RETIREMENT PLANNING: Potentially Exorbitant Healthcare Costs

EDITOR’S NOTE: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace column.

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While most Americans focus on their financial health as they head into retirement, they could be overlooking something.

This would be a different kind of health — their personal health. And the potentially exorbitant costs associated with insuring their health.

A recent report shows that a newly retired couple should set aside $250,000 to cover healthcare costs — which few have done. This rather large sum does not include investments and assets to cover other retirements expenses.

According to a report from the Employee Benefit Research Institute, a typical couple (at age 65) with this amount of savings would have a 90 percent likelihood of covering these healthcare costs. To complicate matters, there are exaggerated uncertainties about healthcare costs and coverage under the new Affordable Care Act.

Of course, there are many variables involved, and mitigating steps you can take. Retirees should first estimate their healthcare expenses, factoring in Medicare coverage as well as employer-retiree benefits and supplemental care.

And do not overlook prescription costs. In fact, medications can be one of the biggest out-of-pockets expenses for retirees.

You could also consider funding a Health Savings Account, a tax-advantaged way to defray healthcare costs. And let’s not forget about long-term care expenses, and whether you will self-insure or rely on family members to care for you.

But don’t forget that extended stays at nursing homes and assisted living facilities are not covered by Medicare. And these costs can range from $40,000 for an assisted living facility to $80,000 or more for a nursing home.

In a new development, healthcare insurers are proposing significant rate increases for 2016. The increases are mostly tied to the new healthcare program, and the massive changes it has brought.

Many of the rate increases — proposed by prominent insurers like Blue Cross Blue Shield and Aetna and United Healthcare — will mostly impact plans sold on the new healthcare exchanges. For instance, Blue Cross Blue Shield is trying to raise premiums by 20 percent in Texas, while Aetna is proposing increases of 30 percent in New Jersey.

In other states, residents are facing even bigger increases in insurance coverage. These include: Tennessee at a 36 percent increase, Connecticut at 32 percent, Oregon at 42 percent and Alaska at 38 percent.

Under the new rules, insurers must publicize significant rate increases on the government’s healthcare website. Insurers contend the higher rates are needed to cover unexpected costs related to new patients and escalating costs of prescription drugs.

Prior to this year, insurers had to play a guessing game going into the new healthcare program. With little information to go on, they set rates too low (partly to entice participants).

Just because a health insurance company proposes higher rates does not mean they will be approved by state regulators, however. A negotiating process between insurers and insurance officials will now ensue.

Still, any increases in premiums or deductibles will not be favorable for the so-called Obamacare program. The premise of the program is to expand affordable coverage to everyone.

In addition, the U.S. Supreme Court is due to rule on a challenge regarding subsidies given to lower-income patients in the healthcare plan. If the high court rules against the legality of the subsidies, about 90 percent of the people enrolled through the federal exchange will see premiums shoot up dramatically.

And that’s enough to shoot down anyone’s financial health — whether retired or not.

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Free Summer Class: Learn About Investing

Local financial advisor and columnist Steve Nicklas is offering his long-running class, “Investing in Today’s Financial Markets,” on Amelia Island this summer.

Nicklas has been teaching the continuing-education classes since 2001 at Florida State College in Yulee. Hundreds of local people have taken the class since its inception.

The four-part class will be offered on Tuesdays from 6:30 to 8 p.m. beginning July 7. The class schedule will be: July 7, Investing in Stocks; July 14, Investing in Bonds; July 21, Investing in Mutual Funds, IRAs and 401ks; and July 28, Developing a Financial Plan.

The sessions will be held at the Executive Park conference room, 1890 South 14th Street, in Fernandina Beach. The class is complimentary, although pre-registration is requested at 904-380-2376.