For decades, retirement planning has focused on ensuring clients have enough money to retire. Increasingly, holistic planning requires making sure they have enough money to stay healthy and navigate the cost of private care throughout their retirement.
Even as health-care costs have risen over the last couple of decades, there has been a steady decline in employer-sponsored retiree health benefits coverage. That’s hitting Canadians just as they grow more dependent on health-care services.
As longevity reshapes retirement, health insurance should no longer be viewed as an afterthought. It should be integrated into comprehensive retirement planning.
Because today’s retirees are living longer, they are spending more years managing chronic disease and mobility issues. They’re paying more for prescription medications and caregiving needs.
Clients who haven’t had much experience with the health-care system often confuse our guarantee of universal access to medically necessary hospital and physician services with free health care. They’re surprised to learn that the system does not cover many of the expenses that are increasingly common later in life.
These include, but are not limited to:
- prescription medications (depending on provincial programs);
- dental care;
- vision care;
- hearing aids;
- physiotherapy and rehabilitation;
- psychological services;
- mobility equipment;
- home-care services; and
- travel medical insurance.
Demographic reality
Historically, retirees evaluated heath insurance based on expected annual claims. That approach no longer reflects the demographic reality. Longevity changes the insurance equation.
A healthy 65-year-old Canadian today may spend three decades in retirement. During those years, they will likely experience multiple transitions: from active retirement to chronic disease management, caregiving responsibilities, the passing of a spouse and eventually increased care needs.
The probability of significant health-care expenses rises substantially over time. Actuarial data show that many retirees have a meaningful probability of living well into their 90s. This uninsured risk is especially prevalent with females due to their longer life expectancy.
Advisors should encourage clients to plan for a scenario in which they require extensive health-care support. That can last years or decades, or come in the form of acute care needs.
The planning horizon has fundamentally changed. The best emerging practice is to treat health insurance as a risk management tool.
Advisors routinely insure against low-probability, high-impact events. Clients purchase home insurance despite expecting never to make a claim. We insure vehicles, cottages and businesses against losses. Health insurance deserves similar treatment.
This represents an important shift. Advisors should position health insurance as an important protection against uncertain future health-care costs. Think of it as a complement to cash-flow planning.
The years immediately preceding retirement represents an important planning window. Clients often discover too late that:
- Conversion privileges expire shortly after leaving an employer.
- Medical underwriting becomes more restrictive with age.
- Pre-existing conditions may affect eligibility for new coverage.
- Employer-sponsored retiree plans offer advantages that become unavailable later.
Advisors who raise these issues early can help clients compare employer conversion options, individual health plans, association-based coverage and self-insuring strategies before choices become limited.
Health-care planning
Health insurance is only one component of health-care planning. Clients should be encouraged to establish dedicated health-care reserves within retirement projections.
These reserves may fund higher deductibles, non-covered services, home modifications, private caregivers, medical equipment, family travel related to care and out-of-pocket long-term support.
Rather than estimating a single health-care cost, multiple scenarios should be modelled. Retirement rarely follows a straight line.
One frequently overlooked area involves travel medical coverage. Many retirees become frequent travelers after retiring, yet pre-existing medical conditions, age and trip duration can significantly affect available coverage.
Clients often assume credit card travel insurance provides sufficient protection. In reality, coverage limits, age restrictions and exclusions may leave significant gaps. Clients should review travel insurance annually, particularly as health conditions evolve. A single medical emergency outside of Canada can create substantial financial exposure.
Health insurance planning should also account for household structure. Couples often assume one spouse’s health determines overall health-care spending. But health costs are usually asymmetric.
One spouse may remain healthy while the other develops complex medical needs. Following the death of one spouse, surviving partners, particularly women, often lose access to certain group benefits while simultaneously facing lower household income and increasing health-care needs. This makes survivor planning an increasingly important component of retirement advice.
Our profession continues to evolve alongside demographic change. Today’s retirement discussions increasingly include health-care system navigation, caregiving plans, cognitive decline, housing decisions and estate planning.
Health insurance fits naturally within this broader framework. Rather than asking clients only about investments and income needs, we need to ask additional questions:
- What happens to your health benefits when you retire?
- Have you reviewed your employer’s conversion options?
- How will prescription costs be covered?
- Have you budgeted for dental, vision and hearing expenses?
- How would you pay for several years of home care?
- Do you understand your provincial drug and health-care programs?
- Is your travel insurance appropriate for your age and medical history?
These conversations strengthen retirement plans while reinforcing your value beyond investment management. In the age of longevity, protecting retirement means protecting health. Increasingly, that begins with a conversation about health insurance.