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Getting Out of Health Care Limbo

Many of your ideal prospective clients are those who are in their late fifties or early sixties, leaving the workforce, and have a significant sum in an employer-sponsored retirement plan that needs to be rolled over and overseen by a financial professional.

But whether their early retirement is voluntary or not, they often have a concern that looms even larger than deciding who will handle their money: how to obtain and pay for health care (and health insurance) before reaching Medicare eligibility.

These options can help you address the fears of those clients who are worrying as much about their health as they are their wealth.

1. Maximize the Mortgage

Homeowners who have a relatively low amount of non-retirement assets and a higher ratio of equity in their homes should consider using the equity as a potential safety net for an uncovered health care emergency or condition.

They should think about applying for a new, 30-year fixed-rate mortgage for as much as the lender will allow, especially if they’re still employed. Any proceeds should be parked in a risk-free and readily accessible certificate of deposit.

If the clients can’t handle the thought (or payment) of a new loan, they should at least set up a home equity line of credit to tap in the event of a future medical crisis.

2. Consider COBRA

Assuming the soon-to-be retired client can’t get continuing health insurance coverage from his employer or from a working spouse, his next step is to weigh the costs of coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

COBRA can allow employees (and/or certain family members) leaving full-time employment status to continue receiving group health insurance coverage on their own, as long as they pay both the employer and employee portion of the cost of the policy.

Prepare your clients considering COBRA for “sticker shock.” The Kaiser Family Foundation says that in 2011 single employees paid $921 per year on average for employer-sponsored health care, but the total costs averaged $5,429. Families paid $4,129 on average for coverage that had a mind-blowing total cost of $15,073. Under COBRA, the client would have to pay the total cost of coverage.

The length of the COBRA coverage usually lasts from 18 to 36 months, depending on the circumstances surrounding the reduction or severance of employment.             

As you might guess, the intricacies of COBRA coverage are many. But you can start by wading through the details with a guide supplied by the Department of Labor at

3. On Their Own

In many instances clients might find that they can obtain better and/or less expensive health insurance coverage by skipping COBRA benefits and searching for an individual health insurance policy on their own.

Assuming the clients (and you) don’t have already have a preferred agent or health insurance provider in mind, you can start the search and compare rates and policies at

As an added bonus, the site offers a free copy of the booklet Individual Health Insurance for Dummies (no offense to you or your clients), which can be downloaded or mailed.

Keep in mind that clients in decent health can use a high-deductible health insurance policy combined with a Health Savings Account (HSA) to save money on both the policy premiums, and income taxes that would otherwise be applied to deposits made to the HSA.

4. More Help on the Way?

Assuming the Affordable Care Act of 2010 (ACA) remains in place, clients searching for individual health insurance may soon have an easier time finding affordable individual health insurance coverage.

Beginning in 2014 the law will provide access to “affordable insurance exchanges” that may offer individuals the opportunity to purchase cost-effective health insurance coverage on their own, and with less regard to health history and pre-existing conditions.

The ACA and ensuing program are being put in place in stages throughout the country, but you can find out more information at

5. Good Choices for Bad Health

Until the ACA is fully implemented, a client’s ability to purchase and pay for an individual health insurance policy may be affected by an adverse family medical history, previous procedure or current condition.

Don’t give up just yet. According to the National Association of Health Underwriters, 33 states have “high-risk health insurance pools” that may allow residents with disqualifying medical conditions to still obtain individual policies, albeit at higher rates than what regular group or individual coverage would cost.

Another 12 states offer some form of assistance or guarantee of insurability to their high-risk residents.

A great resource to sort through all of the various public and private health care options and programs is, sponsored by the Foundation for Health Care Education. The site allows users to search for information by state and zip code, which will be especially useful for clients who are considering moving to a different state and are concerned about how the move would affect their health care coverage.

6. Don’t Lose the Life Insurance

Retiring clients who have no more mouths to feed and are looking to cut costs may want to discontinue paying for term or cash value life insurance policies. But that could be penny wise and pound foolish, especially in regard to future health care expenses.

First, the company may be paying a decent rate of return on the accumulated worth of cash value policies. Plus, some insurance providers allow the insured to tap the death benefit early in certain dire circumstances.

And in the unfortunate event that the insured passes away, the death benefit from the life insurance policy can protect the finances of the survivors by replenishing accounts that were previously liquidated to pay for out-of-pocket health care expenses.

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