Disparity in Insurance Costs Could Affect Retirement Plans

Published September 1, 2008

Retirement can sometimes mean uprooting and relocating to a new state, but a recent report by the Longevity Alliance finds retirees are not doing the research necessary to prevent sticker shock when it comes to purchasing health insurance or enrolling in Medicare in a new state.

The report found, for example, the price of Medicare Advantage varied quite dramatically depending on the insured’s city of residence, costing $1,200 in Phoenix and more than $3,700 in New York City.

Important Retirement Factor

“Health care costs are such an important component of financial security for people as they age,” said Steve Zaleznick, CEO of Longevity Alliance, a Washington, DC-based organization helping people make the financial choices necessary to ensure their retirement savings will last as long as they live.

“We wanted to get a sense of whether people recognized the difference in health insurance costs and how it could affect them if they were considering a move,” Zaleznick added. “We didn’t think people would change their minds about moving, but it’s definitely something they should consider. I think people understand there are different cost of living issues from place to place, but there is less awareness about costs concerning health care issues.”

According to the report, “Uncover a Hidden Cost of Moving: Health Care,” a survey of more than 1,500 adults over the age of 40 found elements such as climate and overall cost of living were considered more important than the cost of health care when determining where to relocate.

Industry experts say health care costs should become more of a priority in determining where to retire and should be considered before deciding to retire.

“When retiring, you need several hundred thousand dollars at a minimum just to buy insurance for the rest of your life, even though at some point you’re going to become eligible for Medicare,” said Cheryl Matheis, senior vice president of health strategy for AARP (formerly the American Association of Retired Persons).

“You can’t get Medicare until you’re 65, unless you’re disabled, and most people retire before that age these days. So if you’re retiring before the age of 65 and not automatically eligible for Medicare, it is imperative that you think through all of the costs associated with getting health coverage before turning in your retirement notice,” Matheis said.

Variety of Programs, Prices

As the geographical variations in the pricing of Medicare Advantage plans show, the federally funded program requires as much consideration as other important aspects of retirement location selection. Because there are so many drug and care plans available under Medicare, Zaleznick says, it is important to get full knowledge of options available in each state.

“A lot of the consideration will have to do with a person’s comfort with the Medicare Advantage plan and whether they would be comfortable with the networks in the Advantage plan of a particular state,” said Zaleznick. “It’s important that people understand the networks and doctors available with each plan. That way they can make a choice that makes sense for their needs and preferences. People have to do the research.”

Zaleznick suggests people start with their current health insurance plan and get a good idea of the services they need, use, and don’t use. From there, he says, one can find a broker to help navigate through the variances between insurance plans in each state and issues concerning out-of-pocket costs, long-term care, and Medicare Advantage plans.

Aricka Flowers ([email protected]) writes from Michigan.

For more information …

“Uncover a Hidden Cost of Moving: Health Care,” Longevity Alliance: http://www.heartland.org/article.cfm?artId=23615