Part 1 of 2: Health Insurance When You Are 60-64


Holes in health insuranceLast week I was asked what health insurance plans were necessary for people who are in their 60s.  That question is easier asked than answered.

I do understand why that question is asked.  Nobody is paying more for health insurance than people age 60-64.  My answer is not going to be the one you want.  Never-the-less, here it is.

Your 60th decade on this earth will experience the biggest swing in private health insurance of your life.  Like the month of March, it will “come in like a lion but go out like a lamb.”

Today I will try to answer that question for people who are still in their early 60s and not yet enrolled in Medicare.  It is a rehash of the advice I gave in March in “Pre-Retirement Personal Insurance Portfolio.”

Tomorrow I will speak to people who are already enrolled in Medicare.

MAJOR MEDICAL

The next time your health insurance company adjusts their rates after your 60th birthday, your major medical premiums will increase.  They will reach a level that you have never seen before.  For the next 4 years they will get even higher.

People in their 60s use health insurance more than people in their 20s.  Since it costs more to treat people in their 60s, the premium for major medical insurance is going to be higher.  In many cases, the only options that are available to people in that age bracket are to pay the increased premiums or change to a plan with more cost sharing.

Unfortunately, the high premiums are not the only bad news for people in their 60s.  Regardless of how your major medical policy is structured, there are holes in the coverage.

DISABILITY/CRITICAL ILLNESS

Major medical insurance will help pay the doctor’s and hospital’s bills.  It will not pay your mortgage, utilities or grocery bill if you get sick or injured.  If you cannot work, you are out of luck.

Ideally, you have a “Rainy Day” savings fund.  It will continue to pay the bills  until you are healthy enough to return to work or old enough to retire.

However, not every person is fortunate enough to have 3-6 months of cash set aside in a “Rainy Day” fund.  As retirement approaches, they have their savings tied up in investments.  They do not have the luxury of selling assets in a down market.

Disability Income insurance provides a stream of income regardless of what the injury or illness is that prevents an employee from working.  As long as a licensed physician is willing to verify that you are not able to work because of a physical issue, it will pay.

Many Americans are of the opinion that Social Security Disability Income is all they need.  They do not have an appreciation of how difficult it is to qualify for SSDI.  Unless your injury/illness automatically qualifies you, your benefits, if any, will be delayed until after you have gotten an affirmative answer from one of Social Security’s appeal boards.

There is no stated time-frame in which Social Security must act on your application for Disability Income benefits.  It all depends on the number of applications that precede yours.

On average, it is taking SSDI 18 months to authorize disability payments for those who do not automatically qualify.  During that time, SSDI will pay you nothing.  You will have to rely on savings, charity or insurance to pay your living expenses.

The private insurance world is different.  Most states have laws that mandate that an insurance company start paying benefits within 90 days of a claim or explain why the claim is rejected.

Many Short Term Disability Income insurance plans will pay for up to two years.  If SSDI has still not authorized your disability income payments after two years, you may be able to claim Social Security retirement benefits early.

I realize that early enrollment into Social Security retirement will cost you some monthly income.  It is not the ideal.  Sometimes, however, you just got to do what you got to do.

Critical illness insurance is another option that you may wish to consider.  It is not as comprehensive as traditional disability income insurance.  It does not pay for any and every physical problem that can cause you to have to be out of work.  Critical illness insurance only makes payment in the event the insured is diagnosed with one of the covered critical illnesses.

Critical illness insurance also differs from disability insurance in the way it pays its benefit.  Unlike disability insurance that pays a monthly benefit to replace salary, critical illness pays a single sum of cash to the insured when he has been diagnosed with one of the covered critical illnesses.  It is up to the insured to make the money last until they can go back to work or start receiving retirement benefits.

Often, critical illness insurance is going to be much less expensive than disability insurance.  It also is less comprehensive.  Before you use either disability income or critical illness insurance to fill the holes that your major medical insurance has, make certain that you understand what is and is not covered.

LONG TERM CARE

Many people think that since they are paying so much for “health insurance” they can relax.  They think that their major medical policy will take care of all their health needs.  That is not correct!

Major medical insurance pays bills for things that are medically necessary.  It will not pay for assistance with your quality of life.

If you are injured and able to continue to live on your own with a little help, Major Medical insurance will not pay for you to hire the help you need.  If you have too many assets to qualify for Medicaid and you are not willing or able to rely on family, your only remaining options to hire  Home Health Care help are to use your retirement savings, “Asset-Based Insurance Plan” or Long Term Care insurance.

I realize that with the cost of major medical insurance being so high, you are reluctant to add any more insurance obligations.  If you are not careful, you could find yourself “insurance poor” in your early 60s.

I warned you that this post was not going to be uplifting.  Facts are facts.  Major medical health insurance has holes.  Whether you wish to fill those holes is up to you.

Fortunately, when you turn 65 and are eligible for Medicare things will change.  Medicare still has some holes.  Tomorrow, I will explain how you can address those holes.  It will be significantly less expensive during the last half of your 60th decade than it was during the first half.

 

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2 thoughts on “Part 1 of 2: Health Insurance When You Are 60-64

  1. Thanks for this info. Although I am in the UK it is a useful summary of some of the key issues regarding medical insurance for seniors. My parents are in their sixties, and we are currently trying to manage this issue.

  2. I have no idea what health insurance is like in the UK. According to many people over here, your national health insurance program has no problems. If your folks are having problems, I would appreciate knowing what they are. I am not certain but I may be able to direct them to an international health insurance policy to augment your national health plan. I know that I can for U.S. ex-patriots. I think I can for citizens of other countries but have never tried. I do not know for certain that I can help, but I do not know for certain that I cannot help. On UK health insurance, I am totally ignorant.

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