One of the most confusing and stressful issues retirees face is the decision of when and how to file for Medicare. There's a lot to know, but you don't need to be an insurance expert to add value for clients. Simply knowing the answers to a few of the most common Medicare questions -- and being able to point to deeper resources for more information -- will help you equip clients to tackle this process.
1. WHEN SHOULD THEY APPLY?
Most advisors know that Medicare eligibility begins when a person turns 65 or has a qualifying disability. But not everyone understands when to begin the application process. And because some of your clients may apply for Part A and B at different times, it is important to understand when clients should apply for each.
For most clients, think in terms of the seven-month enrollment period for Part A: It includes the three months prior to a client's 65th birthday, as well as that month and the three months after. One exception: Clients who are already receiving Social Security will be automatically enrolled.
Use your CRM system to help clients. Set up alerts to remind you when clients are approaching age 65 and then reach out to help them start the process. Remind clients that if they miss their initial enrollment period, their application may have to wait until the general enrollment period, which occurs each year between January 1 and March 31. That delay could cause a gap in coverage, since they will have to wait until July 1 for coverage to start.
2. DO CLIENTS NEED PART B?
My clients often ask if they should sign up for Part B at the same time as Part A. Naturally, they are concerned about paying premiums for Part B if they don't need the coverage. But the timing for enrolling in Part B is a bit trickier and the stakes much higher, since late enrollment can cause a permanent premium increase.
One thing clients should consider: If they don't have employer group coverage, then this is a no-brainer. They should apply during their seven-month initial enrollment period.
If your clients are covered under a group health plan based on current employment -- whether their own employer or a spouse's -- they may qualify for a special enrollment period, often abbreviated as SEP. If so, they may delay enrolling in Part B until their group health coverage is terminated, and avoid the late enrollment penalty.
The eight-month special period starts the month after the end of either employment or the group health insurance coverage based on that employment -- whichever happens first. Here, again, you can use your CRM system to remind you when to revisit a client's Part B coverage.
Keep in mind that COBRA coverage does not qualify as employer coverage, and so won't allow them to escape the penalty for delayed enrollment. Be sure to educate your clients so they don't make this common mistake.
There are other considerations as well. Some smaller employers require Part B coverage to be integrated with their existing insurance plans, for instance, while larger employers may not. Have your clients talk to their human resources department or insurance specialist to know whether Part B coverage is necessary for them.
3. MEDIGAP OR ADVANTAGE PLAN?
Do your clients understand the difference between a Medigap policy and an Advantage plan? Most don't, so this is a great opportunity to educate them on the basics and provide resources to get them to the right coverage.
- Medicare supplemental insurance policies, also known as Medigap policies, provide additional benefits and can reduce out-of-pocket costs when combined with parts A and B. They're provided by private insurance companies and require additional premium payments. And because they usually exclude prescription drug coverage, clients may need to layer Part D coverage on top. That means clients could end up with three different monthly insurance premiums to pay and coverage plans to manage. There's a vast marketplace for these types of policies, though, so you should be able to help them target and virtually customize coverage for a client's exact situation.
- Advantage plans, on the other hand, combine Medicare parts A, B and sometimes D. In essence, these policies bundle coverage into a single Medicare-approved health plan offered by a private insurance company. The level of coverage varies depending on the plan chosen; again, there are numerous options available.
When a client still has employer health plan coverage, it can sometimes act as a Medigap plan, so usually additional coverage is not necessary. Otherwise, I've found that traditional Medicare with a Medigap plan is a great option for clients who have a special health consideration, don't mind shopping around and/or have a tendency to be thrifty. Advantage plans tend to feel more like traditional employer health plans; they are great if the client is willing to pay a little more for the convenience.There are more resources for clients (and for advisors) on the Medicare website:
- Getting Started with Medicare
- Medicare coverage choices at a glance
- What's Medicare supplement (Medigap) insurance?
- Medicare Advantage Plans
BONUS TIP: SHOP AROUND
While either Medigap or Advantage plans could make sense for a client now, circumstances change -- and both the plans and your clients' needs may require a recalibration in the future. Encourage clients to shop around at least every three years. The Medicare website is a great resource; among other information, it shows what plans are available in each state. There is also a customized search option that lets enrollees filter plans based on the coverage they want, with an estimate of the health care costs associated with each specific plan.
Your clients can also get personalized health insurance counseling at no cost from their local State Health Insurance Assistance Program. In fact, you may want to send clients a reminder each year during open enrollment -- from Oct. 15 through Dec. 7 each year -- suggesting that they review their plan. They'll appreciate that you are thinking of them.
Jessica Ness, CFP, is a client advisor and the director of financial planning at Glassman Wealth Services, a wealth management firm in McLean, Va.
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