Your Health is Changing, So Should Your Coverage
You’ll save money and be better prepared for whatever comes if you rethink your health coverage as you get older.
Regardless of your age, you should review your health insurance policies every year. Even if you have all your health insurance policies with one company, agent, or agency, it’s just smart not to rely on them to contact you to make changes.
As you near retirement age or the age you can take advantage of Medicare, you should also consider reevaluating your coverage and possibly make some changes. Your insurance needs and costs will shift as you age, but you can still get solid coverage while keeping costs as low as possible by making smart moves. Here’s how.
When to stick with your employer plan
The Affordable Care Act helped millions of Americans get coverage they couldn’t get before. But it also forced most people and companies to choose plans with significantly higher deductibles, out-of-pocket maximums, and co-pays to keep the premiums at a reasonable cost.
The ACA, more commonly known as Obamacare, also caused many insurance companies to leave the health care market and, some argue that it drove up health care costs. If you’re one of the fortunate employees or retirees under the age of 65 who can get health insurance through your employer, don’t even bother looking at coverage outside of your employer.
A good rule of thumb is that group coverage through your employer is usually better than anything you can get on your own. First, your employer is paying at least 50 percent of the actual cost of insurance, and you’re making up only the other half of the premium. Second, the deductibles and co-pays are usually much lower than anything you can buy yourself.
Most employers that can still afford to offer benefits do it because they see still see the value in offering benefits to their employees to retain loyalty and keep you happy. You’ll never beat the cost for the benefits.
Tips when choosing your plan
Whether you’re choosing an individual or an employer plan, consider these few points to help make your decision:
• You should choose a plan that reflects your average annual medical utilization. If you haven’t been hospitalized, visited an emergency room, or had costly outpatient treatments or surgery, then you should consider a plan with a high deductible and/or out of pocket maximum to lower your premiums. If you already have a serious or expensive ongoing condition, then it makes sense to pay the higher premiums to have lower out of pocket expenses.
• Check the difference of the prescription coverage between plans. Does the plan require that you meet the deductible before the medications are covered? If one does and the other doesn’t, that can translate into big savings.
• Look at the emergency room coverage. If it says there’s a $300 co-pay after the deductible, then you’ll be looking at several thousands of dollars out of pocket for an ER visit. Some plans have a flat co-pay, while others are subject to a deductible.
• Take a PPO, or a preferred provider organization, over an HMO, or a health maintenance organization. With a PPO, if you were diagnosed with a serious illness for which the best care and treatment available is out of your service area, you could go to that out-of-area facility regardless of whether the hospital or physician is in your health network.
You’ll likely be responsible for higher out-of-pocket costs, but those will be subject to a maximum out-of-pocket amount. And you can work out a payment plan if you can’t pay the full cost of your care at one time. It’s easy to say you’ll just stay in your network until there’s a life-saving treatment somewhere else, but not in your service area.
Many people focus on the co-pay amounts for physician office visits. Don’t.
Make that your least important factor. The smallest portion of a person’s health care is an office visit. Concentrate on the amount of the deductible plus co-insurance and your out-of-pocket maximum.
If you’re in reasonably good health, you may even want to consider a plan that pays nothing at all for office visits until you’ve met your full deductible. Many of these high deductible plans are available as an HSA plan. HSA medical plans are given favorable tax treatment to help lower your taxable income. You simply set up a separate HSA account with a bank and pay your medical expenses out of that account, typically with a special bank card. Your employer plan may have a similar option for you called an FSA or HRA.
If you don’t have one of these tax favored accounts, then you may only be able to deduct medical expenses that exceed 10 percent of your Adjusted Gross Income. Check with your accountant, but for you to deduct out-of-pocket medical expenses, you have to meet certain guidelines.
Many CPAs will recommend you enroll in one of these tax favored plans to lower your taxable income or maybe even reduce your tax bracket. If you choose one of these options, make sure you set it up timely and fund your account properly. If you don’t, you may not be able to use it to your advantage.
If you just can’t afford the cost of a PPO, look at the HMOs. Start by searching for your doctors and hospitals in the network. Remember not to weigh too heavily on the office co-pay for a physician you aren’t continuously seeing. Just pay the cost of the visit to any specialists. Also, if you let the billing office know you’re out of network, they may charge you a reduced fee.
While an occasional visit with a specialist is no big deal, your primary care physician is a very important factor to consider. All of your care and referrals starts with your PCP. If you don’t use an in-network PCP, you’ll be responsible for all the charges associated with your care.
Once you find an insurance company and plan that has your physicians, pick the lowest-cost HMO offered. Plan on paying a portion of the bills for the whole year, but if you’re reasonably healthy, you should save several thousand dollars over a PPO.
The ACA system is basically pay now or pay later. The law made sure all plans offer the same core benefits, but the co-pays, deductibles, and out-of-pocket maximums will differ.
Whether to shift to a Medicare plan
One of the greatest things about becoming a senior is the opportunity to enroll in Medicare Part B. Medicare Part A is automatically awarded to you if you’ve paid into the Medicare system and earned at least 40 credits under Social Security.
If you’ve been covered by an individual, under-65 plan, you’re not permitted to keep it once you’re eligible to start receiving Medicare, and you need to accept or enroll in Medicare Part B.
Still covered through an employer, regardless of whether you’re an active or retired employee? You’ll generally have a tremendous boost both financially and an improvement in benefits by changing to a Medicare plan. If you’re covering a spouse who’s not yet eligible for Medicare, you may have to stay with the employer plan to keep your spouse insured. Check with your Human Resources department to see what your company allows.
You won’t incur any late penalties for not enrolling in Medicare when you turn 65 as long as you have employer coverage. You generally don’t need to accept Medicare Part B until you end your employer coverage. If you have very high deductibles or out-of-pocket costs, you may want to consider enrolling in Medicare Part B to cover those expenses.
Once you’ve signed up for Medicare part B, you’ll have a few options as to how you want to improve your Medicare coverage. There are two different ways to receive additional Medicare benefits.
But first, remember this. As people age, they generally have more health problems and increased care. So keep in mind that the plan you choose is the plan you may have to keep for the rest of your life. Try to imagine yourself with a serious illness, and base your decision on the type of plan you’d want when you were sick, not healthy.
With that in mind, you can choose one of the following two options:
1. Purchase a Medicare supplement. These plans are commonly referred to as Medigap plans. They pick up what Medicare doesn’t cover, such as the 20 percent of Part B services and the Medicare Part A hospital deductible.
In other words, you’d continue to use traditional Medicare parts A and B, and Medicare would still pay your portion. The supplement would pay the difference based on the plan design you choose.
When you purchase a Medicare Supplement, you’ll need to add a Medicare Part D drug plan, even if you don’t take any medications now. If you don’t, you’ll pay a 1 percent penalty for every month you wait.
There are 10 different Medicare supplement plan designs that are standardized by Medicare. Medicare supplements don’t control which medical providers you use, so you can go to any doctor, lab, or hospital in the United States that accepts Medicare. You will pay an average of $100-$200 per month depending on where you live and the plan design you choose, but you pay very little when you use services. There’s no provider network, there’s no requirement of a referral, and there’s no pre-authorization by the insurance company for treatment.
2. Enroll in a Medicare Advantage plan. Medicare Advantage plans don’t pick up what Medicare doesn’t cover; they don’t add to Medicare. Instead, they completely replace Medicare Parts A and B with Medicare part C, also called Medicare Advantage.
Medicare Advantage plans contract with Medicare to provide all medical care, and most plans include prescription drug coverage. Medicare will prepay your chosen Medicare Advantage company a set amount each month to provide all of your care. You need to use physicians and facilities that are in the network if it’s an HMO or pay higher out-of-pocket costs to use non-network providers with a PPO.
These plans are required to cover all the services that traditional Medicare covers, but they can and do charge co-pays, deductibles, and co-insurance for the services. Many of these plans are available for a very low, or even $0 monthly premium which is what attracts most people, but you can easily pay five to six thousand dollars of medical expenses when you access care.
Once you’re enrolled in a Medicare Advantage plan, your health care will be “managed” by the plan. These plans control costs by promoting preventive care but also by using more cost-effective methods of treatments and testing. Most plans also use a “gatekeeper,” who’s your primary care physician. For most HMO plans, PCPs help to limit unnecessary specialist visits and tests by treating you themselves.
TIPS-If you want to be assured that you will get the best medical care available decided by you and your doctor, not an insurance company, then choose a Medicare Supplement from the beginning. Once you choose a Medicare Advantage, you may never be able to pass all the health questions to get into a Supplement again. Use the Medicare Advantage system as a last resort.
Covering the what-ifs
Long-term care is defined as needing either assistance or supervision from someone when you’re unable to care for yourself as a result of a chronic illness, physical injury, cognitive or mental impairment, or just due to old age and frailty.
You may need long-term care if you need help with the activities of daily living or have a cognitive impairment like Alzheimer’s.
Home health care insurance is a variation that provides coverage only in your own home. These policies are generally less expensive than full long-term care policies and are becoming more attractive as most people prefer to be taken care of in their own home. They’re also usually easier to qualify for because they accept more health conditions. Most policies offer coverage for six months to two years of benefits.
It’s never too soon to purchase either type of policy. They younger you are, the less it costs, and the better chance you have of passing the medical underwriting. There are only a handful of companies left that offer traditional long-term care coverage compared to 20 years ago.
But there’s been an emergence of annuities and life insurance policies that include coverage for long-term care. These are great alternatives if you’re in your 60s or too unhealthy to qualify for a traditional policy.
If you purchased a disability income policy when you were younger, now isn’t the time to cancel it. The older you get, the more likely you are to become disabled. Unless it’s a financial hardship, let it continue to whatever age is defined in the policy, especially if you retire before you hit your full Social Security age. Even if your income and savings are more than sufficient, keep it until it expires.
The key to better coverage is staying on top of your health insurance policies and shifting the money you spend to coverage that benefits you the most now and in the future.
In an article—Your Health is Changing, So Should Your Coverage—in the November/December 2017 issue, the author stated:
Are you still covered through an employer, regardless of whether you’re an active or retired employee?…If you are covering a spouse who’s not yet eligible for Medicare, you may have to stay with the employer plan to keep your spouse insured…….You won’t incur any late penalties for not enrolling in Medicare when you turn 65 as long as you have employer coverage. You generally don’t need to accept Medicare Part B until you end your employer coverage……..
However, a reader has noted that this information could lead readers to believe there’s no problem under Medicare with a retired employee continuing with the employer coverage (to cover a younger spouse, because it’s free, etc.). This isn’t the case.
Natalie Cooper, the author of the original article, understands this reader’s concern and has provided the following additional information to clarify:
The reader is correct that a distinction should be made between an active employee and one who has retired. It’s possible that you’ll need to keep your employer health plan and enroll in Medicare Part B to cover your under-age-65 spouse (or dependent) and avoid a penalty.
• If you’re an active employee (or covered spouse) and become eligible to enroll in Medicare, you don’t have to enroll in Part B as long as you’re covered under your employer’s group health plan. If the employer health plan ends, you have eight months after the month it ends to enroll in Medicare Part B.
• If you’re already (or your spouse is) 65+ when you stop working for the employer that’s providing your health insurance, the Medicare-eligible person has eight months after the month you retire to enroll in Part B. If you stop working for the employer providing your health insurance and then turn 65, the Medicare-eligible person has the latter of eight months after the month you stopped working or three months after the month you turn 65 to enroll.
If you don’t enroll when you’re first eligible, you (or your spouse) may not be able to enroll in Medicare Part B until the next general enrollment period, which runs from January 1-March 31 each year. If you enroll during that period, your Medicare Part B will begin the following July 1, and you may incur a penalty for the time you waited.
We apologize for any confusion.
“©2017. Published in Experience Magazine, Vol. 27, No. 3, November/December 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.”