Elaine Floyd, CFP, is passionate about educating Baby Boomers and financial advisors on the facts of social security and Medicare. She told me that while many advisors are starting to have conversations with their clients about this, most are way behind. Let’s face it – we’re all struggling to manage the high volume of activities we already have in our personal and professional lives. Sometimes there isn’t room to take on one more activity.
That said, if you can find the time to get the facts on Medicare then make sure you speak with your clients about their transition to Medicare. “The transition to Medicare is the biggest source of confusion”, Elaine says.
It is mandatory once your client is retired
Elaine’s research suggests that unless your clients over 65 are covered in an employer plan with more than than 20 employees, they must sign up at 65 or pay penalties later. This includes people on a retiree plan or COBRA or individual health insurance policies.
“Private health insurers don’t want to lose their customers”, Elaine says. “No one is telling people turning 65 years old that they need to enroll in Medicare, and it isn’t automatic.”
It’s not automatic – if your clients don’t sign-up they will face penalties
If your clients don’t sign up on time they may face a late enrollment penalty. Signing up is not necessarily automatic, however. Parts A and B are automatic if your client is on Social Security. If s/he is not on Social Security then the client must proactively enroll in Parts A and B during the initial or special enrollment period. For Part D s/he must select a private insurer. If they will use Part C (Medicare Advantage) the client must also choose a private insurer.
Elaine shared with me a story about an attorney, who had reached 65, who employed two people in her small business. She was paying $800 per month for her own health coverage and also paying for her employees. She eventually signed up for Medicare and supplemental insurance for herself and elected to continue coverage with her health insurance company only for the two employees. In doing so she lowered her monthly premium from $800 to $300. So, what’s the problem here? The attorney’s health insurance agent never mentioned this option upon her turning 65. And she hadn’t realized that Medicare becomes the primary payer after 65.
Medicare won’t cover everything
“Supplement insurance is essential,” Elaine says. Medicare Parts A and B do not cover vision care, dental care, hearing aids or long term care. “Medicare leaves too many gaps and with Medicare alone there is no limit to out-of-pocket spending,” she adds. Selecting a supplemental insurance can be confusing, however.
One way you can help as your client’s financial quarterback is to provide a list of resources for her/him to turn to when selecting a supplemental insurance policy. There are several such providers, such as SelectQuote Senior Insurance Services.
Your clients' out-of-pocket expenses will be higher than they expect
Medicare is not free for most Americans. Even your affluent clients may experience out-of-pocket expenses that are higher than they would like. Elaine recommends that you “Build future health care costs into the retirement income plan.”
The challenge is estimating those health care expenses. One firm told me broaching the subject of health care costs is like “opening a can of worms”. If you are ready to open that can, there are health care consultants and other resources available (see also 3 steps to assist your clients in planning for their health care expenses).
Elaine’s service, Savvy Medicare Planning, offers a Baby Boomers Guide to Medicare that you can use to educate your clients. The approach, Elaine says, is prudent financial planning guidance for advisors and their clients.
Medicare doesn’t cover your clients’ long term care needs
According to a 2012 study by Bankers and Life and Casualty Company Center for a Secure Retirement, Retirement Healthcare for Middle-Income Americans, most retirees don’t understand that long term care is not covered under Medicare. And yet retirees and Baby Boomers are worried about long term care.
What can you do as your client’s financial quarterback? Elaine recommends the following:
Prepare to educate your clients about Medicare
Alert clients to Medicare enrollment periods
Guide them on supplemental insurance
Help them evaluate options for paying for long-term care
Build future health care costs into the retirement income plan
If jumping head first into health care planning isn’t an option for you in 2014, then perhaps you should get your toes wet by providing your clients with a list of resources that they can turn to. Or, make it the year for you to get educated. Is it too soon to start your summer reading list? Perhaps not.
Elaine Floyd, CFP, is Director of Retirement and Life Planning for Horsesmouth.
Cynthia Stephens is the Vice President of Marketing for ByAllAccounts where she provides executive leadership and management of the marketing organization and marketing activities. She has helped build a brand that was ranked as the #1 account aggregator for two consecutive years in 2011-2012 by Investment News and ranked 405th on the 2013 Deloitte Technology Fast 500™.
You may also be interested in:
How you can make your firm more attractive to clients concerned about healthcare costs (First in a healthcare blog series by Cynthia Stephens)
3 steps to assist your clients in planning for their health care expenses (Second in a healthcare blog series by Cynthia Stephens)
Podcast: Interested in adding healthcare experts to your professional network?
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