The cost of extended health and dental insurance can shock retirees who have cruised through working life with an employer benefit plan.
Even for those who didn’t have work plans, mounting drug and dental bills are a heads up to reconsider the insurance question.
About 2.2 million Canadians over 65 years old have supplementary health insurance coverage for drugs/dental through individual or group benefit plans, according to the Canadian Health and Life Insurance Association.
Still, there are millions left wondering if health and dental insurance are really necessary in retirement – and what options are out there.
Like most retirement planning questions, there’s no one-size-fits-all answer, says Ayana Forward, a fee-only certified planner with Retirement in View in Ottawa.
It depends on your health, your finances, what your provincial plan covers and if you can carry over coverage from your job.
“You have to do a cost-benefit analysis. Some people might need a lot of drug coverage. Some people might need a lot of physio,” she says.
Find out what your provincial plan covers
Some provinces offer drug coverage, particularly for seniors, but it doesn’t cover all drugs. Private dental coverage doesn’t cover big-ticket items until a year or two into the policy and often has a cap on claims. It’s also usually bundled in with extended health insurance, rather than offered separately.
“It’s a bit of getting creative around how much do you really need. How do you avoid something catastrophic?” Ms. Forward says.
Some people decide to self-insure by setting up a bank account specifically for paying out-of-pocket health and dental expenses, which means being pro-active, she says.
“Check what you’re spending on an annual basis. It changes year by year, so go back a few years.”
For those who decide to get health and dental insurance, the premiums can be claimed at tax time for a credit, so there’s a bit of relief there, Ms. Forward says.
Even for those going without extended health and dental, Ms. Forward advises that travel health insurance is a must.
“What if you’d been in Spain or the States and got COVID? You could be in serious financial trouble.”
She suggests seniors check their auto insurance policy to see if they need to boost the accident benefits. That may not increase premiums much, but it offers some peace of mind in case a vehicle accident results in a serious injury.
Check with your employer
Carla Zanotto, an insurance specialist with Integral Financial Services Inc. in Surrey, B.C., says if an employer is offering a retirement health and dental plan, it will often have a lower price than the retiree can get as an individual. But fewer companies are offering those post-employment benefits today.
If retirees don’t have that option, they should go shopping for their own plans within 60 days of the expiration of work coverage, she says.
“As long as you come to me within 60 days of losing that coverage you had from work, I can get you coverage without medical questions,” Ms. Zanotto says.
That can save on premium costs and can be important if the retiree is on medication that a new insurer might otherwise exclude from coverage.
Ms. Zanotto typically offers clients a spreadsheet of coverage details and quotes from three companies to choose from.
Retirees should also check insurance offers from unions, professional organizations or organizations they may belong to such as the Canadian Association of Retired Persons (CARP), which may cover their needs with a lower premium than brokers or companies can offer to individuals.
She recently had a client retiring from the film industry who was seeking advice about whether to buy her own insurance or take a plan offered by her union. They discovered the union plan was better than what she could find on the open market.
Some extended health plans include travel, Ms. Zanotto says. People can consider building more days into the plan than are routinely covered if they regularly travel outside Canada.
If retirees count on buying trip-by-trip medical travel coverage, they may be disqualified because of their answers to the medical questionnaire, she adds. It’s another reason to have it included in an extended health plan which doesn’t require requalification for each trip.
There is no disability insurance for retired people, but retirees with critical illness included in an extended health policy may be able to claim that if they suffer from major health events such as stroke, heart attack and cancer, Ms. Zanotto adds.
Coverage can evolve
The Canadian health system is very good, but there have been significant changes in recent years that affect costs, says Darren Ulmer of Regina-based Darren Ulmer Financial and Insurance Services Inc., a Sun Life financial adviser and a health specialist.
He says provincial plans covered drugs administered while the patient was in hospital. “Now the emphasis is on recovery at home. Everybody thought that was a great idea until they realized that now they were on the hook for all of those drugs (taken outside the hospital),” says Mr. Ulmer, a cancer survivor.
“Most provincial drug plans will cap the cost of the drugs over the age of 65, but there are many drugs that are not on the national formulary [the list of prescribed drugs]. If you’re on a drug that isn’t in that formulary, it can be catastrophic to come up with $3,000 to $4,000 a month extra above your planned living expenses.”
Seniors may also consider long-term care insurance or retirement health-assist insurance.
“It’s a type of dignity insurance that provides you with an uncapped benefit for the balance of your life providing you with a monthly benefit … that’s not taxable,” Mr. Ulmer says. “It will top up your retirement income anywhere from $500 a week to $2,000 a week at the point in time that you qualify because you’ll require assistance with the activities of daily living.”
The claimant’s family doctor certifies if the claimant has reached the need for that assistance and at what level, Mr. Ulmer says.
“You don’t want to be 70 years old and thinking about this type of coverage. We typically talk to our clients in their 50s and 60s, so they’ve already built it into their retirement financial planning,” he adds.
“The younger you are and the less medication you’re on, the easier it is to get any of this type of coverage.”