Author: bretpadilla99@gmail.com

June 17, 2019

This briefing from Cigna:

On June 13, the U.S. Departments of the Treasury, Labor, and Health and Human Services (tri-agencies) issued a final rule allowing employees to use the dollars in employer-funded Health Reimbursement Arrangements (HRAs, also called Health Reimbursement Accounts) to purchase individual coverage both on and off the public Marketplace (or Exchange). The rule also creates a new excepted benefit HRA (EBHRA) to enable employees to be reimbursed for excepted benefit costs. This finalizes a proposed rule issued in Oct. 2018 largely as proposed, but with some modifications. The rule follows through on an Executive Order that directed the tri-agencies to consider ways to expand the flexibility of HRAs. 

Individual Coverage HRAs
Beginning Jan. 1, 2020, employers can offer individual coverage HRAs (ICHRAs) to provide tax-exempt dollars to their employees for the purchase of Affordable Care Act (ACA)-compliant individual coverage, but not the less comprehensive, short-term, limited duration insurance (STLDI) coverage. Under the final rule:

• Employees can use ICHRA funds to pay the premium for individual insurance coverage purchased either on or off the public Marketplace.
• Employers can offer their employees either a group health plan or an ICHRA, but not both.
  • Offering an ICHRA will satisfy the Section 4980H Employer Mandate, if it meets the affordability threshold.
  • Employees can opt out of an ICHRA if they are eligible for premium tax credits on the public Marketplace.
• Employers are required to make the ICHRA available to entire “classes” of employees (e.g., full-time, part-time, or seasonal workers).
  • In response to comments received on the proposed rule, the final rule includes a minimum class size requirement based on employer size.
    • <100 employees: minimum class of 10 employees
    • 100-200 employees: minimum class of 10% of total employees
    • >200 employees: minimum class of 20 employees
• Employers must provide a written notice to employees at least 90 days prior to the start of the plan year that details the terms of the ICHRA. The tri-agencies will provide a model notice.
• The total funds offered through an ICHRA may vary in two instances: as the age of the participant increases (not to exceed a 3:1 age band), and based on the number of dependents covered.
• A new individual market Special Enrollment Period (SEP) has been established for when an employee or their dependent gains access to an ICHRA.

Excepted Benefit HRAs
Under the final rule, employers that offer traditional group health coverage can offer EBHRAs of up to $1,800 per year to reimburse employees for certain medical expenses, including stand-alone dental or vision benefits or premiums for STLDI coverage. The maximum amount will be indexed annually after 2020. Employees do not need to be enrolled in a group health plan to use EBHRA funds, and an employer cannot offer both an ICHRA and EBHRA. 

The tax treatment of HRAs remains unchanged. The final rule can be read in detail here.

There was a fundamental change in philosophy I had about two years ago that transformed the way I read and approach books which has accelerated my enjoyment and ability to read or listen more. There’s a great blogpost I just read really outlining this approach. I think this is an unconventional approach, so maybe could be important for someone to hear. Here’s the gist though.

1. If a book looks interesting, buy it. It’s an investment.
2. Don’t feel like you have to trudge through and finish a bad book, or not start a new one because you’re already reading one.
3. Feel free to skip ahead if a section you find is boring, or it’s not connecting with you. (Mainly more for non-fiction books).
4. Get used to reading multiple books at the same time. Learning in a multi-disciplinary way creates different mental models for your brain to make connections faster and find creativity across disciplines.
5. When you open up your Kindle or Audible, you will never feel bored because you are only reading what you’re “in the mood” for today, so you’ll actually be more interested and engaged for whatever you’re reading or listening to today.

I learned this approach from Naval Ravikant, the founder and CEO of AngelList on a podcast. Here’s how he describes it:

“Everyone I know is stuck on some book. I’m sure you’re stuck on some book right now. It’s page 332, you can’t go on any further but you know you should finish the book, so what do you do? You give up reading books for a while. That for me was a tragedy, because I grew up on books, and then I switched to blogs and then I switched to Twitter and Facebook, and then I realized I wasn’t really learning anything, I was just taking little dopamine snacks all day long.

We’re taught from a young age that books are something you finish, books are sacred. When you go to school and you’re assigned to read a book, you have to finish the book… A really good book costs $10 or $20 and can change your life in a meaningful way. It’s not something I believe in saving money on. This was even back when I was broke and I had no money. I always spent money on books. I never viewed that as an expense. That’s an investment to me. I probably spend 10 times as much money on books as I actually get through. In other words, for every $200 worth of books I buy, I actually end up making it through 10%. I’ll read $20 worth of books, but it’s still absolutely worth it. I open up my kindle, I look through. Based on my mood, I’ll flip through to whatever book matches my mood…

The most important thing that does for me is it lets me read on a regular basis. If the book is getting a little boring, I’ll skip ahead. Sometimes I’ll start reading a book in the middle because some paragraph caught my eye and I’ll just continue from there, and I feel no obligation whatsoever to finish the book.

The problem with books is that, to write a book, to publish a physical, dead tree book, takes a lot of work and effort and money. Sometimes people start wrapping long books around simple ideas. Those are probably my least favorite books. That’s why I avoid the whole business and self-help category because you generally have one good idea and it’s buried in hundreds or thousands of pages and lots of anecdotes.

I just view it as a blog archive. A blog might have 300 posts on it and you could read just the two, three, five that you need right now. I think you can think of a book the same way. You skim very very quickly to find the ones that grab you, that are important and interesting for you, and then you stick to those and go really deep. There’s exploration, and there’s exploitation. So you explore a lot of books until you decide that there’s something there to exploit.”

It was Charlie Munger’s 95th birthday earlier in January. For those who don’t know, Charlie is Warren Buffett’s partner and Co-investor at Berkshire Hathaway. Both are not only investors but also known for their simple, yet wise and timeless life-philosophies. In honor of Charlie’s birthday, here is a list of Charlie’s approach to making decisions (not only investments) into 12 main categories, summarized in under 500 words by investor and writer Tren Griffin. Maybe someone will find some value here.

1. STAY IN YOUR CIRCE OF COMPETENCE: Know the edge of your own competency. It is not a competency if you don’t know the edge of it.

2. MAINTAIN A MARGIN OF SAFETY: Buy assets at a bargain so your investing results can be financially attractive even if you make a mistake. Price is not always the same as value. Avoid big mistakes. Reputation and integrity are your most valuable assets. Reputation earned over a lifetime can be lost in seconds.

3. THINK INDEPENDENTLY AND WITH OPPORTUNITY COST IN MIND: Markets and crowds are not always wise. Allocate your time and other resources to your most attractive opportunities. The highest and best use of a resource is always measured by the next best use.

4. BE INTELLECTUALLY HUMBLE: Recognize that the world is genuinely complex and that what you know is a fraction of what you still don’t know. Wait for what you expect rather than try to forecast timing. Think about second order and above impacts of anything.

5. BE SMART BY NOT BEING STUPID: Tune out stupidity. The greatest and most important risk is permanent loss of capital, not just volatility in price. Only accept risk when you are properly compensated for assuming that risk. Activity for its own sake is not intelligent.

6. BE PATIENT, BUT AGGRESSIVE WHEN IT IS TIME: Great opportunities do not appear that often, but when they do appear they won’t last long so you must be aggressive when the time is right. When the odds of success are very substantially in your favor, bet big.

7. BE PREPARED: Great investments are hard to find but by consistently working hard you might find a few of them. You only need to find a few great investments in a lifetime.

8. KEEP IT SIMPLE: Apply organized common sense when solving a problem or when doing an analysis of an opportunity. Think more and calculate less. Avoid false precision and unnecessary transaction costs. Try not to interrupt interest that is compounding. Focus on being a business analyst, not a macroeconomic forecaster. Pay attention to the business cycle, but don’t try to predict it.

9. ACCEPT CHANGE: Avoid master plans since change is the only constant in life. Adapt. Look for evidence that would dis-confirm your own ideas. Understand arguments from all sides. Face your problems.

10. THINK BROADLY: Use multiple models from many disciplines in doing an analysis. Borrow the great ideas of the best thinkers in every discipline. The antidote to man with a hammer syndrome is a full set of tools.

11. AVOID HUBRIS: Try to avoid fooling yourself, which is hard since it is easy to do. Understand that success in life is luck more than you imagine.

12. KEEP LEARNING: Be a learning machine. Never stop reading. Be curious. Surround yourself with smart people. Set aside time to read and think.

Most Enjoyable Books Finished:
– Surely You’re Joking Mr. Feynman! by Richard Feynman
– Total Recall by Arnold Schwarzenegger
– Titan: The Life of John D. Rockefeller Sr. by Ron Chernow
– A Man for All Markets by Ed Thorpe

Most Important Books:
-Thinking Fast and Slow by Daniel Kahneman
– Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Taleb
– Mastering the Market Cycle by Howard Marks

Surely You’re Joking Mr. Feynman! by Richard Feynman

Ranked as one of the ten greatest physicists of all time, Nobel Prize winner Richard Feynman demonstrates why he’s such a unique character in history with this book. This is a laugh out loud book and shows how Feynman’s mind operates and how he is curious about how nearly EVERYTHING works, from learning to dance, to learning to play the bongos, to learning how to pick locks, and on and on. Feynman is FUNNY, playing practical jokes on his colleagues while he worked on the Manhattan Project in Los Alamos developing the nuclear bomb. This book is one I will probably revisit again at some point down the road because it was just so enjoyable and emanates what being someone who approaches the world with joy and curiosity can do, and how much they can enjoy life.

Total Recall by Arnold Schwarzenegger

Arnold is an AMAZING person. This biography was really uplifting, inspiring, and funny. Arnold set a vision for himself to come to America and become a bodybuilding champion. Speaking no English, he came to America and won the Mr. Olympia competition 7 times. Many people don’t know though, that Arnold would take business classes along with his English classes. He made $1M in real estate before he ever became a millionaire in the movies. He would go on to do MANY other various business ventures. He then set his mind to becoming the highest paid actor in the world, which he achieved. And then later, set his mind to becoming Governor of CA, the largest state in the country, and was twice elected. It’s an amazing story, but listening to Arnold tell it, you get the full grit, determination, and 100% uncompromising vision that leads someone to not take NO for an answer in order to accomplish monumental goals.

Titan: The Life of John D. Rockefeller Sr by Ron Chernow

I wrote a long review of this one a few months ago. I LOVED this biography of Rockefeller who may be the best businessman and philanthropist in American history. John D. hardly changed his demeanor from the days he was a young man, to the day he became the richest man in the world, till the day he died. He reshaped what it meant to be a philanthropist and changed the world. Can’t recommend this one enough. 

A Man for All Markets by Ed Thorpe

Ed Thorpe’s story touched so many areas I enjoy. This mathematician from MIT was the man who invented how to count cards in blackjack and demonstrate that the game could be beat. But he also was an early hedge fund manager and one of the early “quant” hedge fund managers in the markets, racking up impressive returns which handily beat the markets year after year. He also discovered the Bernie Madoff fraud in the 1990s and tried to alert people that Madoff was committing fraud, to no avail. Fascinating story of accomplishments from MIT, to Las Vegas, to markets and business.

Thinking Fast and Slow by Daniel Kahneman

Daniel Kahneman is the only behavioral psychologist to win the Nobel Prize in economics. Through his lifetime of work with his partner Amos Tversky, he demonstrated that even though people believe that they’re rational, they are NOT. Kahneman demonstrates how the brain actually works, breaking it down to System 1 (impulsive) and System 2 (deep, slow thinking analysis) decision making. Most people don’t realize how often they make System 1 decisions verses System 2 (which is almost always better to do, stopping and taking more time to think through). Kahneman’s lifetime of countless studies demonstrate all of the biases that cloud human judgments, from recency bias, availability bias, anchoring, confirmation bias etc. If you want to understand your mind better, you should know that we all fool ourselves often with our own biases and emotional decisions every day. Kahneman’s work laid the ground work for the study of behavioral economics, which has upended that humans always make rational decisions in economics. This book will be one I probably review every year.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Taleb

Somewhat a good corollary to Daniel Kahneman, Nassim Taleb has become perhaps the greatest modern day philosopher on the great role of randomness, luck, and Black Swan events that shape our world. Most people like to believe they’re successful in life or in the markets or in business because they are exceptional and better decision makers, but very often it’s due to a large role of luck and chance in life. Taleb demonstrates that we should prepare ourselves for asymmetric risks that are unpredictable, and we should realize that there are “alternate histories” that can take place, through no prediction or fault of our own.

Mastering the Market Cycle by Howard Marks

Howard Marks is widely considered one of the best investors living today. His understanding of risk management, and also of the cycles in the economy, company profits, and the markets is what he tries to illuminate in this book. He has long been a very clear, straight forward writer on the markets, and this book is a great primer for learning to understand market cycles in better detail. Marks’s ability to write in such an understandable way is why I’d recommend this book to anyone wanting to learn to be a better investor.

Other Books Completed:

– Deep Survival by Laurence Gonzales
– The Red Queen by Matt Ridley
– Never Split the Difference: Negotiating As If Your Life Depended on It by Chris Voss
– Superforecasting by Philip Tetlock
– The Book of Joy by Dalai Lama & Desmond Tutu
– What I Learned Losing a Million Dollars by Brendan Moynihan & Jack Schwager
– Cathedral of the Wild by Boyd Varty
– The Lessons of History by Will & Ariel Durant
– Behave: The Biology of Humans at Our Best and Worst by Robert Sapolsky
– The Rational Optimist by Matt Ridley
– The Story of the Human Body by Daniel Lieberman
– The Coming Storm by Michael Lewis
– The Little Book That Beats the Market by Joel Greenblatt
– When Genius Failed: The Rise and Fall of Long Term Capital Management by Roger Lowenstein
– The Laws of Human Nature by Robert Greene

Working on but haven’t completed yet:

– 12 Rules for Life: An Antidote to Chaos by Jordan Peterson
– Leadership: In Turbulent Times by Doris Kearns Goodwin
– The Power of Now by Eckhart Tolle
– Den of Thieves by James Stewart
– Fortune’s Children by Arthur Vanderbilt II
– 48 Laws of Power by Robert Greene
– The Death of Ivan Ilyich by Leo Tolstoy
– The Most Important Thing Illuminated by Howard Marks
– Big Debt Crises by Ray Dalio

Also On My Digital Bookshelf for 2019

– Who Is Michael Ovitz by Michael Ovitz
– Man’s Search for Meaning by Viktor Frankl
– Zero to One by Peter Thiel
– Washington by Ron Chernow
– Genghis Khan and the Making of the Modern World by Jack Weatherford
– Ego Is The Enemy by Ryan Holiday
– The Daily Stoic by Ryan Holiday
– Atomic Habits by James Clear
– Extreme Ownership by Jocko Willink

I finally finished an incredibly long biography on John D. Rockefeller Sr.  It was probably the best biography I’ve every completed.  JDR was a fascinating and amazing person, not only in what he accomplished in business and philanthropy, but also in how he conducted himself in day to day life.  His impressive accomplishments are too many to list in a short writing to do them enough justice, but here are some things I learned or found interesting.

Business Accomplishments

JDR built what was at the time the largest American oil refining company of its time – Standard Oil.  At its peak it controlled roughly 90% of the refining in the country.  It was eventually broken up as a monopoly.  Many criticized its power and influence and tarred it as being unfair to the small business refiners.  This was a new era in business however, and JDR built a single company the size of which America had never seen before.  Even though it was criticized rightly as a monopoly, Standard did bring incredibly cheap kerosene to the masses, and really helped bring light, a thing of luxury for the wealthy, to the lower and middle classes.  And with the new era of the automobile, cheaper oil certainly became a larger driver for the entire American economy, which Standard Oil could claim credit in.  When finally broken up, the subsidiaries of Standard Oil became the companies of Exxon, Mobil, Chevron, Amoco, Marathon and others.  An amazing list.

JDR became the richest man in the world (considered the richest person ever as a % of GDP) and demonstrated perhaps more than anyone before him, the power of COMPOUNDING.  JDR would gladly buy and hold any shares of Standard Oil any other owner would offer to him.  And he gladly advised any firm he was buying to take their payment in the form of Standard Oil shares and to hold them.  Even when Standard was broken up by the regulators, JDR advised, “buy Standard Oil shares.”  The era after the company was split proved immensely profitable to him actually as many of the subsidiary company stocks went up more than 5x.  MANY years before he died (to my recollection roughly 15 years or so) he transferred the majority of his remaining money to his son – JDR Jr. – about $500M.  He left himself with about $20M as he needed “relatively” little money as he was not much of large spender, and didn’t flaunt his wealth on massive luxuries.  He was content living a relatively modest life, interacting with local towns people and church goers and getting in a round of golf.  JDR Jr had the role and responsibility in directing the giving away of the family money in the years to come, with advice from Sr of course.

Character & Personal Demeanor

JDR was a very calm, and collected individual.  He almost never became angry, and approached disagreements in a thoughtful, level-headed manner.  He was incredibly comfortable with himself and didn’t feel the need to respond to critics, as he seemed at peace with who he was and how he conducted himself.  Even when he was tarred by inaccurate reporting and rumors, JDR never felt the need to respond because he was comfortable knowing and believing he wasn’t the person the media or detractors portrayed.  This was arguably a mistake, but I still find his ability to put his ego aside very admirable.  He didn’t care what others thought, because to him, he knew the truth – a great lesson here.

JDR was more comfortable around lower class people, refusing to really ever rub shoulders with and embrace the true elite.  He was more at home in small humble churches with regular people, refusing to join the wealthy elite clubs that his brother would find more appealing.  He was a genuine family man.  He didn’t smoke or drink, and preached to all his children not to do so.  He was obsessed with staying healthy, exercising, getting into nature, and focusing on his own longevity.  JDR enjoyed people and was very fair with business associates – paying his workers above average wages, and paying those he did business with what they thought was fair – even when he was buying other refineries that were competitors.

JDR was very generous, embracing charity towards others very early.  At age 16 he was already giving away 6% of his wages to charity and others.  He continued this his entire life, always believing that he owed a responsibility for being successful and seeking to help others.  This led to many philanthropic efforts especially after he retired.  He really set the template well before Bill Gates did towards a systematic effort to giving away his wealth in a very targeted and thoughtful manner.  Much of his giving was quite anonymous.  He didn’t seem to want really any credit for a charity’s success, and he often didn’t want to make a show of his gifts by hardly stepping foot in places he funded.  A large ceremony and ribbon cutting ceremony celebrating him would have been absolutely out of the question.  In the second half of his life (he basically retired in his early 50s – living to age 97) he focused his efforts primarily on giving away his wealth, and he had a team dedicated to vetting charitable efforts and running the philanthropies very thoughtfully.  Over his years he gave away roughly $550M of his wealth.

Some of his numerous philanthropic efforts include:

• funded the founding of Spelman College (named after JDR’s wife) – the 4th Black female college in the US
• Spearheaded the funding of the University of Chicago
• founded the Rockefeller Institute for Medical Research, later Rockefeller University – this was a HUGE advance for science and medicine in the early 20th C – 23 Nobel Laureates came out of here
• helped eradicate hookworm disease in the American South

Overall, I highly recommend the book.  The accomplishments of JDR are really too numerous to list here.  The best part of a good biography, especially this one, is to see how the person deals with daily life, struggles, and year to year accomplishments, and how it changes them as a person.  For the most part, JDR was fascinating because it seemed he was actually quite UNCHANGED from his struggles and massive accomplishments.  He was always basically the same person with a grounded purposefulness about the way he went through life, always maintaining a steady demeanor, imparting life lessons to his friends and family, working to philanthropically share his success to help others, and also enjoying himself throughout his journey.  His massive wealth hardly changed the way he really lived and approached the most common of people, and he always was conscious of his responsibility to do what he could to help others. I think that is a theme I’ve seen across other biographies from some of the other successful giants of history I’ve read such as Warren Buffett, Lincoln, Benjamin Franklin etc.  As they become successful, they basically don’t change.  They’re rooted in the qualities that made them successful in the first place.  Their success only amplifies the qualities that they already possess, and if they’re good ones, they have a snowball effect for themselves and the people around them which continues to compound their life and wealth, literally and figuratively. 

The behemoth company that Standard Oil would become certainly crowded out and was unfair to small competitors in numerous ways.  But the wealth creation for not only JDR but hosts of others, along with the great strides the company made in regards to scientific research and bringing oil to the country, would have great far reaching influence and positives for the American economy for decades into the future.  His numerous medical, scientific, and educational philanthropic efforts certainly did the same many times and generations over. 

“If you do something every day, it’s a system. If you’re waiting to achieve it someday in the future, it’s a goal…One should have a system instead of a goal.”

I really liked this blog analysis I was reading from a review of one of writer Scott Adams’ books. This crystallized for me a little why I’ve always felt a little strange about goal-setting. From his book:

“The system-versus-goals model can be applied to most human endeavours. In the world of dieting, losing twenty pounds is a goal, but eating right is a system. In the exercise realm, running a marathon in under four hours is a goal, but exercising daily is a system. In business, making a million dollars is a goal, but being a serial entrepreneur is a system.

“TRADE YOUR EXPECTATIONS FOR APPRECIATION AND YOU WILL CHANGE YOUR LIFE.”

We were lucky enough (me for the 2nd time) to spend an afternoon at a Tony Robbins seminar last week.  Here were some of the highlights and teachings Tony went over.  I think everyone should at least one time see or listen to a Tony Robbins event or speech to further reinforce ways to achieve and be fulfilled.

Tony stressed that since we only had 4 hours together, there was only a limited amount that we could do together.  But overall, most people come to his seminars because they want to either ACHIEVE goals in their life, or to be FULFILLED or find happiness.

“WHAT WE FOCUS ON, WE FEEL”

• FOCUS = FEELING = MEANING = EMOTION = LIFE
• You can CHOOSE to focus on different things (goals, material things, jobs), and where your focus goes your energy flows (spending your time, emotions, mental energy on the things you focus on).  Do you need to change what you’re FOCUSING your mental energy on?  
• “DO YOU FOCUS MORE ON WHAT YOU HAVE, OR ON WHAT’S MISSING?” – If you’re focusing on what’s missing, then you will be less satisfied with what you have.

2 FACTORS INFLUENCE PEOPLE – YOUR STATE (short term – are you depressed, happy, energized) AND YOUR BLUEPRINT (Long term planning).

YOU CAN CHANGE YOUR SHORT TERM STATE IN AN INSTANT.

This is a major theme of a Tony Robbins event.  If I told you to jump up and scream, you could do it INSTANTLY – this PHYSIOLOGICALLY changes your body, heart beat, brain etc.  You can make a CHOICE to do this in an instant.  You CHOOSE how to approach people (excited high energy vs. sullen low energy).  The ENERGY that you bring towards other people, changes THEIR ENERGY and will change your interaction and possibly your relationship with them.  HIGH ENERGY will energize others and create more positive emotions (AGAIN EMOTIONS = LIFE).

WHAT DOES AN EXTRAORDINARY LIFE LOOK LIKE TO YOU?  HOW DO YOU GET THERE?  WHAT’S GOTTEN IN THE WAY AND HOW CAN YOU CHANGE IT?  Personal questions to evaluate.

2 MASTER SKILLS OF LIFE:

1. THE SCIENCE OF ACHIEVEMENT – People come to events to figure out HOW to achieve their goals.  This is more of a “science” because it can somewhat be taught.

• A. FOCUS – you have to focus on the right goals for YOU.  (WHERE FOCUS GOES YOUR ENERGY WILL FLOW).  You have to have the POWER OF CLARITY which is POWER AND COMMITMENT (Are you committed and prioritizing your goals?  Are you letting things get in the way of that commitment?)
• B. MASSIVE ACTION IS REQUIRED and is the cure all along with EFFECTIVE EXECUTION.  If your actions don’t work, try something else.  If that doesn’t work, try something else.  You have to DO and then adapt and adjust.  You will eventually find what works and what doesn’t.  In order to short cut this process, you can MODEL SOMEONE ELSE – find a mentor or read books about people who achieved what you wanted and incorporate that into how you model your plan and actions.
• C.  You need GRACE (or luck).  Most successful people (or at least the clear thinking ones) will ascribe at least SOME or sometimes A LOT of their success to luck, or grace, or God.  Whatever that unknown, unpredictable, X factor is (right place at right time, met the right person, right industry at the right time, etc), that is found through grace or luck.

2. THE ART OF FULFILLMENT – Many people achieve goals but then ask, “What now?  Is that all there is?”  They are good at ACHIEVING but not necessarily good at being FULFILLED or genuinely happy.  Fulfillment is an ART because there’s not necessarily a formula you can give to people.  It’s different for EVERYONE.  Some people are fulfilled by jumping out of planes, others by painting a picture.  You have to experience life and figure that out for yourself.  However, there are 3 methods that help.

• A. GROWTH – Find a way to grow/learn on a regular basis.  Are you getting BETTER at the things that make you happy?
• B.  GIVE – Find ways to give to others or causes that are greater than yourself.  By giving to others, you get out of your own head and stop worrying only about yourself and what you don’t have. 
• C.  Live in a BEAUTIFUL STATE – Are you bringing energy, happiness, playfulness to the table for other people?  Or are you bringing others down or living with negative energy?  ENERGY FEEDS OFF EACH OTHER.  Positive energy will bring more positive energy from people and negative energy will foster more negativity in relationships.

WAYS TO LIVE IN A BEAUTIFUL STATE

• First make the DECISION that you want to.  Check yourself and ask if you’re living up to this.
• Write a letter or let someone know that you respect what they mean to you.  Check in with old friends.
• Losers REACT.  Leaders ANTICIPATE.  Are you being reactionary to events and letting negative energy build from it?  
• Identify your “favorite flavor of suffering” i.e. getting cold to others, giving the silent treatment, feeling depressed etc.  Once you identify those in yourself, recognize when you’re getting into that state and CHANGE your state, focus, and energy level.  Find out what TRIGGERS those states of suffering and MAKE CHANGES.
• You can CHANGE YOUR STATE to react differently i.e. when you get bad news, maybe crack a playful joke first – this disarms you and the person and then you can attack a problem differently.
• 90 second rule – take SUFFERING to APPRECIATION – take some deep breaths and remember things to APPRECIATE.

3 THINGS THAT CAUSE SUFFERING

• LOSS – losing money, relationships etc.
• LESS – focusing on why you have less of something than someone else
• NEVER – worrying that you will never get what you want, or never feel a certain way.

The way to deal with these is:

TRADE YOUR EXPECTATIONS FOR APPRECIATION and your life will change.  Don’t focus on what you DON’T have or how something didn’t meet what you expected, and appreciate what DID happen or what you can learn from that adversity.  Re-focus on the things that you have to APPRECIATE about your life.

Hello everyone!  I hope this check in finds everyone healthy and happy, and I hope everyone is having a great 2017 so far!

Many people who purchase individual health insurance policies are in the dark on whether they qualify for Advanced Premium Tax Credits in order to lower their monthly insurance premiums.  In many instances, some advanced planning and tax strategies made near the end of the year can help qualify an individual to save a lot more money on their insurance premiums the next year.  This can affect a lot of people, but especially those who have taken early retirement as well as those who are self-employed or own a business that have some flexibility with their income strategies for the upcoming year.

I’m not a certified financial planner, nor a CPA.  But I have done my own taxes for myself as well as my corporation for years and feel I have a good grasp of the issues.  And I have helped many clients in real life who have benefited enormously from the money that the federal government is providing to individuals to purchase health insurance.  I urge anyone who is working with a financial planner or their accountant to consult with them on some of the strategies that I might introduce here.

What Is the Advanced Premium Tax Credit?

This is copied straight from the IRS website:

https://www.irs.gov/affordable-care-act/individuals-and-families/the-premium-tax-credit

The premium tax credit, or PTC, is a refundable credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through a Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return.

Who Qualifies

You are eligible for the premium tax credit if you meet all of the following requirements:

•Have household income that falls within a certain range.

•Do not file a Married Filing Separately tax return

◦Unless you meet the criteria in the regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using Married Filing Separately

•Cannot be claimed as a dependent by another person.

•In the same month – a coverage month – you, or a family member:

◦Enroll in coverage through a Health Insurance Marketplace

◦Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value.

◦Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.

◦Pay the share of premiums not covered by advance credit payments

2017 Income Limitations to Qualify

Family Size For the Tax Household (e.g. 2 is a joint return for husband and wife)

1 – Below $47,521

2 – Below $64,081

3 – Below $80,641

4 – Below $97,201

5 – Below $113,761

The important thing to note is this is based on projected income for 2017, which obviously hasn’t occurred yet, so some planning can take place to get underneath these marks to qualify.  Again, this is Adjusted Gross Income, which is the line that would appear on Line 37 of your 1040 Tax Form for 2017, filed by April of 2018.  It is always worth re-looking at the 1040 form to see how it works.  Lines 7 – 22 add up your Total Income, which would include W2 income, capital gains from stocks, business income, IRA distributions that are TAXABLE (very important), etc.

Then lines 23 – 36 add up your DEDUCTIONS which can LOWER your adjusted gross and taxable income.  Here is a key area to focus on as well because some of these can be flexible on the part of the individual like contributions to an HSA, or contributions to qualified plans like 401Ks or Traditional IRAs.

Case Study

Let’s take an example to get this into real-life perspective, and it stems from a conversation that I had with one of my clients.  They are a husband and wife who decided to retire early.  With their current pension and other income, which included distributions from taxable retirement accounts, they were planning to be just over $65,000 in income.  Well if this was the case, then they wouldn’t qualify for a Premium Tax Credit.  They are both 63 years old.  In the Denver area, for 2 people that are 63 years old, the CHEAPEST qualified health plan would cost them $585 a piece, or $1,170 per month.  However, if they could get their income to $55,000 for 2017, then they would qualify for an Advanced Premium Tax Credit of $1,000 per month!  This would bring their total premium down to $170 per month for the two of them combined!  And this money is ADVANCED monthly, so it goes directly from the government to the insurance company on the member’s behalf to lower their premiums monthly.  This would have HUGE cash flow savings for them for the year, not to mention literally saving them $12,000 of their hard earned money.

So how could they get their income from $65,000 to $55,000?  Well, one thing that is important for their situation is that they were planning to pull money out of their retirement funds to supplement their income.  Say they were going to pull $10,000 out in 2017 to help live off of.  What they could do instead could be to pull that money out in December 2016, and put it into a simple savings account, so that it is a TAX EVENT in 2016, and NOT 2017.  This reduces their Adjusted Gross Income for 2017 and thus gets them to the $55,000 number.  Then they could pull money out of the savings account as they saw fit to use in 2017 –  a NON-tax event.

Another thing they could do is take $10,000 say from another savings account, and contribute $5,000 a piece, $10,000 total, towards an IRA in 2017 which would be a deduction on their Adjusted Gross Income also getting them to the $55,000 number.  So think about this for 1 second.  By re-allocating $10,000 from one account to another, they are literally saving $12,000 for the year –  the amount of their new Advanced Premium Tax Credit.

Another way to look at it would be, what if they had to contribute that $10,000 over the course of the year monthly?  That would be a contribution of $833 per month to get to the $10,000 for the year.  So contributing $833 per month literally garners them $1,000 per month immediately in health insurance premium reduction – AND they get to keep their $833 that they contribute as their own asset and money for later use.  The tax credit literally pays for the contributions themselves and MORE.

They could also look at any of the other things in lines 23 – 36 on the 1040 including HSA contributions (as long as they choose an HSA qualified health plan) to lower their Adjusted Gross Income.

If their calculations are a bit off on their estimates, the final numbers will reconcile on their tax return for the year.  If they received a bit too much, they will pay it back (or get a lower tax return).  If they didn’t get quite enough tax credit, then they will receive a higher tax return.  It is important to plan BEFORE the new year comes however, as well as managing your income, capital gain sales, and not creating new tax events throughout the year which can jeopardize the plan to receive the appropriate credit.

It is important to note that tax credits are higher the older that you are – because the premiums for this age group are also much higher.  The tax credits are based off of a percentage of the 2nd lowest cost Silver level plan available on the marketplace.  So the higher the price is for that plan, the higher the tax credit.

Should you have any questions, please reach out to me, but as the new year approaches, if you are on an individual health insurance policy and might qualify for the Advanced Premium Tax Credits, it is best to begin discussing how to strategize out the income NOW so that you benefit financially from what is available to you.

September 22, 2016

Hello everyone!  It’s been a little while for many of us, and I hope this message finds you and your families very well.  First off, I again want to thank each of you for having allowed me to assist you with your health insurance needs in the past.  I look forward to being a resource to all of you if you ever need assistance in the future.  

As always, I try to keep my clients aware of any coming changes regarding their plans, and the health insurance market in general.  I wanted to reach out as we head into the end of the year to prompt everyone to begin thinking about their health insurance options for 2017.  We already know a decent amount of information on some of the upcoming changes to the market for the next year.  PLANS WILL NOT BE AVAILABLE UNTIL NOVEMBER, when Open Enrollment Season will officially begin, so at this time I cannot answer specific questions about 2017 plans.  This message is just to begin the process of alerting everyone that in a few weeks, we may want to begin the process of evaluating and/or changing your plans.  I expect that to only be the case for about 20% or so of you however. 

I always seemingly get much busier as Open Enrollment proceeds, so I would encourage anyone to reach out in early November unless I reach out to you first, as opposed to waiting until mid/late-December.  This year, the Marketplace has indicated that the December 15th deadline for a January 1 start date is a HARD-SET deadline (as they have tended to extend it in the past).  They would like to get away from offering extensions, so this year I would plan on December 15 being the last day to enroll for January 1.  I would encourage anyone changing to do so in November before Thanksgiving though as the later you wait, the busier I get, and also the busier companies get.  The Medicare side of my business tends to keep me busier often than the individual health side as well.  Last year I had MANY January 1 enrollments that did not have their plan information until late February, just due to how behind some companies were in processing enrollments.  (Sorry for those of you that had to experience that uncertainty!)  Therefore, the earlier you all take care of your enrollment the better you will be, and the more peace of mind you will have that it is complete, and the less stressed I will be as well!

All of the companies have filed their initial rates with the Colorado Division of Insurance.  Unfortunately there will be premium increases coming for EVERYONE, as usual, and some of you will be losing your plans altogether and will need to change.  Here is a minor summary of things that we may need to discuss.

PLANS STAYING RELATIVELY THE SAME FOR 2017 (There will be rate increases, but generally if you’re happy here, I’d recommend keeping the plan for 2017)

– Kaiser

– Cigna

– Anthem HMO (Pathway Network)

– Colorado Choice (For Southern and Rural CO)

PLANS GOING AWAY FOR 2017 (WE NEED TO DEFINITELY TALK IN OPEN ENROLLMENT AND CHANGE YOUR PLAN!!!)

– Anthem PPO

– Humana

– UnitedHealthcare On and Off Exchange Plans

IF YOU’RE HAPPY WITH YOUR PLAN, AND IT’S AVAILABLE FOR 2017, THEN YOU DON’T NEED TO TAKE ACTION.  Also, if you’re getting a tax credit to lower your premiums through the marketplace, you will be re-enrolled for 2017 into your same plan and a new tax credit will be calculated based on the same income numbers.  You will only be dis-enrolled if you ACTIVELY choose to dis-enroll or enroll into a new plan.

 

I would recommend that if everything is going generally well, and you’re on a plan staying for 2017, you should probably just KEEP YOUR PLAN as it will roll over right into its 2017 version.  I’m confident that we thoroughly thought through the reasons that we put you on that plan in the first place, i.e. premiums, coverage, doctors, networks etc, and that we chose an appropriate one for you at the time.  If you are receiving a tax credit to lower your premiums, generally, your 2017 tax credit will be calculated by Connect for Health, and applied to your plan for 2017, assuming that there have been no significant changes to your income.  We will have to wait until we see the full layout of plans in November, but I expect generally few changes to networks of doctors on the remaining plans, and generally few if any major changes to overall coverage.  If something has changed with your health, then generally, we should probably evaluate that you are on a plan that will save you the most money.

WHO IS THIS COMPANY CALLED “BRIGHT HEALTH”?

You may hear about a new company entering the marketplace for 2017 called Bright Health.  I recently attended a rollout meeting that the company held in the last month.  I was generally impressed with the approach that the founders of the company were taking and their level of expertise in being able to put together a sustainable plan for the future.  However, I am NOT inclined to recommend that anyone change to them.  They said that their pricing will be roughly in line with the pricing that Cigna will be offering, and their network will be limited to doctors and hospitals in the Centura network.  Well, Cigna also has Centura in their cheaper plan networks, as well as other doctors and networks as well, so I’m not sure why anyone would go with Bright Health since it wouldn’t give them a cheaper coverage, nor would it give them a network of doctors that wasn’t available from another carrier.  Many of you lived through the collapse of CO HealthOP last year and having to change plans so I would be more wary to go with a new or un-proven company in the marketplace.

WHAT SHOULD I DO AS OPEN ENROLLMENT APPROACHES?

If you are on a plan that is terminating, start thinking about getting things together to change.  Also begin thinking about or discussing with your family that if you had to give up some doctors, which are you willing to give up and which are you not.  EVERY company now has a network, and one that has seemingly narrowed in recent years.  That is the reality of the current insurance market.  If you have several/many doctors, it is fairly unlikely that any plan will have all of them in network.  Anthem PPO and UnitedHealthcare easily had the largest networks of all the carriers, and unfortunately, those plans will not exist anymore.  Some tradeoffs will probably have to be made in order to save you the most money on your insurance coverages.  

MY #1 GOAL IS TO SAVE YOU THE MOST MONEY POSSIBLE ON YOUR INSURANCE AND HEALTH COSTS THROUGHOUT THE YEAR.

Again, I am a free service to you all.  You do not pay anymore for your premiums with ANY company for going through me as your broker, nor any other broker.  I am paid a credit, which is equal to every other broker in the market, by the carrier for helping to advise you on plans and coverage.  I am certified with the Connect for Health marketplace and all of the carriers on it.  My sole job is to advise you which plan out of the many available would be most appropriate for you and save you the most money overall per year based on premium and coverages, on which doctors you see, and in regards to your health status and any medical treatments you may have upcoming, or are likely to need.  So with that being said, if you have new health needs that you’re planning for, also reach out to me as there may be a different plan that will save you more money overall.  Again, if everything is relatively the same and you’re generally happy with your plan, the one that we put you originally is still the most likely to be the most appropriate for you.

GIVE ME FEEDBACK!

I always like getting feedback from all of you on how the companies have been handling your health and claims.  Both good and bad feedback helps!  In turn, it keeps me more aware of changes in the marketplace and how the rubber meets the road and how the carriers are treating you all IN REALITY.  This helps me to relay the information and make better recommendations for you all.

 

Again, I hope all has been well, and I look forward to speaking to many of you in the coming weeks!  As always, if I can help any friends or family with any of their health insurance needs, please let me know.  Also don’t forget that I’m also contracted with dozens of companies for life insurance and annuities as well.

 

Have a great start to the Fall Season!

 

Sincerely,

Bret Padilla