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By Jill Poser, CGCM, CMC, CDCP

APRIL 9, 2024

It is no secret that as we get older, we can experience more complications to our health. Of course, not everyone will experience more complications, 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 emotional well-being as well as retirement budget. One of the significant challenges we all face is the health insurance choices we have made along the way.

Each year, the open enrollment period for Medicare typically runs from October 15th to December 7th. This means that if you want to make changes to your Medicare plan, you can do so during this period without special enrollment.

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 otherwise known as supplemental insurance coverage. 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 supplemental insurance plan is during your 6-month Medigap open enrollment period at 65-years old. During that time, you can buy any supplement insurance policy sold in your state, even if you have health problems, for the same price as people with good health. It is known as a guaranteed issue. 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 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 supplemental insurance 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 and provide you with extra benefits. It 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 and their profit comes out of the Medicare dollars they manage; therefore, leaving you with less option for services than you would have had with straight Medicare and supplemental insurance coverage. Further, they all have a maximum out-of-pocket. The sales associate does not lead the 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 and he certainly did not discuss what the insurance company does not cover.

Suffice it to say, you will not realize any of these matters until you develop more medical issues. By example, you signed up for an HMO Advantage plan and are later diagnosed with 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 have a cardiac episode and are rushed to the nearest emergency room because you are in heart failure. 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 that 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 home bound 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 and so often the services are very limited. Under straight Medicare with a supplemental insurance policy, you have many options.

The needs accelerate, costs accelerate, the stress accelerates, and the care likely suffers. You may not have accounted for these types of ‘what ifs’ when you were planning your retirement, and it proves difficult. It is critical to recognize that your health is paramount and health insurance choices become a critical component to your long-term planning and well-being.

1. Understand the appropriate health insurance coverage choices as part of your retirement planning with a trusted adviser.

2. Make certain you have a health insurance specialist you are comfortable with.

3. Check to be sure you have signed up for Medicare/supplemental insurance at 65 years old.

4. Be certain you understand prescription coverage. This is an additional expense; premium and copays, that must be taken into consideration.

5. Be sure that you understand the difference between Medicare/Medigap or supplemental insurance coverage versus a Medicare Advantage plan and the impact on your health and well-being.

6. Perhaps there will be a time that you, a client, or a loved one may need to transition from Medicare/supplemental insurance to an Advantage plan because of a financial downturn. Perhaps you can only afford an Advantage plan from the onset. Understand the differences between these plans and the carriers offered in your local area. Include a trusted adviser if you have any uncertainty.

This is a critical issue that we face with some of our clients, and these are questions you need to ask 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 - address matters that many do not.

Let us help you create solutions that address your family’s unique circumstances.

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