Supplemental Healthcare Coverage in Retirement

Supplemental Healthcare Coverage in Retirement

The Balance, a personal finance website publisher, recently reported on the alarming rate of medical bankruptcy in the U.S., stating that 643,000 Americans face bankruptcy each year as a result of medical costs. One thing that was shocking about the information gleaned from the many studies conducted on the relationship between high medical bills and bankruptcy is the fact that people who have health insurance are three times more likely than those who do not to file bankruptcy related to healthcare costs.

The hypothesis is that the actual protection provided by the health insurance was considerably less than expected once copayments, deductibles, and excluded fees and expenses were added up. Others found their insurance denied claims or excluded specific services, hospitals, or physicians.

For all these reasons and more, it is more important in retirement, as you adjust to life under Medicare coverage, to consider supplemental healthcare coverage and protect the nest egg that funds your retirement and avoid overwhelming medical expenses that could cripple your retirement budget.

What is Supplemental Health Insurance?

Some refer to supplemental health insurance as a type of “gap” insurance. It is designed to plug in holes in your Medicare coverage by filling in the gaps. What this means is that supplemental health insurance helps to pay for the expenses your Medicare insurance doesn’t cover. This includes things like:

  • Deductibles
  • Out-of-pocket expenses
  • Copayments

You might not realize it at first glance, but these expenses can add up quickly, and things like deductibles reset every year. The way supplemental policies for Medicare insurance work is that you pay a monthly fee for the insurance and you get to eliminate the additional debt.

Is supplemental health insurance good for everyone?

There is no such thing as one-size-fits-all. Every home, family, household, and individual is different. While working and earning a living, a supplemental policy may not be critical. However, that takes on a different relevance once you retire, especially if you are using Medicare.

The other thing to realize is that there are different types of supplemental or “Medigap” insurance policies available. AAA reports that there are ten different types of Medigap policies, each one offering different levels of coverage and types of coverage. That can keep things more than a little confusing on the consumer end.

It also means you need to think about whether now is an ideal time to invest in supplemental health insurance. Those who are just retiring and do not yet have significant medical expenses may not be ready to invest in additional protection. However, your health status is something that can change on a dime with little notice. Many people feel it is necessary to invest in supplemental insurance for their Medicare coverage from day one.

When Should You Consider Supplemental Health Insurance?

One key consideration when choosing supplemental health insurance involves whether you are enrolling in Medicare Part B. If that is the case, you should strongly consider signing up for additional Medicare insurance within the first six months of enrollment in Medicare Part B.

If you do not purchase supplemental health insurance during this six month grace period, your additional coverage options may be severely limited. Most importantly, failing to do so within the first six months of Medicare Part B coverage eliminates the “guaranteed issue” aspect of supplemental health insurance, meaning you may not be able to enroll at all after the six-month window closes.

In other words, the ideal time to purchase supplemental health insurance, if you suspect you will someday need it, is within the first six months of enrolling in your Medicare coverage. Otherwise, you run the risk of being unable to do so at a later date.

Key Details about Supplemental Health Insurance

  • Supplemental insurance can spare you the pain of medical cost-related bankruptcy.
  • Different supplemental health insurance plans offer varying degrees and types of coverage.
  • There is a limited window of opportunity to get access to supplemental health insurance with guaranteed issue.

With so many bankruptcies every year over mounting medical costs, the average retiree cannot afford to skip out on supplemental health insurance protection. Just make sure you get the coverage most likely to meet your needs today, and as they evolve, best.