By Emily Brower Auchard
The high cost of healthcare in the U.S. takes up an increasingly large portion of consumers’ financial resources, with health spending in the U.S. reaching $3.1 trillion—or nearly $10,000 per person per year, according to the Centers for Medicaid and Medicare Services.
Even with long-term disability and health insurance, consumers who get sick can be hit with unexpectedly large out-of-pocket expenses. Advisors say the unpredictable nature of healthcare costs requires creative planning and careful attention to the small print of health-related insurance.
Over the course of his career, Anthony Domino, an advisor with Associated Benefit Consultants in Rye Brook, N.Y., with $2 billion under management, has seen big changes in how healthcare costs impact his clients. “Today my clients can spend more on co-pays for drugs than they used to for their entire health insurance premium,” he says.
While healthcare reform has changed the funding for health insurance it hasn’t impacted healthcare costs, he notes. With that in mind he encourages clients to shop carefully for their healthcare insurance. He also recommends they repeat the process for every annual enrollment period to be sure they are getting the best coverage possible. In addition to premium increases, other plan benefits and costs, such as drug benefits or coverage of out-of-network provider care, can change significantly from one year to the next. This can lead to what the healthcare industry now calls “surprise medical bills.”
Get the healthcare benefits your clients are due
Neal Slafsky, managing director of United Capital in Newport Beach, Calif., encourages clients to approach healthcare with the same financial awareness they bring to buying a car or a home. Slafsky, whose firm has $15.4 billion under management, works with his clients to ensure they get the benefits they are due from their health insurance providers — which can mean taking a more active role in reviewing medical bills after a client’s hospital stay.
“Sometimes clients have to appeal their claim and go back more than once to get the benefits they are due,” he explains. If the process is too much for a client, he recommends they hire a medical claims processor. “The fees are very reasonable and I’ve seen them get terrific results,” he says.
The best way advisors can serve clients, he says, is to do a “deep dive” into the world of healthcare insurance. Providers can be very opaque in their explanations of benefits and advisors can play a crucial role in translating that information for clients. “Where else is a client going to go to get that information?” he notes.
Beware misleading long-term disability insurance income
Long-term disability insurance is another element where clients typically need advisor guidance. “Clients need to plan well in advance to prepare for the possibility of being disabled,” explains Venita Zavidny, an advisor with Houston, Texas-based Kanaly Trust, which has $2 billion under management.
Zavidny, who considers incurring a long-term disability to be one of her clients’ biggest risks, is well versed in the financial needs of long-term care. Zavidny works with clients to look closely and carefully at their long-term disability plans and to make sure they know exactly what coverage they are buying. For instance, a plan that says it will provide 60 percent of a client’s income may look appealing on paper — but clients often neglect to factor in other costs.
“Taxes will make that income considerably less,” notes Zavidny. Many plans include Social Security benefits in their formulas and will subtract any amount of long-term disability provided by Social Security from their payments. One piece of advice Zavidny offers her clients: avoid paying taxes on future long-term disability income by taking the benefit as imputed income. “This small decision on insurance choices can have big consequences for the future,” she notes.
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