How Health Insurance Impacts Your Aging Clients
Adviser Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It is no secret that getting older brings on health complications as our bodies age. Doctor visits may increase, more prescriptions may be required and medical costs will rise; all of these factors have an impact on one’s retirement budget. We are midway through the health insurance open enrollment period, November 1 to December 15, 2018, and one of the biggest challenges we face with our clients are the health insurance choices they have made along the way.
Your client turns 65 years old. They are entitled to Medicare, a federal health insurance program geared for people 65 and older. However, Medicare does not cover prescription costs or all medical costs your client may encounter. Medicare only covers 80% of the medical costs. The other 20% can be covered by a Medigap insurance policy. Prescription drug costs are covered by a separate prescription insurance plan.
The most important thing to understand for your client is that the very best time to buy a Medigap insurance plan is during their six-month Medigap open enrollment period at age 65. During that time, they can buy any Medigap policy sold in their state, even if they have health problems, for the same price as people in good health. At any other time, Medigap insurance companies are generally allowed to use medical underwriting to decide whether to accept an application and how much to charge for the Medigap policy.
This open-enrollment period automatically starts the month you turn 65 and become enrolled in Medicare part B medical insurance. After this open-enrollment period, you may not be able to buy a Medigap policy with existing health issues; if you are able to buy one, it may cost a great deal more.
By age 65 your client has read many advertisements about Medicare Advantage plans and has a friend who convinces him that he is “healthy,” and the Advantage plan will save him so much money. Why does he need to pay a premium for the Medigap insurance plan? Why does he need to pay a separate insurance premium for prescriptions? The Advantage plan has promised him he will have no out-of-pocket costs.
That is not true.
Medicare Advantage plans are run by insurance companies: United Health Care, Blue Cross Blue Shield, Aetna, to name a few. Insurance companies are in the business of making a profit. These insurance companies agree to manage your Medicare dollars. They leave your client with reduced chances for services than they would have had with straight Medicare coverage and they will incur out-of-pocket expenses. The sales associate does not lead with discussion about maximum out-of-pocket expenses. He may not even discuss the differences between the HMO Advantage plan and the PPO Advantage plan options.