Additional Healthcare Coverage Needs For An Aging Population
Many Americans believe that once they retire or turn 65, they no longer need private healthcare insurance because Medicare kicks in. When retiring, most group health benefits terminate or are only able to be renewed for an exorbitant amount of money. However, Medicare doesn't cover all medical costs and, in some cases, doesn't provide any coverage at all for certain expenses. As the population, on average, lives longer and longer, the number of post-retirement years that require healthcare coverage increase, making it more important than ever to ensure you have the right healthcare coverage. (For more, check out What Does Medicare Cover?)

TUTORIAL: Intro to Insurance

Here's a rundown on what you need to consider when transitioning into retirement.

What Medicare Doesn't Cover

Medicare coverage is not meant to cover all healthcare expenses for everyone. It has limitations on specific coverages and there are expenses that are not covered at all, such as custodial care, dental and vision care, routing immunizations and experimental procedures. To receive some coverage, such as prescription drugs, seniors must enroll in separate Medicare coverage and pay a monthly premium.

Long-Term Care Coverage

While Medicare does cover some costs of medically-necessary home healthcare in certain circumstances, it by-and-large denies coverage of the cost of assistance with day-to-day activities. So, for example, if you require help with meals, personal hygiene or other daily tasks, only a private long-term care policy will cover that. As with most other types of insurance, the policy must be in place prior to the disability occurring. The younger you are when you take out the policy, the less expensive the premiums will be. Some group long-term care policies offered by employers can be rolled over into individual plans on retirement, and these are often less expensive than starting afresh. (To learn more, see Considerations For Long-Term Care Coverage.)

Catastrophic Coverage

Even with Medicare, it's possible to be buried in medical bills if you have a serious illness or accident. Medicare limits coverage for many procedures and hospital stays, so having additional private coverage makes sense in most cases. Catastrophic healthcare coverage provides payouts when you hit a minimum out-of-pocket amount annually. These plans do not cover routine medical expenses, such as doctor's visits or prescriptions, but they are there to protect you in a major medical event. Premiums for these plans are lower than traditional private healthcare, as they cover fewer events. A secondary benefit is that, with a catastrophic plan, you can sign up for a Health Savings Account, which allows you to fund the plan with a maximum amount ($3,100 in 2012; $4,100 for those 55 and older). The amount funded is tax-deductible and the account can be used to pay for most medical expenses. The account balance can be withdrawn for non-medical purposes at age 65 without penalty, which allows the plan to operate similarly to a traditional IRA.

Private Medigap Insurance

Medigap, also called Medicare Supplement Insurance, is a plan offered by private insurers but federally regulated to fill in where Medicare does not provide coverage. Medigap plans can cover co-payments, deductibles and other non-covered healthcare costs. Each state has different requirements for the plans that are offered, but all insurers who sell medigap coverage must provide standard levels of benefits. In general, medigap insurance does not cover long-term care, private nursing care, or dental, vision and aural services.

The Bottom Line

As our population ages and healthcare costs increase, making sure that there are no gaping holes in medical care coverage is critical to protecting your retirement assets. Medicare does not cover all healthcare needs and private policies can be instrumental in shoring it up. (For more related reading, check out What's The Difference Between Medicare And Medicaid?)




comments powered by Disqus
Trading Center