Among the many equations financial advisors use with their clients, here’s one to consider for the summer: A + B might equal C. This is especially true when Medicare annual open enrollment period arrives Oct. 15-Dec. 7.

Annual open enrollment is the one time of year that Medicare beneficiaries can switch plans, including choosing a Medicare Advantage (Part C) plan instead of original Medicare (Parts A and B). And more retirees are doing just this. This year, 14.4 million people are enrolled in Medicare Advantage plans, an amount higher than 2012 by more than 1 million people.¹

But before we get into the details of comparing Medicare Advantage plans over original Medicare—it’s important to realize how different this year’s annual enrollment season will be.

Helping Clients Prepare for October Onslaught

Just as the U.S. Department of Health & Human Services is gearing up for Medicare enrollment season—including reporting next year’s premiums and plans for beneficiaries—they’ll launch a new national health insurance program.

A result of healthcare reform, the new Health Insurance Marketplace opens on Tuesday, Oct. 1, allowing individuals to enroll in non-Medicare health insurance for next year (with coverage effective Jan. 1, 2014). The Marketplace is first and foremost designed to help insure the millions of U.S. residents who don’t have insurance. But it’s open to the general public.

Given that the Oct. 1 Marketplace launch is just two weeks prior to the Oct. 15 start of Medicare annual open enrollment, there is likelihood for confusion among some seniors.

Financial advisors can play a critical role in helping their clients sort through this. For example, it’s important seniors know that Medicare is not part of the Health Insurance Marketplace and that if they have Medicare, they are considered to have healthcare insurance—and won’t face any potential penalties for being uninsured.

Just as important, the increased attention to health insurance coverage provides you with a planning opportunity to help your clients undertake a careful review of their needs for Medicare annual enrollment.

A Few Weeks To Review Healthcare Costs, Concerns

Summer is a good time to assist clients with Medicare review as there’s a natural break from reviewing tax-related issues and before year-end decisions. It’s also a time when clients may be in better health and can step back with a clear mind to discuss their health, what procedures they have undergone or anticipate, and the types of needs they may have in the coming year.

Key questions to ask clients can include:

• Were you happy with your Medicare plan in 2012?
• Are you happy with the Medicare plan you have for 2013?
• Do you anticipate any medical procedures in the coming year?
• Did you have any surprising medical expenses?
• Did you hit the prescription drug donut hole? How did you handle those costs?
• Are you planning to relocate in 2014?
• Have you experienced any significant changes in your income? What about life changes (e.g., death of a spouse, divorce)?

The above are just a few of the issues that financial advisors can help their clients to evaluate.

It’s important to make the connection between healthcare needs and costs and clients’ financial well-being. This is another important value financial advisors can add to the complete picture their clients have in retirement and as they age.

Medicare premiums are income based, and those with higher incomes can pay higher premiums for Part B (medical insurance) and Part D (prescription drug) plans amounting to hundreds of dollars. Life changes can affect this annual income, which in turn may affect your client’s Medicare plan selections. Reaching the prescription drug donut hole also can add to the out-of-pocket costs Medicare beneficiaries may have to pay.

So, there are a number of ways Medicare choices end up impacting your clients’ financial resources for the short and long term.

Growing Interest in Medicare Advantage Plans

Enrollment in Medicare Advantage plans has increased by 30 percent since 2010, which raises an important area of discussion for financial advisors to address with their clients.

Individuals using original Medicare purchase Parts A (hospital insurance) and B (medical insurance) and also have the option to purchase Part D prescription drug coverage. In addition, they can buy Medigap or supplemental coverage, for any gaps that aren’t covered by Parts A and B.

In comparison, more than 14 million people are choosing Medicare Advantage plans, or Part C plans, which can provide a combination of coverage equal to what they would receive under original Medicare.

Seniors may choose Medicare Advantage plans for a number of reasons including:

• They may have the opportunity to purchase a zero-premium plan.
• They can combine medical and prescription drug coverage through one plan similar to coverage they had while working, for example, through an HMO (health maintenance organization).
• Their employer-provided retiree plan is a Medicare Advantage plan, allowing them to receive coverage through their former employer.
• They may have access to broader, more extensive healthcare coverage at a cost comparable or less than original Medicare, depending on where they live. The average Medicare beneficiary will have 20 plan options, which break down to 10 HMOs, two regional PPOs, four local PPOs, two PFFS plans, and other plan types²  (PPO – preferred provider organization; PFFS – private fee-for-service).
• These plans provide a limit on out-of-pocket spending; for instance, nearly half of all Medicare Advantage plan participants purchase plans with an out-of-pocket limit of $3,400 or less.³

In addition to comparing original Medicare with Medicare Advantage plans, many seniors shop for Part D prescription drug coverage during annual enrollment.

Depending on where they live, seniors could have 20 to 30 or more Part D plans from which to choose. Monthly premiums also vary widely, ranging on the low end from $15 up to $165 on the high end, amounting to a possible $1,800 cost difference for the year.⁴

Timing Is Critical To Navigating Medicare Maze

Based on the questions your clients have and the possible factors in their Medicare choices, it’s easy to see why there are benefits to getting started early with Medicare annual open enrollment. In addition, many Medicare Advantage and Part D plan providers begin mailing out materials about next year’s plans in September.

Taking time this summer to assist clients with outlining their needs, experiences in 2013 and expectations for 2014 will place them on good footing for Medicare annual open enrollment. It’s important that individuals clearly understand their personal circumstances and healthcare needs, then work on finding the plan that best matches those needs—instead of vice versa.

The 54 days of Medicare annual open enrollment, from Oct. 15 to Dec. 7, isn’t really very long to help your clients make those critical choices that will shape their healthcare and financial experiences in 2014.

Paula Muschler is manager of the Allsup Medicare Advisor®, a nationwide Medicare plan selection service that helps financial advisors ensure their clients choose the Medicare coverage that best matches their needs and preferences. Allsup Medicare Advisor® is an unbiased Medicare plan selection service that serves as a trusted resource for financial advisors and seniors. Allsup Medicare specialists can work with your clients one-on-one to assess their needs, research their Medicare options and help them choose cost-effective coverage that protects their health and retirement savings. Financial advisors may contact (888) 220-9678 or go to FinancialAdvisor.Allsup.com for more information.

¹Kaiser Family Foundation (KFF), “Medicare Advantage 2013 Spotlight: Enrollment Market Update,” June 2013.
²KFF, “Medicare Advantage 2013 Spotlight: Plan Availability and Premiums,” December 2013.
³Ibid.
⁴KFF, “Medicare Part D Prescription Drug Plan (PDP) Availability In 2013.” November 2012.