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THREE INSURANCE OPTIONS TO PONDER

Who's the guy at the party no one wants to talk to? He is the insurance salesman, or at least that's how the old saw goes. For seniors this stereotype is no longer true: they have so many serious insurance concerns and questions that they are more likely to be hounding the agent for answers and preventing him from getting to the hors d'oeuvres.

There are so many more insurance decisions for seniors to make than there were just 10 years ago that it seems almost overwhelming. You used to sign up for Medicare and were done with it. Now retirees have a choice of managed care options and insurance companies. To supplement Medicare there are 10 choices of types of policies plus numerous insurance companies to screen.

The growing need for long-term care in nursing facilities and at home has created a whole new class of insurance policies to consider. And life insurance, which long ago stopped being a simple product, demands some important estate planning decisions in retirement.

Here is an overview of the choices and questions facing seniors. Before making decisions, however, you should carefully research the options that are most appropriate for you. There are plenty of publications, Web sites run by government agencies and non-profit groups, and professional advisers to help you.

Health insurance

Medicare threw some choice, and inevitable confusion, into the market last year when it began allowing seniors to enroll in managed care plans through local insurance companies or to stick with traditional Medicare. Traditional Medicare is the fee-for-service program begun in 1966. It allows retirees to use just about any health care provider anywhere. The provider is paid a fee for the service. If the Medicare fee doesn't cover everything, the patient has to bear part of the cost. Many seniors usually buy a supplemental private policy - known as "Medigap" insurance. Now Medicare participants can select a managed care option instead. They pick an insurance company and a primary care physician who gives basic health services and decides who they can use for more complicated forms of care. The advantages are small out-of-pocket costs - the managed care plan doesn't sock the patient with a lot of extra bills, as long as the patient uses doctors and facilities that are part of the plan. Also, the patient doesn't have to pay hundreds or thousands of dollars for a Medigap policy. Some managed care plans also cover a portion of some prescription drug costs, something Medicare doesn't do.

But there is a big potential drawback: the managed care plan gets paid a fixed rate by Medicare. It has an incentive to hold down its costs, and that may affect decisions on a patient's health care. Also, coverage outside of the managed care plan's geographic area may be limited.

Those who travel a lot and spend extended periods of time away from home - Florida snowbirds, for instance - may find traditional Medicare and a Medigap supplemental policy offering more comprehensive coverage.

If you are retiring from a company that offers retiree health coverage do some serious homework before making a decision. Employer-sponsored retiree coverage may give you better benefits than anything you can do on your own. If you opt out at retirement many employer plans won't let you back in. Through next year you will have the right to switch to a new Medicare option at any time. After that you will be limited to one change per year in most cases. And, to confuse matters more, Medicare soon will offer several more choices.

In the Buffalo area, seniors have a choice of eight managed care plans run by Blue Cross and Blue Shield of Western New York, Independent Health Association, and Univera Healthcare.

You can compare their plans to traditional Medicare by going to Medicare's comparison Web site at www.medicare.gov/MPHcompare/Home.asp Medicare offers a sister Web site that allows you to find the 16 insurers who offer Medigap plans to Western New Yorkers. You can find help at www.medicare.gov/mgcompare/home.asp

Long-term care insurance

Just a few years ago it was hard to get seniors interested in long-term care insurance. It was costly, complicated, and new. It's still costly and complicated, but more seniors are interested when they hear horror stories of the high costs of nursing home care. New federal and state tax laws have helped to standardize the products and even offer small tax deductions on insurance. Long-term care policies pay a daily dollar benefit that you select - $120, $250, whatever - for a time period you select - three years, lifetime, etc. - if you need care. The premiums you pay are high, usually several thousand dollars per year. But the potential benefits are enormous. A five-year policy that pays $175 per day would shell out over $319,000 on your behalf if you were in a nursing home for that period. Probably the most important advice is this: don't delay. Not only are the premiums cheaper if the policy is purchased at a younger age, but you may develop health problems later that will prevent you from being able to buy coverage at all. The paradox for seniors is that those who know they are most likely to use the insurance because of health conditions like arthritis or Alzheimer's disease are also the mostly likely to be turned down for coverage.

New Yorkers have an extra option when buying this insurance. An alliance between the state and private insurers, the New York Partnership, offers a form of long-term care insurance that combines public and private financial benefits.

An approved Partnership long-term care policy gives a buyer three years of coverage in a nursing home. If the policy owner stays in a nursing home more than three years, she can receive Medicaid assistance (the state-federal health insurance plan for the poor) without having to use up her own savings and investments first. Partnership policies are sold by the same private insurance companies that offer other long-term care policies. They are cheaper to buy than a private policy that offers lifetime coverage.

There are tradeoffs. You have to receive your long-term care in New York once the insurance policy is done paying its benefits. And when you start getting Medicaid much of your income must be used toward your care, including pensions, Social Security benefits, and earnings on investments.

Life insurance

A lot of seniors find that they have little need for life insurance. After all, its main purpose was to provide an income supplement to their survivors in case the wage earner died early. If the proper pension form is chosen at retirement, or enough investments are in place, a surviving spouse or other dependents will continue to receive an income after the retiree's death.

But that isn't always the case. Some retirees choose a pension that ceases at their deaths. They protect their spouses by buying an insurance policy that is supposed to provide income to replace the pension if the retiree dies first.

Others may be using life insurance to pay off debts, or, federal estate taxes due at death.

In any event, any retiree with a life insurance policy or annuity contract should check their beneficiary designations. They should determine whether these designations still fulfill their wishes. Those with assets nearing $675,000, including homes, investments and savings, should look at the beneficiary designations carefully because the death benefits on an insurance contract will be included in their taxable estates. Estate planning specialists help married couples protect up to $1.3 million in assets from estate taxes by writing a trust clause into a will in order to shelter part of the assets. But that only works if the beneficiary designations on life insurance policies, annuities, and retirement accounts are written correctly.

Richard Schroeder is a certified financial planner and registered investment adviser in Williamsville. He writes about financial matters for seniors in First Sunday.

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