Health-Care Plans: Getting Best of Both Worlds
QUESTION: I just started working for the first time in 20 years, and I have to choose a medical plan. My husband’s HMO has been covering me and the children for years, but there have always been things about it I didn’t like. Can I enroll in a regular medical plan, or do I have to choose the HMO because that’s what my husband has?--K. C.
ANSWER: Not only are you permitted to choose a standard medical insurance, you would probably be wise to do so. Your husband’s HMO--or health maintenance organization--should continue to cover the entire family as should your standard medical insurance.
By this arrangement, you can save money on routine expenses and still have access to your personal physician or a highly regarded specialist for emergencies or at other times when you don’t feel comfortable being cared for by whichever HMO doctor happens to be on duty at the time.
An HMO generally pays 100% of your medical bills; standard medical insurance usually pays only 80% of your expenses, and then only up to certain limits.
On the flip side, HMO patients usually don’t have the luxury of seeing their longtime family doctor or a recommended specialist--an advantage of standard health-care plans. Rather, employees who enroll in HMOs generally must choose from a list of doctors who practice at the HMO, and often these employees wind up seeing a different doctor on each visit.
Some HMOs also cover the deductible--typically 20% of most expenses--that isn’t covered by the employee’s spouse’s standard plan. Be sure to ask.
Q: I have to get rid of some stock I own, but if I sell, I am going to get killed on taxes because there is a huge capital gain involved. Is there a way to give the stock away to a charity and still come out ahead?--D. M.
A: The tax rules do permit the charitable giving of stock in exchange for a tax deduction. But with the tax rates lower than they have been for many years, it seems unlikely that you would come out ahead by giving away the money. Be sure to do some calculations first.
If you decide that this is the strategy for you, don’t delay. The maximum income tax rate is 38.5% until the end of this year. On Jan. 1, it drops to 28%, so the value of your tax deduction drops sharply.
Depending on your adjusted gross income and the value of the stock that you’re considering giving to charity, you may be able to reduce your taxable income by the price you paid for the stock and any appreciation and avoid all taxation on the total.
But if the appreciated value of your stock is worth more than 30% of what you expect your adjusted gross income to be for 1987, you won’t be able to take the entire deduction this year. On gifts of stock, the IRS now says taxpayers may offset up to 30% of their adjusted gross income with the tax deduction in any single year. Donations over that level may be carried forward for up to five years.
Some other types of charitable contributions may be fully deducted from taxable income as long as they don’t exceed 50% of the taxpayer’s adjusted gross income. In addition, taxpayers subject to the 30% rule have the option of contributing up to 50% of their adjusted gross income and then claiming a deduction for an amount equal to the cost of the stock or other property plus just 60% of the appreciation.
Also keep in mind that under new rules for the alternative minimum tax, the amount of appreciation on donated property is treated as a so-called tax preference item under most circumstances. This could raise your taxes by more than your tax savings from giving away the stock to charity. So be sure to do some detailed calculations before you make that donation.
Debra Whitefield cannot answer mail individually but will respond in this column to financial questions of general interest. Do not telephone. Write to Money Talk, Los Angeles Times, 780 Third Ave., Suite 3801, New York, N.Y. 10017.