Defining Your Health Insurance Needs
Health insurance can be broken down into a few different categories: 1.) Medical expense insurance for hospitalization and physician services; 2.) Disability insurance in the event of an accident or illness; 3.) Disability insurance also incorporates a newer type of insurance product known as long-term care insurance. Approximately 170 million Americans under 65 receive health insurance through their employers. Only about 16 million have purchased individual polices.
Medical Insurance Prior to 65 and Medicare
Americans over 55 and under 65 looking to retire need to recognize the importance of maintaining a medical insurance policy until they are elder for Medicare. Medicare is typically available for those age 65 or who have met the definition of “disabled”. Since Medicare is typically not available to individuals before they reach 65, a potential coverage gap can occur.
If you are under 65 and considering early retirement, please consider the following:
- Check and see if your group’s plan has a conversion privilege
that allows you to convert your group plan to an individual plan. If
there is a conversion plan available, review the provisions if you were
to move to another state. Inquire whether you can keep the plan (for
prescription benefits) after turning 65.
- If your previous employer employed more than 20 full-or part-time
employees and offered medical benefits, COBRA (Consolidated Omnibus
Budget Reconciliation Act) must be offered (unless you were terminated
for documented gross misconduct). An individual can keep this coverage
for a maximum of 18 months, and dependents can have this coverage extended
up to a maximum of 36 months in some cases. By law, the premiums cannot
be more than what the group was paying (although a 2% administration
fee can be charged); however, your former employer is not contributing
to your premium any longer.
- After the 18 months of COBRA coverage, the former employee may be eligible for a guarantee to issue individual policy under the Health Insurance Portability and Accountability Act of 1997 (HIPAA). If eligible, federal law dictates the former employee must be accepted for individual coverage. Some states may use a risk pool arrangement for the HIPAA eligible plan. A risk pool is designed to cover those individuals deemed uninsurable by a medical insurance carrier.
Health Insurance over 65 and Medicare
Medicare is divided into Part A (covering hospital services), Part B (covers physician services), and what is commonly referred to as Part C (Medicare + Choice, which includes Medicare managed care plans and private fee-for-service plans). Currently, there are no provisions to “buy into” Medicare prior to age 65. Part A is a compulsory program and has no monthly premium while Part B is voluntary and requires a monthly premium ($54 in 2002). Many Americans purchase a Medicare Supplement or Medigap policy. There are 10 policies available and are referred to as plans A-J. These are the only types of Medigap policies allowed to be marketed and sold by insurance carriers. These policies typically will pay the part A deductible (currently $812 for the first 60-day hospital stay in 2002) and subsequent hospital deductibles. Many polices will pay the 20% co-insurance and $100 annual deductible for physician services for Medicare Part B. Medicare supplemental polices are designed to cover the “gaps” for which Medicare does not pay.
Once the medical insurance need has been met, perhaps an even more difficult decision to address is the potential long term illness. Americans are living longer. A common misconception is that Medicare will provide long-term care benefits. Medicare Part A will provide 100 days of skilled (not custodial) nursing care, provided a three-day hospital stay preceded the nursing care and the Medicare beneficiary was showing signs of progress. To learn more about Medicare visit www.Medicare.gov.
Long-Term Care
Long-Term Care (LTC) includes the ongoing nursing, social, rehabilitative, and personal care or services provided in a nursing home, one’s own home, or an alternative site such as an assisted living facility.
Long-term care insurance helps pay for these services. It can also protect you against the risk of large financial losses and may assure that you have choices about what services you receive and where you receive them.
Recent national averages price assisted living care at an average $20K - $30K annually and skilled nursing care between $30K - $50K annually. Some states are significantly higher than those averages. Like most insurance, LTC premiums are very affordable at younger ages (under 65 especially) and increase dramatically as you get older. If possible, Americans should explore purchasing a long-term care plan prior to age 55. The premiums would be 50-80% less than waiting until age 65 or beyond.
One of the most critical decisions consumers need to make is from whom they will seek professional advice and counseling. Many health insurance choices are available, but no one size fits all. The Association of Health Insurance Advisors and National Association of Insurance and Financial Advisors can provide a source of qualified professionals dedicated to providing the guidance and expertise for these important decisions.
Choose an agent that is licensed and regulated by your state insurance department and who carries proof of state licensing. If the agent cannot show proof, do not buy from that person.