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July 08, 2013 at 10:09 AM
Do you find your clients are making fundamental adjustments to their spending and saving patterns or do you find them changing their expectations about how they will transition from work to retirement as part of a “new normal” for their lifestyle?
It’s not just individuals’ personal financial situation that is having an impact on our clients lifestyles, federal, state and local government are having fiscal crises that is resulting in permanent changes in both programs and policies. These include, but are not limited to, rising health-care costs, low interest rates and investment returns, later retirement ages for Social Security, less job security and perhaps most importantly, the migration of the baby boomer generation aging into Medicare and retirement.
This “boomer migration” will take the over-age-65 population from under 14 percent today to over 21 percent before the last boomer retires. What will this cultural change bring?
Medicare. Eligible individuals will increase by more than 15.4 million people over the next 10 years.
Medicare Advantage. With the recent changes in the health-care law we saw, starting in 2012, a gradual reduction in subsidies paid to Medicare Advantage (MA) plans, resulting in less generous benefit packages. When these MA provisions are fully phased in, enrollment in MA plans will be lower by about 50 percent, from 14.8 million to 7.4 million (csgactuarial.com).
Many companies and municipalities are forced, due to economic issues and accounting changes, to eliminate or alter health-care benefits for their retirees, who, along with Medicare, will incur more financial burden. According to the most recent Medicare Beneficiary Survey, the number of individuals receiving retiree health benefits has decreased 25 percent over the last 20 years. (csgactuarial.com)
The NAIC is required in the new health-care law to research new plans to be introduced in 2014. These new plans would be expected to eliminate first dollar coverage, similar to Medicare Supplement Plan F, which would be expected to create a “buzz” in the marketplace. While plans M and N generated an increase in sales for some companies it also produced an adverse selection issue that forced many companies to discontinue these plans in their second year of offering. So while lowering the cost of Medicare Supplement plans could open the market up for those who might not otherwise be able to afford this supplemental coverage there could be adverse consequences to the marketplace as well.
