Build Stronger Financial Futures with Health Care Planning - CPA Trendlines
SimoneChristine Simoneis the CEO & co-founder of Caribou, a software solution for the finance industry to include health care costs and plan optimization in financial plans. It’s a top expense and source. . .
SimoneChristine Simoneis the CEO & co-founder of Caribou, a software solution for the finance industry to include health care costs and plan optimization in financial plans. It’s a top expense and source of stress. By Christine SimoneThe Holistic Guide to Wealth ManagementFinancial advisors are well suited to help clients with all the important decisions in their lives. But that doesn’t mean advisors always recognize the areas in which clients need the most help. MORE:Marketing Strategies for Wealth Management Services|Trust Is the Primary Ingredient|How to Prepare Your Clients’ Kids for Their Inheritance|Annuities and Insurance Growing More Attractive|Quantifying the Value of an Advisor|Raise Your Rates to Change Your Clientele|How WealthTech Is Reshaping the Future of Holistic Advice|Profile of a Modern Firm: Putting the Vision into Practice|Tsunami of M&A, PE Is Disrupting the Accounting Profession|Introducing You to a Fulfilling Return on RelationshipsExclusively for PRO Members. Log in hereorupgrade to PRO today. Take health insurance, a big concern for people across all income groups. According to a 2021 report from Spectrem Group (now part of CEG Insights),two-thirds of affluent investors (65%)say they want their advisors to help them with health insurance,but only 4 percent said their financial advisors are providing it to them(see bar chart). Further, among people who don’t have financial advisors, thetop areasfor which they would want guidance are retirement income planning, Social Security planning and Medicare advice. What is health care planning?Before launching into the many benefits of health care planning, let’s first talk about what it is. Health care planning is the comprehensive overview and optimization of a person’s present and future health care costs based on their individual needs and budget. Health care planning is about helping people find ways to reduce the cost of their health care at every stage of life. Health care planning can be as complex as analyzing different plan options and aligning those options with a person’s needs and budget. Or it can be as simple as having a conversation about the best ways to use a client’s health savings account (HSA) funds. Health care planningisn’tabout using the same industry average for every single financial plan. It’s highly personalized, based on a person’s health needs and financial goals. Why is it beneficial to offer health care planning as a service?As a financial advisor, the more unique, high-value services you offer, the better your ability to attract and retain high-value clients. Health care planning fulfills an important client expectation that shouldn’t be overlooked if you want your practice to remain competitive. After all,nearly half (47%)of clients report feeling “somewhat” or “very concerned” about issues relating to health care according to a recent Investments & Wealth Institute survey. Those issues included:Personal or family healthRetiring comfortablyRetiring when they had plannedCaring for elderly parents or family membersWhy shouldn’t financial advisors be a trusted resource in this highly important area of clients’ lives? Health care costs are among the top expenses that retirees face. They need to be discussed frequently as part of a comprehensive financial plan. Clients of financial advisors (especially those who are nearing Medicare eligibility or are already on Medicare) expect their advisors to provide at least some help with health care costs and health insurance planning. Additionally, a Fidelity study found that one-third (34%) of younger investors (Gen Y and Gen Z) want “life advice” from their advisors, not just financial advice. Meeting this expectation is integral to creating a comprehensive financial plan and helps ensure that clients stick with their advisors for the long term. So, let’s say you take your top 20 percent of clients and offer them health care planning services. This is the family office-level care that we’re talking about, which will allow you to provide wealth management services. So, in essence, health care planning becomes part of the holistic financial planning offering that works within the financial flywheel concept we’ve talked about throughoutthis book. Why don’t more advisors offer health care planning?Despite the benefits of offering health care planning, not many CPAs and other financial advisors do so. Health care is a very complex topic, so most advisors avoid it because they feel they don’t know enough about it to be helpful. That’s a huge, missed opportunity, however. Financial advisors don’t need to be experts in health care policy or health insurance to help clients optimize their coverage and costs. They just need to know where to turn. As with many other areas of financial services, technology is now at advisors’ fingertips to do the heavy lifting involved in health care planning. That makes it easier to implement services like health care planning in a streamlined way. Further, thanks to technology, advisors no longer need to have extensive knowledge of health care, health insurance or health care policy to provide this valuable advice to clients. Another objection is that advisors don’t want to sell health insurance, but that’s not required either. True advice-based health care planning is non-commissioned, meaning no one is trying to sell any products to clients. Instead, the client receives unbiased information and guidance to make a confident, knowledgeable decision about their health care coverage. Additionally, there are tax planning benefits to health care. For example, offering health care planning and tax planning could help you and your clients better understand whether an HSA is the right choice. Knowing about your client’s health care costs can also help you to determine whether they should take the standard deduction on their taxes or take an itemized deduction because they have qualifying medical costs. For Medicare-eligible clients, understanding how their income affects the cost of their Medicare coverage is a huge benefit. All of these health care planning strategies enhance the tax planning services you already offer. It’s part of creating a less transactional and more holistic financial plan for your clients. Tax planning on its own is an excellent value-add to financial planning services. But to see the full picture, you must plan for every part of a client’s life that impacts their finances. Not doing so could hurt their financial plans in the immediate or distant future. By including health care costs and health plan optimization in your financial service offerings, you create a foundational step to broaden your client engagements. How? By creating more touchpoints throughout the year to provide value to your clients, by improving retention, by increasing client satisfaction and even by growing your client base. How Advisors Can Implement Health Care PlanningMy advice to financial advisors who want to start including health care planning in their financial service offerings is to start small and to focus on areas where they can have the biggest impact. Following that advice, clients who are eligible (or soon will be eligible) for Medicare are a great group to introduce to health care planning. Research showsone in five retireessay they do not know where to turn for good financial or retirement planning advice. This bleak backdrop provides a great opportunity for advisors to shine as the trusted resource for clients’ health care planning. This can deepen the advisor-client relationship, which can often result in better retention and more referrals. Medicare Case Study:Let’s examine a scenario in which a financial advisor offering health care planning helped a Medicare-eligible client. A longtime client (let’s call her Donna) of a financial advisory firm in Pennsylvania was a critical care unit nurse for most of her career. Donna was no stranger to the health care system, but she still needed help from a financial professional to plan for expected medical costs – including help in selecting an insurance plan. At the time of her HealthPlanning Analysis (which is our company’s personalized assessment of a client’s optimal health plan options based on their reported health needs and preferences), Donna took 16 different medications and saw five specialists. Additionally, she retired at the age of 64, meaning that her life transition would soon coincide with a new type of coverage, Medicare, but she wasn’t quite there yet. Donna and her financial advisor wanted to ensure she selected a health plan that would:Cover her prescription medicationsAllow her to continue to see her five doctors/specialistsNot negatively impact her goal of retiring before 65Not negatively impact her medical needs or financial goalsThe first piece of the puzzle was to ensure that Donna could fulfill her dream of retiring before 65. Instead of resorting to the default advice of: “Work until 65 so that you can transition straight into Medicare coverage,” Donna’s advisor provided a thorough overview of her health plan options available on the individual Marketplace in her state. Then her advisor compared those costs to COBRA, which is a continuation of Donna’s work insurance. Because the gap between retirement and her 65th birthday was about six months, Donna and her advisor chose to go on COBRA. While the premiums were a little bit higher than those on the Marketplace, Donna had already contributed significantly to her deductible and knew that all her doctors and medications would be covered. Further, Donna and her financial advisor searched for a Medicare plan that would cover as many of her 16 medications as possible without costing a fortune. This proved more difficult because of the coverage rules around Donna’s medications. For example, one of her medications is a brand-name drug that Medicare doesn’t cover, but she was able to have our team walk her through the steps for a formulary exception. Initially, Donna and her financial advisor assumed they should choose the plan that had the lowest premium. However, the plan with the lowest premium (only $7. 20 a month) would have cost her $40,034 annually in drug costs. Donna’s financial advisor used our software to complete what we call a “HealthPlanning Analysis” to determine her best options for keeping her monthly premiums and annual drug costs low without significantly disrupting her medication and care preferences. The HealthPlanning Analysis guided Donna and her advisor through the options and showed them that the plan with a slightly higher monthly premium, $38, was best suited to her needs. Mainly, the annual drug costs under that option would be only $4,731, compared to the lower monthly premium plan that would cost over $35,000 more in annual drug costs. Talk about major savings!Aside from the savings, Donna felt a sense of relief after receiving a clear plan of action that was tailored to her specific needs and preferences. Her financial advisor benefited from her gratitude, securing Donna as a lifelong client, and received many great referrals from her. Health Care Planning for Pre-65 Retiree ClientsAnother group that advisors should discuss health care planning with is pre-65 retirees. While Social Security allows individuals to “retire” or begin drawing retirement benefits at 62. 5 years of age, the common definition of early retirement in the world of financial advisors is any age before 65 – the age when individuals qualify for Medicare benefits. According to Life Insurance Marketing and Research Association,more than half (51%)of Americans retire between the ages of 60 and 65, i. e. , before they are eligible for Medicare. This leaves a potential gap in how they mitigate the financial risks related to health care costs. Other than a spouse’s employer-sponsored health insurance, the most common health insurance option for pre-65 retirees is Marketplace insurance. Marketplace Case Study:A 62-year-old woman (let’s call her Elizabeth) had been retired for 18 months and recently become a grandmother. Elizabeth decided to relocate to be closer to her daughter’s family and shared this important life update with her advisor. Her advisor suggested they conduct a HealthPlanning Analysis as part of her relocation plan. Elizabeth’s situation was further complicated because her COBRA insurance was running out a month before her scheduled move date. She would still need one month of health coverage for her time remaining in her home state and wanted a low-cost option for any unexpected health care services. Once she was settled into her daughter’s home state, Elizabeth knew she would want a more comprehensive health plan to support her long-term health goals and care in retirement. The HealthPlanning Analysis considered Elizabeth’s priorities, cost preferences, risk tolerance and personalized health needs for both states. She was then presented with tailored plan options and detailed financial analyses. HealthPlanner identified an average savings of 63 percent in fixed-cost premiums. Elizabeth was relieved to see her plan options laid out so clearly with all of her preferences considered and questions answered. She appreciated the unbiased information and support she received from her financial advisor and felt confident about her health plan decision. This analysis also helped ensure that Elizabeth wouldn’t look for a new financial advisor in her new state, which was a benefit her financial advisor was grateful for. Beyond retirement, there are several other life events advisors can use to implement health care planning and to create meaningful touchpoints with clients throughout the year. Let’s look at two real-life examples in which Caribou equipped financial advisors with the ability to go beyond basic financial planning and offer comprehensive planning for their clients during critical life events. Between Jobs and COBRA Coverage Running OutA 59-year-old man (let’s call him Craig) was between jobs. Because it was the open enrollment period, Craig’s financial advisor recommended completing a HealthPlanning Analysis to determine his optimal health care coverage options for the upcoming year. At the time of the HealthPlanning Analysis, Craig was interviewing for a job that would potentially start within one to two months. However, he and his advisor wanted to be prepared in case his job search took longer than planned. Additionally, Craig had several other concerns. He wanted to be sure he had the flexibility to see doctors in the two states where he had homes. He preferred to see specialists without a referral. He had always been comfortable with a plan that provided him with coverage across state borders in his corporate roles. Craig expressed his preferences during the HealthPlanning Analysis. He noted that he had a low tolerance for financial risk, but would rather pay full price for a plan than use his IRSpremium tax credit. Because Craig didn’t plan on staying unemployed, he didn’t want to risk having to pay money back to the IRS. Because the tax credit can be applied in real time to premiums based on an estimated income or claimed retroactively at tax filing time, it was better for Craig to pay full price and claim the tax credit back when he was more certain about his annual income. With all these factors in mind, Craig’s financial advisor delivered a HealthPlanning Analysis that alleviated his worries. The software his advisor used found multiple health plan options that met most of Craig’s preferences, allowing him to compare plans side by side and confidently pick the ideal one for his needs and preferences. This included PPO options that provided coverage for doctors out of network. Additionally, he received straightforward timelines about when and how to enroll so he wouldn’t experience a gap in health care coverage. Before undergoing the health care planning process, Craig was experiencing high levels of anxiety and felt pressured to find a new job. But after walking through his HealthPlanning Analysis with his advisor, he could breathe a sigh of relief. Craig received the answers he needed for all the uncertainties he faced and moved forward with an action plan that met his needs and goals. Having a Baby and Losing Coverage through a SpouseIn this case study, a married couple in their early 30s (let’s call them Thomas and Morgan) shared with their advisor that they were expecting twins. Thomas is self-employed and Morgan is a teacher, so they’ve always received their health insurance through Morgan’s job. However, Morgan decided she was going to leave her job as a teacher to begin a new job as a full-time mom. She and Thomas were excited about this plan and their growing family, but they knew they needed a new source of health care coverage. Their advisor used our company’s health care planning software to show the benefits of enrolling in a plan with the lowest overall maximum exposure. That was important because Thomas and Morgan would reach the out-of-pocket maximum thanks to the cost of labor and delivery. However, exploring all of the options is important, so the HealthPlanning Analysis also went over the benefits of both high-deductible plans (i. e. , HSAs) and low-deductible health plans. Some would argue that high-deductible plans are “better” because the monthly premium is lower, so fixed expenses are lower and enrollees only pay for the care they use. This is especially true if they are contributing to their HSA and letting that money grow tax-free. But that approach has caveats, too. If someone signs up for a high-deductible plan but uses the health care system often, they end up paying for a large portion of their care out of pocket. Conversely, if they enroll in a low-deductible plan, but rarely use any health care services, they’re wasting money on high monthly premiums. That’s why the question, “Which is better?” is so difficult to answer. It depends on the individual and their needs. In this case, because the couple was expecting a baby, their health care costs were projected to be high; so, HSA-eligible plans with a higher deductible aren’t typically advised. Our team also discussed the typical services included in maternity care for fetal monitoring, bloodwork, genetic testing and ultrasounds to help them prepare. Enrollment dates and timeline planning were an especially important part of this HealthPlanning Analysis, so our team ensured that Thomas, Morgan and their advisor walked away knowing when and how to enroll in coverage. Not only would they be eligible to enroll in the Marketplace (or COBRA, should they choose to enroll in that first) once Morgan left her job, but they’d be eligible to change their plan once the babies were born – a qualifying life event. Many new parents forget to enroll their newborn(s) on their plan within their 60-day special enrollment window. Thus, their advisor marked the deadline in their calendar so they wouldn’t miss this important step. After going over their HealthPlanning Analysis with their advisor, Thomas and Morgan felt well-equipped to take the next steps in optimizing their health care coverage options for themselves and their growing family. Health care planning not only helps protect clients’ financial plans but ensures that they’re equipped with the information needed to make confident health care decisions. The main question advisors will get from clients is: “What’s the best option for my household given my expected situation for the next year?” Even though every household has different circumstances they share a common goal. They want to make the “right” health care decision, and they are afraid of choosing the “wrong” health insurance. This is where advisors can provide a lot of value. Further, health care planning is not a set-it-and-forget-it exercise. Just like an investment strategy or a financial plan, it needs to be evaluated (at minimum) every year. The open enrollment period is critical to build proactive touchpoints with clients to ensure they are not in a situation where their premiums are substantially raised, a medication’s formulary tier is changed or a must-see doctor drops out of their network. This is where unbiased and non-commissioned health care planning comes in to offer another significant benefit to clients – reducing stress and confusion without having to worry if the information they receive is unbiased or not. Health care literacy, just like financial literacy, is extremely important to have so clients don’t overspend. ConclusionTo be a truly comprehensive financial planner, you cannot afford to overlook health care planning. Advances in software and technology now make it easier and more efficient than ever. [Arrowroot Family Office Disclaimer]Posted on July 12, 2026