It is no secret that getting older can bring on more health complications as our bodies age. Of course, not everyone will experience more medical issues, but many will. Doctor visits may increase, more prescriptions may be required, medical costs rise; all of which can have impact on one’s retirement budget. We are moving toward the health insurance open enrollment period, October 15th to December 7th, 2020, 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. He/she is 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 specifically 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 your 6-month Medigap open enrollment period at 65-years old. During that time, you can buy any Medigap policy sold in your state, even if you have health problems, for the same price as people with good health. At any other time, Medigap insurance companies are generally allowed to use medical underwriting to decide whether to accept your application and how much to charge you 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 one open enrollment period, you may not be able to buy a Medigap policy with existing health issues and if you are able to buy one, it may cost a great deal more.
But by 65 years old 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. The simple answer is 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; therefore, leaving your client with less chance for services than he would have had with straight Medicare coverage and they all have a maximum out-of-pocket. 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 he/she develops more medical problems. By 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 accelerate, the stress accelerates, the needs accelerate, and the care may suffer. He did not account for these additional costs when he was planning his retirement. In our care management practice, we deal with this a great deal. In your role as a financial adviser, it is vital to recognize that health care costs are a critical component in your client’s retirement plan and while you are likely not an insurance specialist yourself, you are wise to incorporate these issues in your planning meeting with your client from the onset:
- Make certain you have a health insurance specialist you are comfortable with that you can introduce to your clients
- 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 65 years old. 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; premium and copays, that must be taken into consideration.
- Be sure that you as the adviser 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 be asking your clients as they age. It is unlikely your client will address the matter of health insurance with you. But you see yourself as a trusted adviser to your client and want to maintain that relationship. I encourage you to be proactive – address matters that many do not.
Jill Poser – Kammet, CGCM, is Director of Life Care Planning at Advocare, a comprehensive care management company serving all of South Florida from the Palm Beaches to Miami . Jill is a Certified Geriatric Care Manager by the International Commission on Health Care Certification with 12 years of experience in elder care, care management, life care planning, Medicare home health sales, special needs, and aging-in-place construction. For more information about Jill and how she can help you and your family call (561) 266-3489, or visit Advocare’s website at www.caremanage.com.