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The group health coverage many employees have through work is a sometimes overlooked asset that pays a portion of the cost of prescription drugs, dental visits, vision care, paramedical services and more.
With the cost of health care rising, advisors can work with clients to factor these benefits into financial plans to ensure they’re not paying for coverage they don’t need or that they have enough coverage to avoid additional out-of-pocket expenses.
Janet Gray, money coach with Money Coaches Canada Inc. in Ottawa, talks to every client about employer-sponsored health coverage. She starts by asking if they have it or are eligible for it, pointing out that some may not have signed up because they felt their life situation at the time didn’t require it or, quite simply, because they forgot.
In addition, part-time employees may not be aware that increasing their weekly hours modestly could allow them to qualify for these benefits.
“It is an educational opportunity too – a teachable moment – [because] aside from the health stuff, you might also have disability insurance and life insurance,” she says.
This provides an opening to other conversations.
In addition, she reminds clients they can claim out-of-pocket amounts for eligible medical expenses on their tax returns. Many are surprised to learn that includes unreimbursed expenses for dental services and vision needs such as eyeglasses, contact lenses and even prescription swimming goggles.s reimbursed, so those expenses can be factored into their budget.
In addition, she reminds clients they can claim out-of-pocket amounts for eligible medical expenses on their tax return. Many are surprised to learn that includes unreimbursed expenses for dental services and vision needs such as eyeglasses, contact lenses and even prescription swimming goggles.
Checking in regularly is important, Ms. Gray adds, because people’s health coverage needs change.
For example, maybe someone was topping up to the highest level of family protection while their kids were getting braces. When the kids age out of the plan, a lower-level coverage for a couple or single person may be more appropriate.
Ms. Gray notes that full-time students can generally remain covered under a parent’s plan until age 25, but it’s essential to provide proof to the insurance company they’re still in school.
Leaving a job or retiring
When someone leaves a job for one without health coverage or to become self-employed, Ms. Gray considers options that allow coverage to continue without health questions. She emphasizes there’s a strict time limit during which a person must apply with no excuses for missing the deadline.
Private coverage may be available at a discount through a professional association, alumni association or chamber of commerce, she points out.
“If you [don’t take advantage of the continuity of benefits] and you have severe, or even some, health issues, you could be refused and not be able to get insurance,” Ms. Gray says. “That’s when things start to get expensive. You’re not preparing for the eventuality of declining health.”
Jason Heath, managing director at Objective Financial Partners Inc. in Markham, Ont., treats health coverage as a “nice to have” when it’s paid for by the employer. However, if it’s not, he usually comes down on the side of self-insuring – recommending that clients set aside money to cover anticipated costs rather than buying private coverage.
“If you actually crunch the numbers and do the math – how much am I actually getting in reimbursements?” he says. “It’s usually not such a massive amount that you couldn’t replace it on your own.”
That’s even the case as people move into retirement and their health costs rise, Mr. Heath adds. However, he recognizes a sense of security in maintaining health coverage during retirement may be worth the potentially higher cost. For example, his mother bought a health and dental plan when she retired.
“Every few years, she would ask me, ‘Should I keep this?’ And every few years, my answer was the same: ‘Cancel it, it’s not worth it, pay out of pocket,’” Mr. Heath says.
“For some people, it’s peace of mind, although, from a financial perspective, retirees or even self-employed people are often better [off] paying out of their own pocket.”
Risks of self-insuring
On the other hand, Janine Purves, senior financial advisor with Assante Capital Management Ltd. in Aurora, Ont., experienced the value of employer-sponsored health coverage first-hand when her mother broke her neck in a car accident decades ago.
“The air ambulance was covered by [the provincial health plan], but the [land] ambulance wasn’t [and] we got a number of rehab bills that were not covered. The rental of the hospital bed [in her home] wasn’t covered,” she says.
“All these things would have really added up if we didn’t have good insurance coverage.”
For emergencies and if someone has pre-existing conditions, Ms. Purves thinks there’s merit in privately funding health coverage when leaving an employer or retiring.
“Some people are on drugs that are costing $8,000 or $10,000 a month,” she says. “How would you be able to afford that [without] a plan?”
Even if a provincial plan covers most prescription drug costs starting at age 65, as in Ontario, those taking early retirement may need to bridge the gap with a private plan.
“People definitely have to be educated. I want to make sure they’re thinking about the big picture and what kind of risk is involved if they don’t have anything,” Ms. Purves says.
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