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Life Health > Health Insurance > Health Insurance

The High Cost of Living (Longer)

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A Reuters item today outlined something most of us in the L/H industry already know: that the out-of-pocket medical costs for people 65 years and older are huge to the point of being unmanageable. A quote:

According to a report released on Tuesday by the Employee Benefit Research Institute, a 65-year-old woman retiring this year will need to have between $143,000 and $242,000 to cover their health insurance premiums and out-of-pocket expenses in retirement.

Due to a shorter life expectancy, a 65-year-old man retiring this year would need between $124,000 and $211,000.

Those who save the nearly $200K needed have a 90% chance of meeting their medical costs once they hit retirement (or near-retirement) age, so says EBRI, a nonprofit resesarch group.

90%? I don’t know about any of you out there, but I’ve played with dice and probabilities enough to know that a 10% margin of failure is an uncomfortably large one for me. What this financial burden says is that there should be a much bigger market of ready buyers for long-term care coverage than there already is. And yet, the market seems to be in freefall, with Hancock announcing back in September that it would crank its rates by 40% and with MetLife announcing it was stopping new sales altogether. Genworth holds steady on the line that their rates are stable, but the financial planners I have spoken to on this unanimously cry shenanigans on that.

Now, the EBRI item did caution that these figures are assuming a “risk of longevity,” and that not everybody is going to live to, say, 90, and endure health problems from the age of 65 on. That said, it is unrealistic to expect people across the board to save the huge amounts needed to cover their medical costs when they are only just beginning to claw their way out from under consumer debt (thanks in large part to the Great Recession; can you imagine how badly people’s collective debt loads would be had there been no crash?). This looks like a clear opportunity for LTC coverage and hybrid critical illness and life insurance products, yet we still don’t see either option lighting up the marketplace. Why?

Stepping out for a minute, dear. Need to pull a few hundred Gs from the bank.

LTC can be expensive, of course (or is it?), and one planner I spoke to openly laughed off the idea of it. Her point: if you can afford LTC insurance when somebody is likely to try to sell it to you, then chances are you can afford to handle your medical costs by the time you intend to depend on the policy. An interesting take. Sounds a bit like relying on the airbag in a demolition derby, but whatever.

As for hybrid life products, since I joined National Underwriter, I have been approached by at least three different companies that wanted to use our publication as a platform to talk about their own hybrid product. Each was convinced their take was significantly innovative in a way the others weren’t. Each was convinced this was the Next Big Thing. None had any numbers to back it up.

With there being a lot of anger over health care reform on the part of the L/H industry (or among National Underwriter readers, anyway), I see figures like these medical cost estimates, and I wonder what the most sustainable solution to all of this is. Central to it all surely lies in the innovation of the life/health industry. Which, as the movement to CI/life hybrids shows, is hard at work trying to find a new way to sell workable solutions to a health care funding crisis that will likely continue even after full health care goes into effect in 2014 (assuming the GOP doesn’t repeal and replace it first). In the meantime, I’m looking forward to hitting the gym again tonight. The healthier I get now, maybe the longer I have to wait before I bust my own bank trying to stay alive.

I'll save money in the long run...I'll save money in the long run...


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