Ask Liz Weston

Get smart with your money

Insurance

Q&A: Co-pays and collections

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Dear Liz: My primary care physician referred me to a gynecologist for a medical issue. I called the office three times and asked that the appointment be made as an annual exam.
During the appointment, the doctor was rude and critical of my body and lifestyle. (I am obese.) I left the appointment in tears before it was over.

Five months later, I got a $160 bill for the appointment. My insurance denied the claim twice, saying the doctor was double charging, but the office fought back, saying the charge was for the referral, not the annual exam.

I have tried to work with the doctor’s office and my insurance, but now the bill has gone to collections. It’s knocked my FICO score from 780 to 680 in a matter of months.

Part of me does not want to pay the bill because of the abuse I received from the doctor. However, this is affecting my finances. Would it help my FICO score if I negotiated with the bill collector and then repaid a part of the bill? What are my options?

Answer: Your best option is to ask the doctor’s office, politely, to take back the collection account in exchange for your paying the bill in full.

The doctor should not have been rude to you. But you shouldn’t have tried to get a referral for a medical issue treated as an annual exam. You were probably trying to avoid a co-pay, because health plans typically cover this type of preventive care, but that’s not why you were there.

You could ask whether the bill collector will delete the account from your credit reports. You would almost certainly have to pay the bill in full to win this concession, and even then the odds are against it.

That’s why it’s better to ask the medical provider to take back the account. In many cases, medical providers place accounts with collectors on assignment and have the ability to pull them back if they want.

The latest version of the FICO credit scoring formula ignores paid collections and treats unpaid medical collections less harshly than other collections. But that formula is just starting to be adopted, and the more commonly used previous version, FICO 8, ignores only collections worth less than $100.

As you’ve seen, even one dispute can lead to a big drop in your scores. If you feel an issue is worth pursuing, it often makes sense to pay the disputed bill and then seek justice in Small Claims court.

Q&A: Term life insurance

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Dear Liz: My husband doesn’t qualify for term life insurance because he is overweight and pre-diabetic. Although he’s working on getting in shape, I’m afraid something might happen. I should add we have a 3-year-old daughter, and he is the main breadwinner.

What would you suggest we do to ensure we are covered if something were to happen?

Answer: Just because your husband was turned down by one insurer doesn’t mean others won’t accept him. Even people who are obese or who have diabetes can find coverage, so your husband shouldn’t accept that he’s uninsurable.

Look for an independent agent or broker who works with several companies rather than a captive agent who works for just one or two. A fee-only financial planner may be able to help you find a good agent. The planner also could recommend an appropriate amount of coverage.

Your husband also should investigate any coverage he might have through his job. Many employers provide a base amount of coverage as a benefit (frequently $50,000 or one year’s pay) and often allow workers to buy additional coverage without requiring medical exams.

The downside of employer-sponsored group life insurance is that he may not be able to buy as much coverage as he needs. He may need 10 times his annual salary, for instance, but his group policy may max out at five times his salary. Also, the policy may not be portable — it may end if he’s laid off or quits, for example.

The best strategy will depend on the costs he faces. But one approach may be to buy as much employer-provided coverage as possible and supplement it with an individual term policy purchased on his own.

If his health improves, he could boost his individual coverage while buying less of the employer-provided kind.

Q&A: Surviving on Social Security Disability

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Dear Liz: I’ve been on disability for over 10 years, and I currently receive $1,527 a month in Social Security Disability Insurance. My rent starting in March will be $1,400. I’m not opposed to moving, but after checking literally thousands of listings, I found that what I’m paying is not unusual for my area. I’m living on savings now. I’d like to have a job but am hard-pressed to find work. What should I do?

Answer: You don’t have to do anything if you have enough savings to last the rest of your life. Assuming that’s not the case, you need to do something to dramatically lower your cost of living.

You may qualify for housing assistance. You can use federal government sites such as Benefits.gov or HUD.gov to explore your options, or search for the name of your community and “rental assistance programs.”

You may discover that your low income is still too high for the available programs or that there’s a massive waiting list. If that’s the case, you still have options.
If your disabilities allow, you could earn low or even free rent by working as an apartment manager, a companion to an elderly person, a babysitter for a family with young children or a caretaker for a home or estate.

If your apartment is in a desirable area, you may be able to rent it out a few days a month on Airbnb, Homeaway or another vacation rental site to offset your cost. (Check with your landlord first.)

You could look for a roommate or other shared housing in your community, or consider moving to a less expensive area. You may need to move only a few miles to find a more affordable place, or you may have to consider transferring to a different city or state.

If you’re willing to be truly mobile, you could do what some retirees on limited incomes do and live full-time in a recreational vehicle. Some get jobs as camp hosts or other campground workers in exchange for a free site.

In general, you shouldn’t pay more than about 30% of your gross income for housing. Limiting your rent to 25% is even better, since it will give you more wiggle room to afford the rest of your life.

Q&A: Social Security disability insurance and survivor benefits

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Dear Liz: My first wife died six years ago at age 60. I was 52 and we had been married 27 years. My wife was on Social Security disability for 15 years before her death. My only dealing with Social Security after her death was to cancel her payments. I received no benefits of any kind. I am now remarried. Were there any Social Security benefits that I failed to request? Is there any effect on my future retirement?

Answer: You may have been eligible for a one-time payment of $255, but that’s likely all.

We’ll assume your wife was receiving Social Security Disability Insurance payments, which are disability checks paid to workers who have enough work credits in the Social Security system. SSDI is different from Supplemental Security Income, or SSI, a need-based federal program for low-income individuals who are disabled, blind or over the age of 65. Survivor benefits aren’t available under SSI, but they are under SSDI.

The rules for SSDI survivor benefits are similar to those under regular Social Security. Survivor benefits typically are available starting at age 60. Survivors who are disabled can begin receiving the benefits starting at 50, and survivors at any age can qualify if they’re caring for the deceased person’s child who is under 16. When you remarry before age 60, you can’t claim survivor benefits based on your first wife’s Social Security record unless the subsequent marriage ends in death or divorce.

Q&A: Terminating private mortgage insurance

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Dear Liz: I bought my first home about a year ago. Because I had very little money for the down payment, I have to pay private mortgage insurance, which is a whopping $385 each month. My burning question about this is: How can I get rid of it? There must be a way to pay the loan quicker or pay more each month or something to make it go away.

Answer: Mortgage insurance protects the lender in case you default on your loan. Since loans with small down payments have a higher risk of default, mortgage insurance is typically required until your balance falls to 80% of the original value of your home. At that point, you can request in writing that the mortgage insurance be canceled. If you don’t make the request, the lender is still typically required to terminate PMI when your balance reaches 78% of the home’s original value.

To speed that day, you can pay down your principal, but do it the right way. Call your mortgage servicer and ask how to be sure the extra money you submit is reducing your mortgage balance. Otherwise, your extra money may just be applied to the next month’s payment, which won’t help reduce your balance much.

Q&A: VA health coverage and the Affordable Care Act

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Dear Liz: My brother is a Vietnam veteran. Every month since his separation from the Navy in 1969, he has had a monthly premium deducted from his pay and sent to the Veterans Administration for his medical insurance coverage. Last month he received a notice from his employer stating that if he doesn’t sign up and pay premiums under the Affordable Care Act, he will be fined for not having medical insurance. How can this be? He goes to the VA for all of his medical needs. Can this truly be correct?

Answer: People enrolled in VA healthcare don’t have to sign up for additional health insurance or pay additional premiums. Their VA coverage meets the Affordable Care Act’s requirements for coverage.
Your brother’s employer may have sent out a general notice to all employees about the law, rather than one that reflects his individual situation. If the employer believes that VA coverage doesn’t qualify, it should be alerted to this page on the VA site: http://www.va.gov/health/aca/.