Wiser Financial Advisor – Health Insurance and Medicare with Danielle Roberts
Hi, Everyone. Welcome to the Wiser Financial Advisor with Josh Nelson, where we get real, we get honest, and we get clear about the financial world and your money.
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Let the financial fun begin!
Recently I had the opportunity to sit down with Danielle Roberts, a founding partner at Boomer Benefits, which is a national agency specializing in Medicare-related insurance products since 2005. She is a nationally recognized expert in the Medicare and health insurance industry and the author of the bestselling book 10 Costly Medicare Mistakes You Can’t afford to Make which is on Amazon and Barnes and Noble.
We talked about a lot of great topics surrounding planning for healthcare in retirement. We get this question so much as financial planners. “How do I make that transition successfully, between my employer coverage and Medicare? How do I actually make that Medicare journey and apply for benefits and make sure I don’t make any huge mistakes?” Because many of them are irrevocable and those mistakes can’t be corrected. So it is really important that you understand this topic. It might not even be you right now; might be a friend, a coworker, or a family member, but make sure they listen to this episode because it’s critically important as you plan for healthcare in retirement.
But first, this episode is brought to you by Keystone Financial Services, a top wealth management firm based in the land of love, Loveland, Colorado. At Keystone Financial Services we are here to provide unbiased advice and guidance. Our goal is to replace uncertainty with confidence and clarity when it comes to planning for your family’s financial future. Take the guesswork out of your financial future today and schedule a free initial conversation with one of our Certified Financial Planners. Visit www.keystonefinancial.com . I think you’re going to enjoy this conversation and God bless.
Josh: Today I have a special guest, Danielle Roberts. So glad to have you here. Thank you for joining us.
Danielle: My pleasure. Thank you for having me.
Josh: You’ve built a very successful business focused on what a lot of people are challenged by as they’re getting older and transitioning into retirement or early retirement, figuring out what to do for medical benefits. Could you walk us through how you got into this?
Danielle: Well, I always had an entrepreneurial drive. My dad is an entrepreneur; he owns several businesses and my brother and I were entrepreneurial kids. I was looking for the right thing. A friend mentioned insurance, and I went along with her to an interview, then fell in love with the concept.
It seemed like a great business where you could make a steady living, you could grow wealth, but you could also go home every night feeling good about helping someone understand products that most people find very confusing, and in terms of the Medicare, very intimidating.
I started off working with group and individual products and did that for a number of years. Then people kept asking, “What about my parents? My mom is turning 65 and doesn’t know what to do. We’ve got the Medicare and You handbook but it doesn’t make any sense.”
So we looked into all of that and holy moly, was it confusing! More confusing than under-65 insurance, for sure. We added that product line to our business and slowly over the years stopped working with the group health business and transitioned more into individual and Medicare policies, helping people as they’re coming up on age 65 to learn all the things they need to know. They need to hit the proper election periods. If they make mistakes on their initial enrollment, it follows them forever. And we have around 100 employees in our Fort Worth Call Center. We service 49 States, educating people every single day about their Medicare benefits, how they work and what they cost and what the options are for filling in the gaps.
Josh: That’s a great business to be in right now because there are so many people turning 65. We talk to these people every day, right? And there’s so much information out there on the Internet, and so many conflicting things that people hear from their friends and coworkers. We help people build wealth and help them manage that and handle the tax implications to figure out how to get their cash flow going in retirement. But when it comes to healthcare, regardless of how much money somebody has, that’s a real challenge. People are trying to figure out, “How do I get that gap covered in between my employer’s coverage and Medicare?” So, what advice would you give people as far as where to start?
Danielle: We actually see this a lot because often you have one spouse that’s going on Medicare and they’re the one with the health insurance. Then, when they make that transition, if their spouse is younger, the spouse can either purchase expensive COBRA coverage or they have to go find a way to insure themselves another way. Fortunately, the Affordable Care Act created a marketplace; we call it the insurance exchange, the healthcare exchange. That’s where you want to go when looking at bridging the gap, especially if let’s say you’re 62 and you’ve got just a few years to cover. There are great plans on there.
To keep those premiums low, you can choose a plan with a little higher deductible if you don’t have a lot of health conditions. So we send people to www.HealthCare.gov . You’ll start by typing in your income information and this will help to decide if you qualify for any subsidies. Those will be applied to the premium. When you get to the page with all the health plans, they will let you know exactly what you’re going to pay based on the income you put in for your household. You will find very robust rich plans that cost a lot of money, and you’ll also find plans with higher deductibles that have a lower premium.
If it’s just a couple of years until you’ll be aging into Medicare, we recommend looking at some of the high deductible health plans that are compatible with Health Savings Accounts (HSAs) so that you can contribute money into an HSA. Then when you do go on Medicare, you’re taking that money with you into retirement; you can use it to pay for Medicare Part B,C, &D premiums. You can use it to pay for dental, vision, and hearing, which are things that Medicare doesn’t cover. It’s a great rainy day fund.
If you end up going the Medicare Advantage route, there are costs you might incur down the line when there are health conditions, and so you’ve got yourself a medical nest egg that you can take into retirement with you.
Those options are probably my favorite, but you may find when you get there, that although they try to make it simple, you’re going to be faced with all the insurance lingo. Some people get confused between things like a deductible and a copay. They may ask, “What is a coinsurance, I don’t know what this means.” A great resource is the National Association of Health. It’s a great organization and at their website www.nih.org , there is a find-an-agent button. You can click on that and put in your ZIP code and find a local agent who helps people enroll in plans via the healthcare exchange. Then you’re working with someone that can walk you through all that lingo and help you evaluate the pros and cons. You’re working with a licensed agent who cares about their business and their clients enough to invest in an association to become an expert in insurance.
So, if you get to the website and you think, “Well, I’m not sure if I want to tackle this all on my own,” a great way to go is to find an agent that can help you. There’s no cost associated with that. Agents get paid commissions by the health insurance carriers, and so you usually get someone unbiased that can tell you all the ins and outs of the plans in your area so that you can make a good choice.
Josh: That’s a good distinction. Sometimes people may avoid working with an insurance agent because they figure, “Well, that’ll cost more money,” but my understanding is, that’s not the case, right?
That if you went directly to the insurance company you would pay exactly the same thing as if you went through an agent.
Danielle: That’s right. By going direct with the insurance company, you lose yourself all of that help along the way. And sometimes with insurance, when you enroll in something you get bills in the mail and you’re not even sure whether you owe them. Who do you call? Do you call the insurance company? Do you call your doc? These are the kinds of things that agents deal with on a regular basis. So if you have that agent, your first call every time will be to the agent. A lot of times they can resolve it for you right there on the phone. They know what’s going on. They can tell you whether, for example, something applies against your deductible. The deductible is something you pay, but sometimes you may be billed for something you don’t actually owe. Or maybe your doctor used the wrong billing code and the claim got rejected. In those cases, if you go direct with an insurance company without an agent, you’re going to be trying to figure all that out on your own, where for exactly the same premium and nothing out of pocket for you, you could use an agent. Then that can be your first call to help you when those kinds of things crop up. Then you’re never alone in dealing with your insurance coverage.
Josh: Let’s talk about COBRA. You mentioned that. So let’s hypothetically say we’ve got a husband and wife, age 60. They’re both retiring at the same time. As is often the case these days, people don’t have much retiree healthcare coverage unless they happen to work for the government. What should they be looking at with regard to COBRA and comparing going on COBRA for a while versus going out and getting an insurance plan?
Danielle: The thing about COBRA is that sometimes there is sticker shock because you have been paying an employee portion of the premium out of your paycheck deductions. The employer is often covering a percentage, and that percentage could be anywhere from 50 to 90, even sometimes 100%. And so when people see what the company they’ve been working for has been paying for their insurance, they feel grateful to have had that coverage but also a bit of sticker shock to think, “Wow, if I want to carry this on, I’m going to have to pay a pretty penny.” If you’re in the middle of a year and you’ve already met your deductible and you have other healthcare pending, paying those COBRA premiums for a few months could make sense. Then you get the rest of those things taken care of so that you’re not paying anything for the procedures and treatments that you’re having.
Sometimes you’ll have someone who is very sickly or going through a lot of medical issues all at the same time and they don’t want to rock the boat. They don’t want to have to change doctors and go to a new network, and so it might make sense while you’re dealing with something like that to assume a COBRA premium. People feel very secure with group health insurance and so for some people it is worth it to go ahead and pay those higher premiums. But if you’re a relatively healthy person or you don’t have anything pending, and if you haven’t met your deductible, you will often find healthcare exchange individual plans on the marketplace will be quite a bit cheaper. It just depends on what sort of deductible and premium you had on your group insurance. You have a lot of options there on the health insurance exchange. So I always tell people, before you lay down that COBRA premium, take a look at what’s out there on the ACA website at www.healthcare.gov and see if there’s an opportunity there for you to get coverage where you could pay less.
And sometimes, depending on your employer, if you’re retiring from a company, they may give you a lump sum of money if you’re retirement eligible. It gets effectively dropped into a bank so you can draw from it. Sometimes it’s as much as $50,000 that people will get in company money. But it seems like every company has different rules as far as how it works and how long it’s eligible for. Sometimes at certain ages you lose it. Or if you die, you lose it, or it can only be used for certain insurance premiums. So yeah, if you’ve got that too, just know to look at your specific employer because their plan could work differently than another.
Josh: True yeah, good point. Now, let’s talk about HSAs. We’ve had that topic as a podcast episode before because they’re unique in that they’re really meant for high deductible health insurance plans. Can you talk about how those work a little more?
Danielle: You can open a health savings account (HSA) if you have a qualifying high deductible health plan. So there are rules. The insurance companies have to have a deductible above a certain limit in order for a plan to be considered HSA qualified. Essentially, it’s insurance where you strip out the cushy upfront benefits and instead you just pay everything until you hit that deductible. Thereafter, the coverage kicks in.
So for example, I have been on an HSA for years. In fact, before I even got into the insurance business, I had an HSA plan. Back then, they were super new; very few businesses were using them. I have maintained HSA coverage ever since because I like it so much. I have a plan right now for myself, which is a $3500 deductible, a high deductible health plan, so I can contribute money into an HSA up to a certain limit every year allowed by the IRS. And when you contribute that money, that money is yours forever. It can grow with interest, and if you use it for medical expenses, you don’t pay any tax on it. So that is a top-of-the-line write-off on your taxes.
Out of that HSA, you can pay for all the things that qualify: various medical treatments and medications, copays, deductibles, coinsurance, and even things like dental, vision, and hearing expenses. That HSA account is like a nest egg on the side for future medical expenses.
About deductibles: If I have a preventive visit, something like a woman’s annual mammogram, the insurance is going to cover that at 100%, even though I have a $3500 deductible. So there are certain visits that qualify as preventive care that you’ll get covered by the insurance company. But let’s say I’m going to the doctor because I have the flu. Instead of me paying a cushy little $30 copay, it’s going to count toward my deductible and coinsurance, so when I go in for a visit like that, I end up spending around $100. I’m getting the network discount from my carrier, so I’m paying less than the doctor’s street rate, but I’m not getting the low copay benefit.
However, as someone that doesn’t use a lot of medical care, it really appeals to me to have a high deductible plan. Premiums for the coverage itself are lower because I’m taking on more of the risk. I might have to come out-of-pocket $3500 if I have something big happen or need a hospital. I’m the one that has the exposure for the first $3500 in a year. But I love that you can contribute the money into the HSA and grow that over time. Then later, when you enter retirement with money in there, you can spend it for as long as you as you have it, until it’s exhausted.
Josh: Right, so there’s no age limit. In other words, you don’t lose it at any point. You could be 95 years old and still have an HSA. So, how about contributions? There is a cutoff age for when
you have to stop making contributions, even if you’re still working, right?
Danielle: So with an HSA there are limits that the IRS publishes every year. They will tell you how much you can contribute as an individual, how much you can contribute as a family, and how much for a catch-up contribution. If you are over age 55, you can contribute money and also do a $1000 catch-up per year. The cutoff is enrollment in Medicare, but I do have people who will sometimes forego enrolling in Medicare at 65 because they’re still working for an employer. They have an HSA plan and they want to keep contributing to it. So, you can contribute past age 65 and delay Medicare in order to do so—which brings up an important point:
If you have that high-deductible health plan and you’re contributing to an HSA, that’s the only health insurance you can have. You can’t subsidize that with any part of Medicare or a secondary health insurance plan; it has to be your only coverage as well as being high-deductible. The fact that you are assuming that risk is what allows you to put the money into the HSA. And the family contribution rate is over $7000, I think it’s $7100 this year, might be $7200. Just think about if you funded that fully, and every year you put in say $7000 for you and your spouse. Let’s say you’re both pretty healthy, and only occasionally take money out of there for a doctor visit. You have a debit or credit card connected to the HSA that you can use to access that account. If you have a span of years where you don’t have a lot of healthcare spending and you’re maxing that account, you can add up to a very nice sizable account for down the line. And if you do have a year where you meet your deductible, you’ve been contributing money all along and it’s just sitting there waiting for you to use it. Money that you never paid taxes on. It’s a really good concept.
Josh: You mentioned vision and dental, which can get expensive. Most of the time, it seems that once people are done with their employer, they’re not going out and buying dental and vision insurance. It seems like kind of a rip-off actually when we’ve looked at some of those plans. What’s your opinion on those?
Danielle: Well, there are two lines of thinking on this. You know, dental insurance is not the same as medical insurance, and people often look at it and say, well, I’m spending a lot of money for only $1000 a year in coverage. So there’s a camp of people who will say I’m just going to pay private. They’ll do their research and find dentists that will give them a cash discount, then pay for their own dental. I think it makes a lot of sense if you can afford to do that. But there are other people who would be hard pressed to come up with $1000 if they need to have a root canal tomorrow. They want to have that coverage, which will cover at least 50% of those major expenses. If that’s your situation, then dental insurance is going to make sense for you.
We sell a ton of dental, vision, and hearing insurance to people on Medicare. Because, of course, you don’t just turn 65 and suddenly stop needing dental, vision, and hearing help. In fact, this is probably the time in your life when you need it the most. Back in the ‘60s when Medicare was created, dental, vision, and hearing wasn’t covered routinely by health insurance companies. It wasn’t even in the picture, and so it was never built into Medicare to begin with, and those are very popular products. When people are on a fixed income, especially after they have retired, they like having the security of paying a premium just in case something happens so they don’t have to come up with X amount overnight.
Josh: Yeah, that’s a good point, and you have to look at each dentist, right? Because if you’re in their network, maybe there’s some kind of discount on services, things like that could even exceed the insurance benefits.
Danielle: Yeah. Sometimes we have clients that have to lay out $30,000 for dental work later on in their lives. So having that HSA money for dental work could come in really handy in retirement. Time and again, I hear people say they are so grateful for having that HSA. But some people don’t have an HSA; they might be diligent enough to take the money they would have spent on something else and build their own nest egg. However, people are much more likely to do that when they have this tax advantage vehicle. People are just more diligent about putting money in that way and saving for the future.
Josh: Yeah, so let’s talk about your bestselling book, 10 Costly Medicare Mistakes You Can’t afford to Make.
Danielle: When you turn 65, you’re thrown into a national healthcare system. You have never had universal or national healthcare in any way. You don’t know how it works. You have Medicare which has four different parts, 10 standardized supplements, and literally thousands of drug plans and advantage plans. About 6 to 12 months before you are eligible for Medicare, you will start to get all these solicitations from insurance companies, but because you don’t know how Medicare works, you’re afraid to throw any of that away. It begs the question, “What does my Medicare provide me? What do I first get from the federal government so I can understand that coverage, understand the holes in it, and then know where I need to go and fill in some of those gaps with supplemental coverage?”
With the book, what we set out to do was explain all that. I was talking with our client service team manager and we were discussing the fact that we see new Medicare beneficiaries make the same mistakes over and over and over again. So instead of just educating them about how Medicare works and what it costs, we set out to educate them on the biggest mistakes.
The book starts with basic information, making sure people don’t assume that Medicare is free. People see that paycheck deduction every week taken out of their payroll, the FICA taxes that go toward Social Security and Medicare. That can lull you into a false sense of security and make you think that when you get to age 65, Medicare will be free. It is definitely not free. You’ll always pay premiums for it. You’ll also have cost sharing as you use your benefits, just like you do now, paying copays and things.
So we went through tackling ten of those biggest mistakes to help these new beneficiaries coming into Medicare at least avoid the big things that can really hurt them down the line by losing them opportunities for certain types of coverage because they miss certain windows. It educates them about the things that are most important to consider about certain types of plans. That way, if someone reads a postcard or brochure and everything sounds really good or Joe Namath is on TV telling them about this beautiful plan with a zero dollar premium and a free pink Cadillac… Those types of commercials and advertisements can be very misleading if you haven’t done your homework. So we set out to have a book that someone could pick up when they’re 64. They can read it and highlight all the things they need to highlight. Then they can intelligently ask the questions they need to ask to find the coverage that’s going to be right for them.
Josh: What are a couple, maybe horror stories, things you’ve seen that are some of the worst mistakes people have made around Medicare?
Danielle: We’ve seen a lot of big mistakes. One of the most common is getting a penalty for Medicare Part B because you didn’t know you needed to enroll. So everyone at age 65 has a six-month window; that is, a seven month window starting three months before your 65th birthday, going through that birthday month and then three months after it. That is your window to enroll. And if you don’t have other creditable health coverage you are maintaining at that time, you need to enroll during that window. You will come across people who didn’t know they needed to enroll. They were healthy and just never did. Or maybe they worked for a small employer and didn’t realize that Medicare was supposed to be their primary insurer and their employer coverage secondary.
Then years down the road, they go to apply for Medicare and find out they’re being assessed a penalty. That penalty is 10% for every 12-month window they should have been enrolled in Medicare. But they weren’t and they didn’t have employer credible coverage from a large employer. This can be devastating. Because that 10% is not a one-time thing. And if you accumulate a 50 or 70% penalty, you’re going to pay that on top of your Part B premiums for the rest of your life. So that is one that we always need to be careful to watch out for.
Another one I see a lot is folks who are really healthy will skip enrolling in Medicare Part D. Part D is the drug plan, and they don’t want to spend $7 or $10 a month even for a basic plan to make sure that they have the coverage. The problem with that is: when you don’t enroll in Medicare Part D, you can’t just enroll in it anytime. So if you get sick in the middle of a year and need a $600 medication, you have to wait all the way until the next annual election period before you can get into a plan. You put yourself in a situation where you might have to come up with thousands of dollars out of pocket for very expensive medications. I had one client who paid over $20,000 in four months for a medication for cancer because she didn’t want to buy a $10 Part D drug plan.
Part D drug plans range in premiums. You can find them in the $10 a month range for basic plans, and you can find them for as much as $200 a month or more with really robust drug formularies. But even the very basic plans that are inexpensive have certain classes of medications that they must cover. This includes anti-cancer medications. They have to have two medications in every therapeutic class so that if you develop a new health condition in the middle of the year, your doctor has something to prescribe.
You don’t want to be in a situation where you don’t even have that basic plan.
Also, if you don’t enroll when you’re first eligible and you don’t have other creditable drug coverage from an employer, or perhaps something like VA drug, you accumulate a penalty of 1% for every month that you could have been enrolled in Part D that you didn’t. So if you wait five years and then go to pick up a Part D drug plan, you’re going to pay a 60% higher monthly premium for the rest of your life because you waited.
Josh: Yeah, I think it’s important to be informed. People are drowning in information, and it sounds like it’s kind of a no-brainer that they would work with an expert. They’re not going to pay more for premiums for the same plan going at it themselves and spending hours and hours doing research versus working with somebody like you.
Danielle: Yeah it does help. I think a lot of people are afraid of sales tactics, and insurance sometimes can have a bad name. It’s unfortunate because there are lots of really good brokers out there who are ready to help you and they will put in the time and energy. Also, then you’ve got them at the back end to help you with things that happen. As we’ve talked about before, unexpected things may come up that you don’t know how to resolve, so make sure that you find yourself a good person who can really walk you through the ins and outs. A good agent is going to explain the base to you. Then they’re going to explain to you the differences between Medigap and Medicare Advantage coverage, so that you can make a good choice. They’re going to help you with your enrollment. They’re going to use the proper election period so that you don’t end up with a penalty when you shouldn’t.
Josh: Again, you’re a bestselling author. You’ve been extremely successful as an entrepreneur, so I always like to ask this question because we also have a lot of listeners that are on the other end of the spectrum, right? They’re just starting out, so they might be a young, hungry, starving college graduate. We’ve got people graduating here pretty soon, so what advice would you give somebody about to enter the real world? If you were to go back and give yourself some advice at that point, what would you tell yourself?
Danielle: I love this question, because unless your dad or mom owns an insurance agency, nobody comes out of high school or college saying, “I want to be an insurance agent someday.” You know, there’s that really funny Tom Brady clip where he didn’t make the draft early and he was wondering if he was going to have to spend his life as an insurance agent. That was like his worst case scenario, which I think is so funny. It’s a great career, and in fact you don’t need a college degree to get started in insurance. You can sell insurance in many different ways. You can work for someone else that is already licensed who can show you the ropes and you can contribute as an employee to that agency. I have agents like that who work for me in our Fort Worth Call Center. We give them all their training.
We give them all their leads and we make sure that they provide legendary service to all of the people we work with. You can also go on your own, which is what we did. Myself and my brother in the beginning, front-door-called businesses, offering them group health plans to get my agency off the ground.
If it is an agency, you can take it as far as you want to. I know many people who have a four or five person office. They end up making a few hundred thousand dollars a year and they’re very happy with that. Then there are people like me that can grow a very large agency. Then, the sky is the limit if you provide good service. So the main thing I can tell you is this: Consumers in the individual medical and Medicare market are looking for people they can trust, people that are available and who give them back end support. So if you’re going to go into this career and make a go of it, you have to know that you don’t just sell a policy and then abandon the client. You have to help them on the back end and then always be there for them. Those are the kinds of agents that win renewals from their clients year after year and you continue to get paid because you give those clients good service.
Josh: Yeah, that’s fantastic. How do people find you?
Danielle: Well, fortunately we are so easy to find. Boomer Benefits is our name. You can find us at www.boomerbenefits.com. The book is 10 Costly Medicare Mistakes You Can’t afford to Make. We are not aiming to make a profit on that book. We sell it as cheap as possible, so you can pick up a paperback copy for 10 bucks on Amazon or Barnes and Noble. I also have a YouTube channel for Boomer Benefits. That’s a great way to learn in pieces, if somebody doesn’t want to have all the learning at once, which can be like drinking from a firehose. They might have had the basics, but if they have a few questions, go on our channel and find yours truly explaining what is a Medicare Advantage and what is a Medigap plan and how does Part D work. You can pick the pieces that you really need to access and watch a short video to help brush up your learning. So come on over to our channel and please subscribe so that you can get notified of all the fun new videos that I put out about this super exciting topic which is Medicare.
Josh: Well, super exciting or not, it’s important, right? I think we’ve identified that. And again, there’s a lot of confusion out there. This will help save people a lot of stress and hopefully save people some big mistakes that it sounds like are all too common. Thanks for taking the time today and thanks for being a resource as well. I think a lot of our listeners are going to find this to be helpful, but also some direction as far as what to do next, whether they’re maybe younger retirees or shifting into Medicare mode. So thank you for joining me.
This episode has been prepared for informational purposes only and is not intended to provide and should not be relied upon for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors. Investment advisory services offered through Keystone Financial Services, an SEC registered investment advisor.