Are Health Insurance Choices Financially Impacting You?
By Jill Poser – Kammet, CGCM
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 an 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 are the health insurance choices we have made along the way.
You turn 65 years old. You 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 that you 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 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, you have read many advertisements about Medicare Advantage Plans and you have a friend who convinces you that you are “healthy,” and the Advantage plan will save you so much money. Why do you need to pay a premium for the Medigap insurance plan? Why do you need to pay a separate insurance premium for prescriptions? The Advantage plan has promised you that you 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 you with less chance for services than you would have had with straight Medicare coverage and they all have a maximum out-of-pocket. The sales associate does not lead with a 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, you will not recognize any of these issues until you develop more medical problems. For example, you signed up for an HMO Advantage plan and develop congestive heart failure. You must wait for your primary care physician to write a referral for you to meet with a cardiologist. In the interim, you are in considerable pain and are rushed to the nearest emergency room because you had a heart attack. This is not the hospital you wanted but you cannot be transferred to the hospital of choice because your insurance company is not contracted with this hospital nor is the short-term rehabilitation facility your family selected unless you are willing to pay privately. After short-term rehab, you are discharged home. You are homebound for a period and require 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, you would have had many choices.
The costs accelerate, the stress accelerates, the needs accelerate, and the care may suffer. You did not account for these additional costs when you were planning your retirement. In our care management practice, we deal with this a great deal. It is vital to recognize that health care costs are a critical component in your retirement plan and while you are likely not an insurance specialist yourself, you are wise to incorporate these issues in your planning from the onset:
- Make certain you have a health insurance specialist you are comfortable with.
- Understand the appropriate health insurance coverage choices as part of your retirement planning with a trusted adviser.
- Check to be sure you have 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 you understand prescription coverage. This is an additional expense; premium and copays, that must be taken into consideration.
- Be sure that you understand the difference between Medicare/Medigap coverage versus a Medicare Advantage plan and the potential impact to your portfolio or work closely with a trusted adviser.
- Perhaps there will be a time that you may need to transition from Medicare/Medigap to an Advantage plan because of the financial downturn. Perhaps you can only afford an Advantage plan from the onset. Understand the differences in these plans and the carriers offered in your local area. Include a trusted adviser if you have any uncertainty.
These are some of the questions you need to be asking yourself as you age. It is unlikely you will address the matter of health insurance prior to the open enrollment period. I encourage you to be proactive in order to 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 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 eldercare, 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 (954) 604-1015 or email her at jposer@caremanage.com.
