Have you heard of the reserve fund annuity and had questions about what it is? This is a special premium deferred annuity used to help a policyholder gather funds to meet their yearly deductible or coinsurance. Reserve fund annuities are available for use with Medicare Supplement Plans A, B, D, G, HDF, HDG, K, and L, as long as they are state-approved.
Features of the Annuity
The reserve fund annuity is available to those who are between 65 and 90 (or 65 and 86 in Oklahoma). This is a no-load annuity where the entire amount you deposit is kept, although there may be a premium tax in some states.
There are no penalty charges or fees when funds are withdrawn. In addition, the interest rate is guaranteed never to go lower than 3%.
How to Use the Reserve Fund Annuity
There are several options on how to use the annuity. You get to choose how it works based on your needs. It can be used as a means of saving or can be used for payment of any of the following items:
- Plan A – Hospital inpatient deductible, annual deductible, excess charges, and skilled nursing facility coinsurance
- Plan B & D – Excess charges, skilled nursing facility coinsurance, and deductible
- Plan G – Deductible
In addition, it can be used to pay your cost-sharing fees or calendar year deductible by authorizing the ability to draft funds out of the annuity.
How the Process Works
You have the option to put funds into a reserve fund annuity as a way to pay for your yearly coinsurance and deductibles for Medicare. You have the option of a lump-sum payment or making monthly payments of at least $50 at the same time as you pay your insurance premiums.
When a healthcare claim is made, but your coinsurance and deductible haven’t been made, the money can be taken from the reserve fund, barring any restrictions. This will be used to pay the coinsurance or deductible amount up to the amount existing in the fund.
If there isn’t enough to pay the full amount, the balance will need to be paid to the healthcare provider. After the coinsurance or deductible is met, you’ll have all eligible benefits associated with the your policy.
How to Enroll
Enrollment is a simple process. Fill out the appropriate form and indicate how funds will be placed in the reserve fund. The form lets you authorize taking your coinsurance or deductible out whenever needed. A $50 initial deposit must be made during the enrollment process.
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