individual health insurance

Women, Healthcare and Money: How To Improve Your Long-Term Care Insurability

How to Improve Your Long-Term Care Insurability

We originally published this article on July 28, 2009. In the spirit of ongoing financial wellness and the significant changes in healthcare legislation since this article was written, we thought we’d give it a refresh for 2021 and focus instead on how to improve your long-term care insurability.

When I originally wrote this article, the future of healthcare in the United States was unclear. Of course, we now know that the Obama administration successfully passed the Affordable Care Act (ACA), which radically overhauled the individual health insurance market. One of the most significant provisions of the ACA is that insurers can no longer deny health insurance to individuals because of preexisting conditions—a life-changing development for many people.

Still, long-term care insurance providers maintain discretion to deny individuals coverage due to a variety of preexisting health conditions. Since long-term care is often an important consideration for women planning for retirement, it’s helpful to be aware of what can prevent you from qualifying for long-term care insurance and ways you can improve your insurability.

Reasons You May Not Qualify for Long-Term Care Insurance

A number of preexisting conditions are likely to render women ineligible for long-term care insurance.  These include Alzheimer’s, Parkinson’s, multiple sclerosis, any dementia or progressive neurological condition, a history of stroke, and metastatic cancer, among others. Conditions like these may not come as a surprise. However, you can also be denied coverage for less obvious reasons, such as not drinking alcohol or being underweight. Health underwriting standards vary from provider to provider, so you’ll want to do your research before assuming you qualify.

In addition, insurability standards can change over time. For example, the coronavirus pandemic presents new potential risks to insurance providers. As a result, testing positive for COVID-19 may impact your eligibility for long-term care insurance. If you’re considering long-term care insurance, you should speak with an expert who can explain these nuances in insurability.

How To Improve Your Long-Term Care Insurability

Ask your doctor to review your medical records for accuracy.

Human errors, outdated information, and unnecessary notes in your medical records may cause issues for insurability.  For example, you may have been treated for a condition that’s now improved, or your records may include codes that no longer apply. You’ll want to get any discrepancies updated and corrected on your medical records before applying for long-term care insurance.

Order your Medical Insurance Bureau (MIB) report.

Your MIB report is the healthcare equivalent of a credit report.  However, instead of tracking your bill-paying ability, it tracks your medical history.  Since previous insurance carriers create the report, you’ll only have one if you’ve applied for individually underwritten life, health, disability income, long-term care, or critical illness insurance with a member insurer within the last 7 years (or less, depending on applicable law).

Insurance carriers use proprietary codes to report health conditions and lifestyle choices such as smoking or high-risk activities (e.g., sky diving). You can request a copy of your MIB report (if you have one) for free. Before seeking long-term care coverage, it’s a good idea to review yours and make sure any errors are corrected.

Work with a medical professional or wellness expert to improve potentially reversible conditions (or prevent them altogether).

Chronic conditions like hypertension, obesity, and type 2 diabetes can affect your long-term care insurability (and potentially lead to more serious problems). However, in some cases you can prevent and even reverse these conditions through proper diet, exercise, and lifestyle changes. Whether you need long-term care insurance or not, taking care of yourself now is one of the best ways to reduce your overall healthcare expenses over the course of your life.

Seek coverage sooner rather than later.

There’s no age requirement for long-term care insurance. However, premiums are based on your age when you apply. While the optimal age to purchase long-term care insurance varies depending on who you ask, most agree that mid-50s to early 60s is the best time to apply.

Research shows that 70% of adults who survive to age 65 eventually develop severe long-term care needs. This makes qualifying for long-term care insurance much more challenging the older you get. Plus, many insurers offer discounts to applicants who are in good health, which is good incentive to seek coverage before a triggering event.

What to Do Next If You’re Considering Long-Term Care Insurance

Long-term care insurance isn’t right for everyone. However, having the right coverage can protect you from depleting your retirement savings if you end up needing unexpected or extensive care in your lifetime. To learn more about why women in particular may want to consider long-term care insurance and the potential benefits and drawbacks, check out our recent blog post and podcast episode on the topic.

And if after reading this article, you’d like to speak with an independent financial planner about whether long-term care insurance makes sense for you, we invite you to schedule an introductory phone call. As a fiduciary, we can give you an objective opinion as to whether this type of insurance is appropriate within the context of your overall financial circumstances.

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Being Single, Wanting to Retire Early, and Medical Insurance Options

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Recent surveys have indicated that a big worry for baby boomers is how they are going to handle healthcare costs in retirement. This concern is paramount for those who want to retire early. For singles who want to retire early, there is no spousal insurance fallback. Single people need to get insurance to bridge the gap between retirement and Medicare on their own.

A Brief Summary Of Medicare And Average Costs

For people who retire at age 65, Medicare (Part A, B, and D) will take over as the primary health insurance. Premiums are announced each year by the Federal government Center for Medicare and Medicaid (CMS). Most people will also need a supplemental policy to cover the roughly 20% of health care costs that Medicare does not cover. Alternatively, a person can opt for Medicare Advantage (Medicare Part C), an all-in-one solution that has less flexibility but is usually less expensive. 

Depending on income (MAGI) Medicare Part B premiums range from $1626 to $5,526 per year, Medicare Part D premiums average about $400 per year, and Medicare Supplemental (Medi-Gap) premiums average $1700 per year. Then there are out-of-pocket health care costs such as co-pays. The total average healthcare costs for a 65-year-old woman is $5200/year – this is not a small amount of money, but it is predictable and manageable and easy to plan around. Costs can be substantially higher for someone with chronic illnesses.

Health Insurance Options For An Individual Who Wants to Retire Early 

For a single person who wants to retire before age 65, there are a few options for health insurance overage. One option is COBRA (Consolidated Omnibus Budget Reconciliation Act) – a health insurance program that allows an eligible employee to continue their employer health insurance coverage for up to 18 months. Some states (such as California) have COBRA laws that allow up to an additional 18 months, for a total of 36 months. However, the premiums can be quite high. The advantage of choosing COBRA is a seamless continuation of coverage. Another option for some retirees, although not as common and can be expensive,  is to “convert” their group health insurance policy into their own individual health insurance plan. 

Besides the high cost, depending on what age a person retires, COBRA may not bridge the coverage gap completely. For example, a person who retires at age 60 and chooses COBRA, will have coverage for 3 years maximum up to age is 63, but will still have to buy health insurance for the next 2 years. 

A better option may be to purchase a health insurance policy on the health insurance marketplace in your state. These exchanges were instituted with the passage of the Affordable Care Act in 2010. Buying health insurance in this way is especially affordable for people whose income (AGI) qualifies for premium tax credits.  In general, individuals and families may be eligible for the premium tax credit if their household income for the year is at least 100 percent but no more than 400 percent of the federal poverty line for their family size. This amounts to $12,140 to $48,560 for a single individual in the continental U.S. during 2019.

These income levels may seem low, but many individuals income drops dramatically after retiring. Net worth isn’t considered for eligibility for premium tax credits. It’s quite possible for a person with a comfortable net worth to qualify for premium tax credits.

 An example:

Susan is 60 years old, lives in California and wants to retire in the next year. She has $1,000,000 saved in her 401(k) and another $800,000 in taxable savings accounts. Dividends and capital gains generated by her taxable investments average $30,000 per year. She has an inherited IRA and last year had to take a distribution of $5000.00. She earns a small amount of interest on her bank account, so her AGI is about $35,500.00. With this amount of income, she would qualify for premium tax credits.

Entering her details on the California State Health Insurance marketplace – Covered California website, Susan could qualify for a monthly discount of up to $809.00! She could opt for a Silver Plan with premiums ranging from $224 to $413 a month or choose a more expensive plan, for example, Gold plan options range from $264-$587 per month. (These premium levels include the discount).

Bottom Line

The cost of healthcare is a topic that causes a lot of anxiety and many times unnecessarily so. Just with any other financial decision, it pays to know your options and to do a detailed cost/benefit analysis. As you can see, with the above example, Susan’s healthcare costs will be manageable. If you are trying to decide whether to retire early and want to understand your healthcare costs, start by talking to your employer’s human resources department about options for extending your current insurance. At the same time, log into your state’s health insurance marketplace and compare costs. Armed with this information, you can make the right decision for your situation. 


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Healthcare and Money: Fee Only Financial Planner Discusses Ways to Improve Your Insurability

Buying health insurance when you are self-employed, pre-Medicare, or temporarily jobless.

Remember: An Apple a Day Keeps the Doctor Away | photo
Remember: An Apple a Day Keeps the Doctor Away

The healthcare debate rages on… will the Obama administration succeed where the Clinton Administration failed?  Will the new healthcare system cost you more or less?

Too soon to tell, says this fee only financial planner.

In the meantime, if you’re an individual looking for insurance there are a few critical  things you need to know. Once you leave a group insurance policy, (including Cobra) within which the government prohibits discrimination against people by age or health condition, all bets are off. You will be “underwritten,” which means that an insurance company only offers you coverage if they think they’ll get more from you in premium than they’ll pay in claims (may sound cynical, but true.)

If you can plan ahead for the underwriting process you are fortunate. Most people look for individual insurance when they: 1. retire early and know Cobra will run out before Medicare kicks in. 2. decide to quit their job with health benefits to start a business or freelance. 3. lose their job or a spouse with coverage loses his or her job.  Two out of three of these situations allow for advance planning.

What measures can you take to improve your insurability?

1. Ask your doctor to review your medical records for accuracy.

Human errors happen, a condition you have been treated for may have improved, a code may have been applied to your record to get insurance coverage – you’ll want to get these kinds of discrepancies updated and corrected on your medical records.

2.  Order your MIB report (Medical Insurance Bureau report).

This report is the healthcare equivalent of a credit report.  Instead of tracking your bill paying ability, it tracks your medical history.  The data is created by previous insurance carriers – the very same folks with whom you have applied for individually underwritten life, health or disability insurance.  The insurance carriers use 230 codes to report your health conditions such as high blood pressure, asthma, diabetes or depression, and lifestyle choices such as smoking or high risk activities (sky diving).  Review it and make sure any errors are corrected.  It’s free once a year.

3.  Chronic illnesses cost more.  Work with a doctor to get your weight, blood pressure or diabetes under control.  Start an exercise program and make healthier food choices.

How do you go about shopping for individual health insurance?

1. You can go directly to health insurance companies but my advice, especially if you have a chronic health condition is to use a “non-captive” health insurance agent or broker-one that does not work directly for an insurance company.

2. If you do have a chronic health condition, make sure the agent you choose has expertise in getting insurance for people with your condition.

3. Health insurance agents are paid and incentivized in many ways.  Learn and understand the ways they are compensated. It’s not always transparent.  Ask the questions and insist on answers.

4.If you need help, find a financial advisor that will guide you through the process, many financial planners offer health care planning as part of their comprehensive financial planning services.

Though these proactive steps may seem like a lot of work, they can save you money. And, best of all, they might get you the insurance you deserve.

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