standards for patient data security.Â
What information is protected by HIPAA?
The HIPAA Privacy Rule safeguards all individually identifiable health information obtained or transferred by a covered entity or business associate. Sometimes this information is stored or transmitted electronically, digitally, on paper or orally. Individually identifiable health information can also be referred to under the Privacy Rule as PHI.Â
Examples of PHI are:
- Personal identifying information such as the name, address, birth date and Social Security number of the patient.Â
- The mental or physical health condition of a person.
- Certain Information regarding the payment for treatments.
HIPAA penalties
Health industries and professionals should take extra caution to prevent HIPAA violations. If a data breach occurs or if there is a failure to give patients access to their PHI, it could result in a fine.Â
There are several types of HIPAA violations and penalties including:
- Accidental HIPAA violations could result in $100 for an isolated incident and an upward of $25,000 for repeat offenses.
- Situations in which there is reasonable cause for the HIPAA violation could result in a $1,000 fine and an upward of $100,000 annually for repeat violations.
- Willfully neglecting HIPAA can cost anywhere between $10,000-$50,000 and $250,000-$1.5 million depending on whether or not it was an isolated occurrence, If it was corrected within a specific timeframe.Â
The largest penalty one could receive for a HIPAA violation is $50,000 per violation and $1.5 million per year for repeated offenses.
HIPPA (Health Insurance Portability and Accountability Act) is a post from Pocket Your Dollars.
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