Accessing Health Benefits in Retirement
According to the 2014 edition of the Sanofi Healthcare Survey almost half of plan members expect to be able to access their current health benefit plan after they retire from their employer. However, a separate survey of plan sponsors reveals that just 23% actually offer post-retirement benefits.
Of those 23%, 12% allow plan members to continue their benefits if they assume responsibility for the premiums and 11% offer a separate plan where the employer covers the premiums. While it’s good to know that some employers do offer these benefits in retirement, the fact that the majority of employers don’t offer post-retirement benefits to employees is likely to come as a shock to many boomers who are approaching retirement.
A Wake up call
Described as a “major wake-up call” for employees by Senior Director of Sales and Business Relations, Pierre Marion of Medavie Blue Cross, this gap between perception and reality when it comes to benefits in retirement is an issue which needs to be communicated to plan members, so that they can better plan for health related expenses in retirement. With 75% of Canadian wage earners having access to at least one health benefit plan (either their own or a spouse’s) and with a third of the workforce set to retire in the next 15-20 years, it’s important that both plan sponsors and carriers make sure that employees know what coverages are available before they leave their employer benefit plan behind them and what impact any existing health issues might have on their ability to qualify for private insurance.
As we continue to make advances in our understanding and treatment of disease, so we are finding that not only are Canadians living longer but they are living longer with illness. Conditions which used to be terminal are now chronic and can be controlled with medication, meaning that health-related spending for seniors has increased significantly in recent years. Added to this, is an increased awareness of the importance of wellness and self-care which means that more and more Canadians are investing in therapies such as massage and chiropractic treatments, in the hopes that they will help in maintaining health and preventing the onset of disease. During the working years, many of these expenses are covered by the employee’s health benefits plan but, in retirement, this is not the case.
Provincial Plans Don’t Cover Everything
More than 75% of households with at least one senior report spending money each year on prescription drugs with the household average being $500/year. Canada doesn’t have a uniform drug plan for seniors; the amount of subsidized prescription drug coverage (and the drugs covered) varies from province to province and each province determines its own rules regarding residency and income testing. Most provinces will cover the cost of eye exams and medically necessary dental surgery but only Alberta provides basic dental coverage to seniors. The cost of medical equipment such as wheelchairs and oxygen delivery equipment is only partially covered and paramedical services such as massage, chiropractic and acupuncture are not covered at all under provincial plans so the cost for these falls to the individual.
The Increasing Cost of Health Care
When you’re living on a fixed income, as most seniors are in retirement, medical costs can have quite an impact on your standard of living and, depending on your income level, can limit your ability to access health care. Premiums for supplementary health insurance plans vary considerably from province to province and are heavily influenced by your physical condition as well as your smoker status. Those in poor health (and most in need of coverage) often either don’t qualify or find themselves paying hefty premiums. Those in the lower income brackets often find themselves limited in terms of the types of medications and therapies they are able to afford.
It is clear that planning for health related expenses in retirement needs to be part of the overall retirement conversation and that both plan sponsors and carriers should be doing what they can to make employees aware of what their options are well in advance of retirement rather than simply offering “just in time” benefit solutions when employees give notice of their intent to retire. With Canadians living longer and so many seniors living with chronic diseases, it’s a conversation that should be started sooner rather than later.