Buying health insurance tends to be a rather joyless experience for a lot of people, no matter how young or old they may be.
That certainly seems to have been the experience of Gail Cavanaugh, an agent with Columbia, South Carolina-based Colonial Life. She admits that “choosing a health plan today is an overwhelming task.”
Given the number of health insurance options available to American seniors, the argument could be made that seniors have it worse than most.
Many of today’s seniors have to choose from one or more of the following forms of health insurance as they age:
- Retiree coverage
- Other private insurance
Navigating these options should be easier for you once you’ve made your way through the following descriptions and explanations.
Retiree Health Insurance
Some seniors don’t have a whole lot to worry about in terms of acquiring health insurance when they retire. Many are able to keep the coverage they first obtained via their employers even after they retire.
These folks tend to be fairly small in number, though, as the majority of employer health plans end when the people attached to them retire.
If you’re lucky enough to be included among this select group of seniors, there are a few things you should know:
- According to healthcare.gov, if you have retiree benefits, you can rest assured that you’re covered under the Affordable Care Act. This means you won’t be penalized like those who lack adequate health insurance.
- You’re free to buy health insurance elsewhere if you’re currently enrolled in some sort of job-based plan. But doing so will make you ineligible for the kinds of tax credits and other savings that may be offered to you otherwise based on your income.
- The above is true only if you’re enrolled in such a plan. If you’re eligible but not enrolled, you can still access these credits and savings if you qualify.
- If you use retiree health insurance through a former employer, you won’t qualify for a special enrollment period.
Don’t forget that private-sector employers are under no obligation to offer retiree health insurance. Most of those that decide to provide them can cut or eliminate those plans at any time. But not if they've made specific promises that they will maintain them.
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A far more likely situation is they may retire early but still need health insurance until they turn 65. Because that's when they’ll become eligible for Medicare.
Some employers will help fill this gap by extending a person’s job-based health insurance until he or she turns 65. But a more typical scenario is that you'd have to purchase this temporary coverage on your own. And usually via the federal health insurance marketplace or the related state “exchanges.”
A couple of notes related to this course of action:
- If you lose your employer-based health plan when you retire, take advantage of a special enrollment period when visit a marketplace or exchange. This means you don’t have to wait until open enrollment to apply.
- When you apply, you’ll find out if you qualify for tax cuts or other savings based on your income or household size. You’ll also find out if you qualify for Medicaid coverage. (More information on the latter can be found below.)
The Many Forms of Medicare
Once you turn 65 you’ll probably drop your marketplace plan in favor of Medicare. That's the federally backed health insurance program for seniors older than 65 and who spent at least 10 years working full time. (It also supports some younger people who receive Social Security disability benefits.)
Here’s where things can get complicated. There isn’t just a single policy or product related to Medicare. It’s divided into four parts Part A, Part B, Part C, and Part D for medication. Just to add even more confusion to the situation, there’s a form of coverage known as Medicare supplement insurance, or “Medigap.”
It can be difficult to wrap your head around all of these Medicare-related options. But you’re going to want to give it your best shot. Rachel Kenselaar, co-founder of eCaregivers.com, says that “the first step in selecting a health plan is understanding the difference between Medicare and Medicare Advantage plans.”
Speaking of which, here is some additional information about both of those health insurance options and more:
Medicare Part A
Commonly referred to as “hospital insurance,” Medicare Part A covers many of the costs associated with in-patient hospital stays. This is care provided in skilled-nursing facilities, hospice care, and some instances of home health care.
There are limits placed on this coverage. But it’s hard to complain about that fact when you consider that it’s available to most people free of charge.
If you’re receiving Social Security benefits when you become eligible for Medicare, you’re automatically enrolled in Medicare Parts A and B.
Medicare Part B
This form of Medicare often is called “medical insurance,” which makes sense given that it covers all sorts of outpatient medical services like:
- Doctor’s visits
- “Durable” medical equipment and supplies (think blood sugar monitors, CPAP devices, hospital beds, walkers, and wheelchairs)
- Laboratory and diagnostic tests
- Mental health care and treatment
- Various kinds of preventative care (such as flu and pneumonia vaccinations), and more
Unlike Medicare Part A, Part B usually isn’t free. It has both monthly premiums and small deductibles associated with it. But private Medigap insurance can pick up some or all of the latter.
If you opt out of Part B when you first enroll in Medicare but later buy the coverage, your premium will be higher than it would’ve been otherwise. This is because of a penalty that’s imposed on people who are actively working and receiving health insurance from an employer fail to purchase it.
Medicare Parts A and B, Kenselaar says, they don't “cover most dental care, dentures, eye exams related to prescription glasses, hearing aids, prescription drugs, or long-term care.”
So, she adds, it’s important to understand what supplemental policies exist and the alternatives offered through Medicare Advantage plans.
Medicare Part C
These “Medicare Advantage” plans basically serve as an alternative to or substitute for Medicare Parts A and B.
They’re offered by private insurance companies who contract with, and receive compensation from, the federal government.
The main differences between Medicare Advantage plans and Medicare Parts A and B are that people who choose the former:
- Typically, you're forced to name a primary care physician and use a select network of healthcare providers except for in specific situations or emergencies.
- May be given access to various benefits that aren’t included in Medicare Parts A or B, such as vision, dental, or prescription drug coverage.
- Are not allowed to buy Medicare supplemental insurance, aka Medigap, plans. (Only people who have Medicare Part A and B plans can purchase these.)
Medicare Part D
Medicare Part D plans help people enrolled in Medicare Parts A and B pay for prescription medications. These costs aren't covered by the other forms of Medicare.
Although they’re approved and regulated by federal government, they’re provided to members of the public by private insurance companies. Also, like Medicare Advantage plans, and unlike Medicare Parts A and B, Part D coverage isn’t standardized. That means that different plans will cover different medications to different extents.
As for Medigap (or Medicare supplement insurance) policies, they’re also sold by private companies.
They exist to fill the coverage gaps that are left open by Medicare Parts A and B. Specifically, Medigap plans can help people pay some of the co-insurance costs and deductibles related to their care.
Four things to keep in mind if you’re thinking of purchasing this kind of coverage:
- When you turn 65 and enroll in Medicare Parts A and B, you’ll have six months to buy any Medigap policy sold in your state, regardless of your health.
- Monthly premiums are associated with Medigap plans, just like they’re associated with Medicare Part B.
- Only one person can benefit from this form of coverage. (In other words, if you have a spouse, he or she will have to buy their own Medigap plan.)
- You can’t buy Medicare supplement insurance if you already have a Medicare Advantage policy.
For more information on this kind of coverage, read our “Medigap Insurance Policy FAQ.”
Before You Buy a Medigap Policy…
When choosing a supplemental policy from a private insurer, eCaregivers’ Kenselaar and Sarah O'Leary, CEO and founder of Exhale Healthcare Advocates, suggest putting time into the following:
Ask yourself, "What are my current and anticipated medical needs, and what policy is the best value for me?" O'Leary offered some sound advice. “If a patient is in need of a hip replacement in the next year, he should bear that in mind when considering his supplemental plan choice for the upcoming year.”
Adds Kenselaar: “Everyone’s financial situation and health condition are different. So write down what coverage is important to you and ask lots of questions before enrolling in a health plan.”
Get objective advice when choosing or changing your supplemental policy. “AARP, for example, recommends a United Healthcare supplemental policy for its members,” she shares. “Most members don't realize that AARP is paid for that endorsement based on how many AARP members enroll in the program. This makes the advisement less than unbiased. Further, most insurance brokers are paid by insurance companies and may have a compromised point of view.”
As for what O’Leary would recommend instead, that would be for seniors to do “careful, objective research on their own. Family members who have the ability to understand the complexities of the Medicare system may be of help. Professional independent advocates can be extremely helpful, too.”
Kenselaar also recommends roping family and friends into the situation. As well as “[going] to the local senior center and [finding] out about their experiences with Medicare and Medigap plans.”
This health insurance program, unlike Medicare, is administered by individual states—although it was set up, and is partially funded, by the federal government.
Also, rather than being an entitlement program like Medicare, Medicaid is provided to those in need.
In particular, it’s provided to various segments of the population—including seniors, children, pregnant women, and people with disabilities--who have limited incomes and resources.
One of the peculiarities related to Medicaid is that many seniors have to “spend down” the bulk of their assets before they can benefit from its assistance. Medicaid pays for many of the same services covered by Medicare. It also pays for the majority of the costs associated with long-term care provided by skilled-nursing facilities, hospice care, and some home health services.
That’s an overly basic look at what Medicaid can provide to seniors, though, as the services covered by the program varies from state to state. To learn more about how Medicaid works where you live, go to State Medicaid & CHIP Profiles.
Additional Expert Advice
Here are a few final words of wisdom courtesy of Colonial Life’s Gail Cavanaugh, eCaregivers’ Rachel Kenselaar, and Exhale Healthcare Advocates’ Sarah O'Leary.
Seek assistance, if needed
Kenselaar and O'Leary already mentioned this piece of advice about choosing a Medigap policy. But Cavanaugh suggests it also should be heeded when contemplating the other forms of health insurance popular among seniors.
“Health insurance contracts are very complicated,” she says, and “insurance agents are trained in helping to interpret them and in meeting compliance issues.”
Review your plan every year
“Seniors absolutely should review their health plans each year,” Kenselaar suggests, “and for one simple reason. Our health is unpredictable and seniors’ needs can change from one day to the next.”
As part of this annual review, she recommends asking yourself the following questions:
- Have I started taking new prescription drugs?
- Have I started visiting any new specialists (particularly out-of-network providers)?
- Have I been diagnosed with a new illness?
O’Leary is another proponent of such reviews, especially for seniors who are enrolled in a Medicare Advantage, Medicare Part D, or Medigap plan.
“The drug formularies—the list of drugs included in one's policy--and plan benefits of privately insured Medicare plans change constantly,” she says. “The drug that was covered last year might not be this year, and the breadth of coverage can change.”
There's another reason to give your plan a thorough look every year when open enrollment seasons rolls around, O’Leary adds. Doing so “can save [you] thousands in the long run.”
Remember: everything’s negotiable
“Most people, seniors included, don't look to negotiate the price of their non-emergency care, medical devices, and prescription drugs prior to the receipt of their services, devices, and drugs,” O’Leary says.
If that describes you, reconsidering your non-negotiable stance could save you a lot of money. “The mark-up on hearing aids is over 100 percent in some areas, and that price can be negotiated,” she explains. “Shopping around the price of prescription drugs can also lead to big savings.”
Don’t ignore long-term care insurance
A “common and dangerous” misconception many seniors have is that “the cost of hiring a caregiver for custodial care is covered by Medicare,” Kenselaar says.
Unfortunately, it isn’t. Yet 70 percent of Americans over 65 will need long-term care in their lifetime, according to MetLife’s 2012 Market Survey of Long-Term Care Costs.
Seniors could avoid some of the expenses related to long-term care if they planned ahead and purchased a long-term care policy. Another option is to add a long-term care rider to their life insurance policies, she adds.
Cavanaugh also calls for more seniors and their loved ones to consider this form of insurance, especially if they have a significant estate. “Many seniors overlook long-term care coverage for [these] expenses,” she says, despite the fact that “plans are less expensive at younger ages.”
For more information about this type of insurance, check out our “Long-Term Care Insurance FAQ.”
Appeal any claim denials that may come your way
That’s another of O’Leary’s suggestions. She says that “seniors owe it to themselves to appeal any denial of claim or service by the government or their private insurer.”
The typical claim denial will be overturned after just a few attempts, she adds, “so it's important to keep appealing denials. Help from a loved one or professional advocate can help this process become less of a burden on the senior.”
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