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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.
Suffice it to say, your client will not recognize any of these issues until they develop medical problems. For example, your client signed up for an HMO Advantage plan and develops congestive heart failure. He must wait for his primary care physician to write a referral for him to meet with a cardiologist. In the interim, he is in considerable pain and is rushed to the nearest emergency room because he had a heart attack. This is not the hospital he wanted but cannot be transferred to the hospital of choice because his insurance company is not contracted with this hospital nor is the short-term rehabilitation facility his family selected unless he is willing to pay privately. After short-term rehab your client is discharged home. He is home-bound for a period and requires physical therapy services in the home. The rehab case manager struggles to find a physical therapy practice that accepts the Advantage plan. Under straight Medicare with a Medigap policy he would have had many choices.
The costs, stress and needs accelerate, and the care may suffer. He did not account for these additional costs when he was planning his retirement. In my care management practice, I encounter this a great deal. As a financial adviser, you must recognize that health care costs are a critical component in your client’s retirement plan. You are not an insurance specialist, but you are wise to incorporate these issues in your planning from the onset:
- Help your clients make appropriate health insurance coverage choices as part of their retirement planning.
- Check to be sure your client has signed up for Medicare/Medigap insurance at age 65. These programs are there to help make the cost of health care a little more bearable. Be certain your client has addressed prescription coverage. This is an additional expense, with premium and copays that must be taken into consideration.
- Make certain you have a health insurance specialist you are comfortable with who you can introduce to your clients.
- Be sure that you as the advisor fully understand the difference between Medicare/Medigap coverage versus a Medicare Advantage plan and the potential impact to your clients and their portfolios.
- Perhaps there will be a time that you may need to transition your client from Medicare/Medigap to an Advantage plan because of financial downturn. Include that in your reviews with your clients.
- Perhaps your client can only afford an Advantage plan from the onset. Understand and plan with your client.
These are some of the questions you need to ask your clients as they age. It is unlikely your client will address the matter of health insurance with you. But as a trusted advisor, you want to maintain that relationship. Be proactive – address matters that many do not.
Jill Poser-Kammet is a Certified Geriatric Care Manager practicing in Florida.
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