Most of us have heard the story: In December 2007, 17-year-old Nataline Sarkisyan died just hours after CIGNA reversed its decision not to pay for a liver transplant that Sarkisyan's doctors said the girl needed.

It's difficult to hear stories like hers and not wonder if your own health carrier would render a similar decision on your behalf-or that of your clients. Dr. Steven Podnos is both a doctor and a CFP and, as the owner of Florida-based Wealth Care LLC who has also spent 17 years practicing pulmonary medicine, Podnos has insights into this phenomenon that the average financial advisor lacks: "There is no Cadillac coverage anymore. I tell clients to stick with big, known-name companies, although that doesn't ensure they won't run into trouble."

Confirming a systemic problem the rest of us only speculate about, Podnos suggests health insurance carriers are always looking for a way out. "[Denying routine claims], the insurer will say you were sent to the wrong lab, or you didn't get preapproval, or, if your doctor prescribes a certain drug different from the norm for a given condition, the insurer will only pay for the cheaper alternative-not the medicine your doctor wants you to have."

Compounding the problem of a broken health-care system, many states hinder advisors' attempts to help clients improve their coverage. Believing only licensed brokers can properly advise consumers on health insurance choices, these states make it nearly impossible for nonlicensed advisors to do their job. For example, Sean Sebold-a fee-only NAPFA member-must be licensed in life and health insurance in Illinois to provide fee-only health insurance advice to his Illinois clients. As this business moves further and further away from the sales mentality to build a profession based instead on competence and objectivity, these state requirements become more and more antiquated.

Combining the problems of a failing U.S. health-care system, outdated state regulations and client lifestyle risks we'll discuss later, you've got a potentially gaping hole in the financial planning process. The result is that many otherwise-talented advisors merely pay lip service to their clients' health insurance. Now, I haven't performed an exhaustive investigation to support this statement, but I'll share with you my "proof." First, when I was a Maryland-based, SEC-regulated, comprehensive fee-only advisor from 1981 to 1997, the state insurance commissioner permitted me to take an exam to achieve "health advisor" status that was so difficult (primarily because of arcane, whole-life insurance-related questions) as to be anti-competitive.         (Let's just say the CFP curriculum's role in preparing one for such an exam would be next to useless.) Second-and here's a little insight into the journalism process-when I e-mail planner organizations looking for knowledgeable advisors to serve as sources for stories like this, I sometimes get almost no responses because advisors fear exposing the deficiencies in their service offering.

As if the problems noted thus far aren't enough, many health-licensed financial advisors don't even sell health insurance; so they're not in the trenches with their clients dealing with insurers' frequent claim denials. Says licensed advisor Adam Sherman, president of Firstrust Financial Resources in Philadelphia, "I've been trained to think risk management first when I'm doing a client analyses, but I don't sell health insurance. I could, but it's very labor-intensive, so we outsource it to other [brokers]."   

Health insurance, then, has become one more area of planning that finds itself on a growing list of risks advisors aren't adequately addressing-for whatever reason-in their clients' financial plans. (These pages have addressed two other such risks-property/casualty insurance and ID theft-both of which can be damaging to your client and your practice if you aren't proactive.) The dilemma advisors are faced with is that they must find a way to meet state advisory requirements and do a thorough analysis of their clients' health coverage, and then accept the responsibility for their recommendations. Or they must align themselves with one or more trusted agents to get the job done. Or they must avoid a health insurance review entirely.  I fear too many advisors may be taking the last approach.

The question now is what do we do about it? The first step is to remember not only the necessity of having health coverage, but also to remember the many ways that not having it can undermine a financial plan. When a homeowner's policy fails to compensate a client for a devastated home because some peril was uninsured, it can derail his entire financial future. A deficient health plan can have exactly the same effect. For example, "Some clients have lifetime maximums of $1 million, which is just not enough in today's health-care environment," says Ed Cherry, once a hospital administrator while serving in the military and now a planning associate with Diesslin & Associates Inc. in Fort Worth, Texas.

And lifetime maximums are just the start. How about the risk that an employer will cancel the health insurance it voluntarily provides your retired client? Maybe your client is unaware that his policy no longer covers his 20-something daughter because she's an out-of-state student. Perhaps your client is the main breadwinner-the one with access to employer-provided health insurance-and he gets laid off. Or he isn't aware that his HMO provides little coverage when he travels. The list goes on and on, but these things are only familiar to those advisors who stay on top of the subject-whether or not their compensation structure allows them to be paid for their counsel.

Don Whalen, an advisor with Versailles Financial LLC in Alpharetta, Ga., had a client who was tired of the corporate grind and recently retired at the age of 50. "One year prior," Whalen says, "I insisted he take out a private health insurance plan for him and his family. Even though he didn't know the exact date he would retire, and even though it would mean paying for two policies at the same time, I insisted that doing anything else would be irresponsible. After all, what if-a year later-he had to leave his job to avoid severe health consequences, such as a heart attack? Imagine the precarious situation he would be putting his family in if any of them were to become uninsurable from the time he contemplated leaving until the time he actually flipped the retirement switch?"

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