Helping Boomers Through The Major Medical Maze
Financial advisors who help affluent boomers find major medical coverage say the search can be difficult for boomers who are not eligible for guaranteed-issue policies under the Health Insurance Portability and Accountability Act of 1996.
Boomers who need help finding coverage include early retirees, executives who are between jobs and entrepreneurs who are finally doing well enough to think about insurance.
Boomers who have had group coverage from employers with more than 20 employees usually qualify for COBRA continuation benefits, and many states require carriers that insure smaller employers to offer special conversion policies to departing employees.
HIPAA guarantees that boomers who exhaust COBRA benefits can get individual coverage, if they are able to pay the premiums.
But HIPAA protection applies only to boomers who apply for COBRA benefits within 45 days of leaving the group plans. Advisors note that an affluent boomer who procrastinates and waits too long to fill out COBRA paperwork will lose both COBRA rights and HIPAA rights.
Self-employed entrepreneurs and wealthy individuals who have never had to work at all may also lack access to HIPAA policies.
Boomers who have to buy coverage through the regular individual market fall into two categories: those who live in states with community-rating laws and those who live in states that allow medical underwriting in the individual market.
Community-rating laws require carriers to charge healthy policyholders and sick policyholders the same or similar rates. Insurers and other critics argue the laws drive up costs for all responsible parties by giving individuals a perverse incentive to wait to buy coverage until they are already very sick.
New York is an example of a state that has a community-rating law and is big enough to hold on to several carriers that still sell individual health policies. The policies are expensive, but they provide decent coverage, observers note.
In some smaller states with community-rating laws, carriers have pulled back from the individual health insurance market, and individuals may have trouble finding good coverage at any price, advisors say.
In states that allow medical underwriting, “it doesnt matter if youre affluent or not,” says George Collett, a principal at Collett-Ragland Financial P.L.C., Phoenix.
Healthy, affluent boomers in states that allow medical underwriting should have an easy time finding reasonably priced policies, but affluent boomers who suffer from chronic or severe health problems, such as asthma or high blood pressure, may have trouble getting any kind of health insurance, even if they are able and willing to pay high rates for policies that exclude coverage for preexisting conditions, Collett says.
Some states use risk pools to cover residents with serious health problems. But the risk pools often have waiting lists, and the risk pool in Florida has been closed since 1991.
The risk pools that function reasonably well often have limitations that make them particularly unappealing to affluent boomers who want protection against catastrophic medical expenses. In California, for example, the out-of-pocket costs for risk pool coverage are low, but the pool pays a maximum of only $75,000 in benefits per calendar year.
So what can an advisor do to help affluent boomers who are not eligible for HIPAA policies?