By Sheryl Smolkin
If you haven’t factored health care costs into your retirement budget, it may be time to take another look. Saskatchewan Health Care covers provincial residents for a whole host of services including all medically necessary doctors’ visits and hospital care. But other services such as drugs (until age 65), dental care and physiotherapy outside an approved institution are typically not covered.
Members of employer-sponsored group health care plans have some or all of these expenses reimbursed. But according to a new survey from benefits consulting firm Aon Hewitt, nearly half of Canadian employers do not offer any post-retirement health benefits.
Aon Hewitt’s survey of 225 Canadian employers reveals that 44 per cent of the respondents do not offer any retiree benefits at all, while another 10 per cent have closed their existing programs to future retirees.
Of those employers not offering retiree benefits, the most often-stated reason (76 per cent) was “high costs compared to perceived benefit to employees,” while 66 per cent specifically blame rising healthcare costs.
However, about 20 per cent of respondents say that they would consider offering retiree health benefits such as drug, hospital and dental benefits if the costs were fully or partially-paid by retirees.
Even if your employer does offer some form of retiree coverage, it may not be the same as the coverage you are eligible for as an active employee. For example, your employer may offer you:
- A lump sum at retirement in lieu of future health care premiums or benefits.
- A defined annual contribution to health care premiums leaving you responsible for paying the balance which may increase each year.
- An annual contribution to a health care spending account you can use to by individual health care or to pay for actual expenses for services (i.e. physiotherapy, glasses).
- A retiree benefit plan that is 100 per cent self-funded.
When your workplace health and dental benefits end at retirement, you have three basic options:
- “Follow Me” products offered by all of the major insurance companies are available to former members of employer-sponsored group benefit plans within 60 days after retirement.
- Groups like university alumni associations, professional groups, the Canadian Automobile Association and the Canadian Association of Retired People (CARP) have “affinity plans” for members.
- Insurers like Saskatchewan Blue Cross sell individual plans.
All three types of programs offer basic health and dental plans plus different levels of enhanced plans. Your premiums will be based on the features in the plan you select, how old you are and your health status when your plan kicks in. Dental plans cannot be purchased on a “stand alone” basis.
So how do you figure out what’s best for you?
First, make sure you have plenty of coffee. Set up a spread sheet and try to do an “apples to apples” cost/benefit analysis of the health and dental plan features that are most important to you.
Insurance carriers offering Follow Me programs, affinity groups such as CARP and carriers with individual products like Saskatchewan Blue Cross have websites with detailed information and you can quotes. They also have information lines you can call for assistance. Websites like Kaneix.ca allow you to compare a series of online quotes from different carriers.
Depending on your health status, one reason to opt for a Follow Me Program if you are eligible is that acceptance is guaranteed with no medical questionnaire at the time of application, and no waiting period for coverage. Unlike some other plans, you can also move from a basic plan to plans providing higher levels of coverage at a later date without medical evidence of insurability.
Of course the real problem is that once you are no longer covered by an employer plan you will pay more for less. Coverage is extremely limited as compared to more robust workplace health and dental plans you may have been covered by in the past.
If you are contributing the maximum annual amount to tax-free savings accounts, that may be one source of funds for unexpected medical costs in years when you exceed private insurance plan benefit coverage