When a life insurance policy becomes a medical expense coverage policy, the beneficiary receives benefits in addition to those provided by the life insurance policy. Medical expense coverage can provide financial assistance during times of illness or injury and can provide income if the beneficiary is unable to work. Life insurance policies that become medical expense coverage policies may have increased premiums, but they also offer a number of other benefits.
What is a MEC?
MEC most commonly stands for “medical expense coverage.” In the simplest terms, this is insurance that helps you pay for medical expenses. It can help cover costs such as doctor visits, hospital stays, and prescription drugs. MEC may also help you pay for services that aren’t typically covered by traditional health insurance, such as vision care or dental care.
What are the benefits?
MEC policies offer a comprehensive and customizable range of benefits that can include coverage for hospitalization, surgery, out-patient care, prescription drugs, mental health services, and many other important medical expenses. MEC policies also offer the flexibility to choose between a variety of deductibles and coinsurance levels, so customers can find a policy that fits their needs and budget. And since MEC policies are renewable and portable, they can be kept regardless of changes in employment or health status.
How do you know if your life insurance policy has become a MEC?
There are a few ways to determine if your life insurance policy has become a MEC. Typically, if the policy’s premiums have been increased in order to keep pace with medical inflation, the policy has become a MEC. Additionally, if the policy pays out benefits for medical expenses incurred by the insured, it is likely a MEC. Finally, if the policy is owned by an employer and provides coverage for employees and their dependents, it is likely a MEC.
What are the tax implications of a MEC?
The tax benefits of medical expense coverage can go far beyond the typical tax savings you receive when your employer offers it. There are two main types of tax savings:
1. Deduction
Employers offer medical expense coverage as a benefit to their employees because it allows them to save money on their taxes. The IRS permits employers to deduct certain expenses, such as the premiums paid for medical expense coverage, from the income they pay to employees.
Employers can deduct up to 80 percent of the cost of medical expenses they pay for their employees. In other words, if your company’s medical expense coverage costs $1,000 a year, you can deduct $800 ($1,000 ÷.8 = $800) from the amount you pay to your employees. If your company pays for your employees’ medical expenses, you can deduct only the amount of premiums you pay, not the total cost of the coverage.
You can deduct the first $2,650 you spend for medical care for yourself or someone else who is your dependent (spouse, unmarried partner or former spouse).
2. Reimbursement
If your employer offers reimbursement for your medical expenses, you can reduce the amount of income you report on your taxes by taking a credit for the amount you were reimbursed.
For example, say your company offers $2,500 in reimbursement for medical expenses. If you’re a single person, you can reduce your taxable income by $2,500 and your refund by that amount. If you’re married, you can take a combined $5,000 in credits, reducing your taxable income by $2,500 and your refund by $5,000. If you have dependents, you may be able to reduce your income even more by claiming them as dependents on your return.
What are the estate planning implications of a MEC?
The first thing to note is that the estate planning implications of MEC vary greatly, depending on how much money you have and what kind of policy you have.
An MEC policy is meant to replace insurance coverage for medical expenses if you become ill or injured, but it is different from your medical insurance policy. For example, if you have a major medical plan, such as an HMO or PPO plan, which generally covers 80 percent to 100 percent of your medical expenses, you won’t need to consider an MEC policy unless you have a very low income.
If you are self-employed, however, you may need to consider an MEC policy because your medical bills are not always fully covered by your business’s insurance policy. If you have an employee-sponsored insurance plan, your employer should reimburse you for medical expenses that exceed the limits of the plan.
If you don’t have an insurance plan at all, you may need an MEC policy. Your MEC policy will provide you with medical coverage when you’re ill or injured. You can even apply for an MEC policy with no health issues, but the deductible and maximum out-of-pocket costs will be higher.
When considering an MEC policy, you should consider the following factors:
Coverage Amount
The amount of coverage you want. An MEC policy will cover a certain percentage of your medical expenses if you become sick or injured. The policy’s coverage percentage varies depending on the amount you select.
Coverage Duration
The length of time you want your coverage to last. You can choose between a policy with lifetime benefits or a policy with a fixed term.
Out-of-Pocket Maximum
The maximum amount you will be responsible for paying out-of-pocket for your medical expenses.
Pre-Authorization
If you decide to have your medical treatment pre-approved, the MEC policy will require you to pay a fee before you receive treatment.
Deductible
The amount you must pay before the policy pays any benefits.
What are the pros and cons of a MEC?
Medical Expense Coverage is an optional coverage offered by Blue Cross and Blue Shield. You can pay out-of-pocket for certain services or you can opt for this coverage. It covers many preventive services, including routine doctor visits, immunizations, blood work and lab work, dental checkups, prescription drugs, and even maternity care. However, it does not cover hospital stays, medical care for injuries sustained in an accident, or most emergency room visits.
What are the Pros of a MEC?
• You will receive a discount on the monthly premium of your policy.
• The plan will provide you with medical coverage for you and your family members.
• You will have access to preventive services without paying extra.
• You can select the doctors and hospitals you want to go to for routine care.
• You can choose whether to pay out-of-pocket for specific services or have this coverage paid for.
What are the Cons of a MEC?
• You may have to pay more than the standard insurance plan would charge.
• You can only receive benefits for a maximum of 24 months.
• Your deductible will be higher.
• You may have to wait for coverage before you can use the medical services your plan provides.
• You will have to pay a higher premium if you are over 40 years old.
