The Globe and Mail Retirement Forum is a place for subscribers of all ages to ask questions about retirement and receive answers from a community that includes actual retirees. Personal finance columnist Rob Carrick will also weigh in. Want to know what works in retirement from a money and lifestyle perspective? This is the place. Send questions to email@example.com.
This issue, we’re diving into post-retirement health insurance.
The first question is from Loanne Myrah, 64, in Regina:
Are post-retirement health benefit plans worth purchasing? Of course each person is different, but any information or advice would be appreciated.
And our second question is from John, 53:
I would like to know what retirees are using for health insurance plans post-retirement, if they are not in a plan provided by their employer at retirement. Also, how much are they paying and how extensive is the coverage?
Postretirement health plans from employers that help retirees pay medical and dental costs are disappearing. This point was noted in a column I wrote a while back, and I suspect the trend has picked up since then. In a follow up, I looked at the many health-related costs that are not covered by provincial health insurance plans. The cost of prescription drugs (the portion not covered by provincial drug plans), para-medical services, dental and glasses averaged around $2,700 for people between the ages of 55 and 80 and more than $5,600 a year for those who are older.
Healthcare benefit plans for retirees are widely available from insurance companies, but most don’t offer quotes online. You have to contact them or their agents. I did find one quote for a couple aged 65 and 66 that ranged from about $160 per month for a basic plan, including 70 per cent coverage of prescription drugs to an annual maximum of $500 yearly plus some degree of coverage for dental costs and glasses, to $420 per month for a premium plan including more dental and drug coverage.
Now, let’s see what members of the retirement forum have to say. Is it worth it to buy extra health care coverage in retirement? What are the costs, and what is the value?
Please share your thoughts and experiences in the comments.
Catch up on past discussions:
I recommend looking for a plan that provides what I call "catastrophic" coverage. In other words, a plan that will provide sufficient coverage if you require expensive care not covered by basic medical, and that could wipe you out financially. My plan covers 70-80% of the first $2000 of paid claims and has only limited coverage for vision or paramedicals but that is just fine, as it has a lifetime maximum of $250,000 and 100% coverage for paid claims over $2,000. It provides the protection where I want it. For dental, I opted out; coverage was limited to not much more than the annual premiums and the most expensive treatments were not covered at all; it was really more a form of cost-smoothing vs cost-saving with no catastrophic component. I can achieve that myself with adequate budgeting.
My husband and I did a certain amount of cost-comparisons among various insurance plans when we retired, including staying on with our former work plans. We found that Blue Cross offered us the best rate, by far, with (so far) adequate coverage. It’s a gamble, though — if you think you’re going to be needing a lot of care, you want to be sure you have a plan that covers you. In 2018, we paid about $1000 for our Alberta Blue Cross Seniors Plan B and we recovered about $1,500 in costs for prescriptions, vision and dental care. So we’re ahead the game. But we’re fairly healthy. I do think supplementary health insurance is worth it, though.
I do think additional health insurance is important. One key issue is your personal health when you seek the insurance. If your employer's insurance company does not offer extended health when you leave work without a medical report, you could be in a difficult situation. Shopping for health insurance at age 65 with a health problem may lead to exclusions or higher costs. Though I am no expert, you may consider looking at health insurance earlier than your retirement date if you anticipate going to the open market. My insurance includes travel insurance with no exclusion for pre-existing conditions. This is very valuable. Many of my friends stopped travelling as insurance became too expensive. This is particularly true if buying for individual trips. Your coverage for an ailment (e.g. heart) may be excluded by a change of medications, including a reduction in dosage or other changes. You may have to wait three months before insurance is granted. Not good. The negative, if it is, we have been retired for several years and have collected little from the insurance company thus far. Too healthy up to now.
Pro tip: Insurance companies always pay out less in claims than you pay them in premiums. Otherwise they are going bankrupt. So it only makes sense to pay for such insurance on your own if you have some risk of incurring massive medical expenses. But in Canada our single payer general health system pays for all of the major and catastrophic medical expenses, while the retirement supplemental insurance mainly pays for just the mundane inexpensive and repetitive things like drugs and dental. So it does not make sense to me to buy this insurance, unless an employer is paying a large chunk of it. On the other hand, travel insurance to the U.S. is becoming vital for Canadians of ANY age, as U.S. hospitals are now setting fees that are often 10x or 100x what the health care system costs in Canada - such as $10,000 for one shot of rabies medication, or $100,000 for a shot of snake antivenom! My dad was in hospital for a couple days last winter for a minor infection in Tucson and the bill came to over $40,000 - and all they did was blood work and later IV antibiotic (luckily he was insured). Medical bills is the number one route to bankruptcy in the U.S. Beware down there.
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