Insurance For Seniors May Change

August 10, 2007
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GRAND RAPIDS — The growing number of older workers constitutes a major demographic force that will bring a change in health insurance services and programs.

More and more workers are staying on the job longer, or plan to stay on the job longer, than in the past, but what they’re finding is that some benefit plans are tailored to younger workers, said Vickie Thompson, vice president and manager of the benefits department at Hilb Rogal & Hobbs.

“I think what we’ll see is that both carriers and employers will change benefits somewhat,” she predicted. “The other thing that plays into it is that as people age, the cost to continue to insure them goes up as well, so you’re kind of caught in a conundrum.”

Thompson believes some health insurance policies will have to be adjusted to cover older workers. Some people will be able to retire comfortably, but others will have to continue working just for the health and prescription drug benefits.

A lot of employers aren’t giving consideration to extending coverage; they’re just trying to afford what they’re offering right now, Thompson said. But as more and more people chose to continue working, that will likely happen at some point.

“Right now we still have a lot of very rich benefits that are in place, and employers have been a little bit slower to go to the consumer-directed, high-deductible plans,” she explained. “I think as time goes on, we’re going to see benefits change; we won’t have the first-dollar coverage that a lot of plans still have today.”

Economics Professor John Laitner, director of the University of Michigan Retirement Research Center, said the aging population has been a major source of concern for the Social Security system for some time because Social Security runs the public disability program. The full retirement age in Social Security has worked its way up, too. It used to be 65, but the federal government has increased the qualifying age for full retirement to save money in the Social Security system, Laitner pointed out. The qualifying age will soon be raised to 67.

People who are on Social Security disability insurance are automatically moved into the regular Social Security system when they reach full retirement age and stop receiving disability at that time. But as the age for full Social Security benefits goes up, the concern is that more people are going to become disabled prior to hitting 67, Laitner said. He anticipates some Social Security money is going to have to be channeled into disability payments. However, the qualifying age for Medicare benefits is still 65, so at least there’s no pressure in that age moving up and leaving more people uncovered, he added.

On the other hand, as the number of people living to older ages increases, and as the percentage of older people in the economy becomes larger because the birthrate is somewhat lower, there will be more people in the critical years for using health care, Laitner pointed out.

“Prior to age 65, they won’t have Medicare coverage, so I think there would be increased use of private insurance of various types,” he remarked. “If employers don’t offer coverage or if people retire early and can’t get medical insurance through their employee, I think there will be a need to find a substitute; they’ll need to find privately available health insurance to carry them over to age 65.”

Jon Snead, vice president of AON Consulting, said the latest trends are Medicare Advantage plans that are part of the Medicare program but offer several health care alternatives to the original Medicare — and, often, lower out-of-pocket expenses. Medicare pays an individual’s Medicare Advantage plan a set amount each month and makes subsidies available to carriers and employer groups as an incentive to offer the plan. The goal is to shift some of the risk from Medicare to the insurance companies, Snead noted.

“Over the past five years, more and more employers have been reducing or terminating retiree medical coverage just because of the cost of offering it,” Snead observed. “Now, more employers are considering offering Medicare Advantage plans as a voluntary option because it’s completely paid by the employee.”

There have always been carriers that offer plans that coordinate with Medicare, Snead said, but health care insurance plans are much harder to find for retired people who are in their early 60s and not yet eligible for Medicare. That’s why people are continuing to work awhile longer, he said.

Though there are a number of special health insurance products for seniors on the market already, with 77 million baby boomers going into retirement over the next 20 years, some new ones may be in order, said Edwin Thauer Jr., president and CEO of Design Underwriting Inc.

“The market is definitely going to get larger in that area,” Thauer remarked. “I think the industry has realized that there’s going to be a lot of demand over the next 15 or 20 years; therefore, they’re coming out with products that directly relate to that demographic and help fill the needs they have.”

The federal government has essentially told insurance agents that they have to help seniors figure out which plans are best suited to them, said Cherie Mollison, division director of the Michigan Offices of Services for the Aging. Michigan law and federal best practices require that insurance agents are knowledgeable about whether a specific health insurance policy is suitable and in the best interest of an individual senior, so the senior doesn’t end up buying the wrong product.

“We’re always in favor of making sure agents are well educated and understand the products so they can help seniors understand them,” Mollison said. “The notion is that companies sell good products through agents who know what they’re doing and can adequately explain it to seniors, so seniors make good choices for themselves.”

The same notion applies to companies that sell Medicare Advantage products. Mollison said the federal government has told insurance agents they must pursue actions such as call backs to ensure their senior clients clearly understand the nature of the long-term care health care products they have purchased. She said the huge array of products in the Medicare market has caused some confusion.

“In order to make good choices for themselves, everyone needs to understand what it is they’re purchasing — whether it’s health insurance, life insurance or any kind of a product,” Mollison remarked. “They need to understand what it does for them, what their choices are, and whether it fits the need they think they’re going to have. That’s good for any age group.”     

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