About 10,000 baby boomers will turn 65 today. How many of them are prepared to pay for the health care they will need to enjoy their retirements? ¶ “I don't think people are aware of the need to plan for health coverage in retirement,” says Colleen Callahan, owner of Colleen Callahan Insurance Services in Pleasant Hill, California. “Some are confused by what the employer or union might offer, and others get confused about what is available directly from insurance companies. There also is a lack of understanding of what is available to them before turning 65.”

Those who do understand their needs must get an early start on planning, adds Craig Gussin of Auerbach & Gussin Insurance and Financial Services Inc. in San Diego, who is also vice president of public affairs for the California Association of Health Underwriters.

“You should think about your health insurance three or four months before you plan to retire to determine whether the benefit you are losing is worth retiring now, or if you can reduce your hours and still get benefits,” Gussin says. “For long-term care (LTC) insurance, the younger they are, the lower the cost will be to the consumer and the better chance they will have to qualify for it. I usually suggest that in their mid-50s most people should start to look at LTC insurance.”

Today's retirees often face a double-edged sword. First, health care costs continue to climb as life expectancy—and average retirement lengths—rise. Second, many employers are reducing or eliminating retirement health care benefits, leaving retirees to fend for themselves.

“Agents are needed now more than ever,” Gussin says. “The consumer does not understand the new health insurance plans, the limited benefits some plans have (such as doctor visits and brand name prescription costs) and the limited networks of doctors and hospitals in some plans.”

What will it cost?

Average annual medical care costs have increased by 5.7 percent in each of the past 20 years, according to the Bureau of Labor Statistics. This is more than twice the inflation rate. And thanks to medical advances, many people can expect to live as long as 30 years in retirement. Although this is welcome news, it also means more years of costly health care.

So why not just go on Medicare? A common misunderstanding is that Medicare is free and will cover all medical expenses. In reality, Medicare Part A and Part B will cover only about half of all expenses, on average. Many important coverages are not included, such as deductibles, co-pays, dental care and dentures, hearing aids, alternative treatments and LTC.

The Employee Benefit Research Institute in Washington, D.C., offers several other eye-opening statistics that workers approaching retirement and insurance brokers alike should keep in mind:

• In 2012, Medicare covered 60 percent of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounted for 13 percent and private insurance covered 15 percent.

• In 2015, a 65-year-old man needed $68,000 in savings and a 65-year-old woman needed $89,000 if each wanted a 50 percent likelihood of having enough money saved to cover health care expenses in retirement.

• If either instead wants a 90 percent chance of having enough savings, $124,000 is needed for a man and $140,000 is needed for a woman.

• Savings targets increased by between 6 percent and 21 percent from 2014 to 2015. For a married couple, both with drug expenses at the 90th percentile throughout retirement, who want a 90 percent likelihood of having enough money saved for health care expenses in retirement by age 65, targeted savings increased from $326,000 in 2014 to $392,000 in 2015.

What employer coverage?

Employees who can look to their company for all or some of their retirement coverage can consider themselves fortunate, as well as part of a rapidly shrinking minority.

About one in four employers that provide health insurance now offer some type of financial assistance to help retirees with medical costs, according to a study by Towers Watson. That is a significant decrease from 60 percent of businesses as recently as the 1980s. Six in 10 employers with more than 1,000 workers provide some type of retiree medical support, the National Business Group on Health reports. More than 70 percent of companies surveyed said subsidized health care benefits for retirees will not be important to attracting and retaining employees in three to five years.

This trend is likely to accelerate under provisions of the Patient Protection and Affordable Care Act, which is causing even more employers to re-evaluate their strategies for retired former employees under age 65 who are not yet eligible for Medicare. Because early retirees are guaranteed access to health insurance, experts say, some companies may drop coverage for this segment of the population.

Even businesses that continue to provide benefits to retirees are seeking ways to trim costs. Some, for example, are discontinuing their medical plans and instead giving retired employees a fixed amount of money to use toward health expenses. Other companies have moved their retirees onto private Medicare exchanges, which are similar to the public health care marketplaces created under PPACA.

Meeting the need

Current trends point to a great deal of uncertainty for consumers, but also a significant opportunity for insurance brokers.

“An agent who is versed in the individual medical and Medicare markets can be of great help, offering the proper education and assistance in sifting through all the options,” Callahan says. “Experience in working with business clients who are 64 and older is a plus. Tell them that this is what you do, and tell them you will be there to help when they're ready. It's a huge relief to the client.”

One of the most valuable things a broker can offer, Gussin says, is options.

“When consumers are thinking of retirement, they contact me about what their cost of health insurance will be when the employer is not contributing toward it,” he says “When they discover the increased cost they may have to pay, some have decided to maybe work until age 65, when Medicare coverage starts.

“They also look at what benefits their spouse can get if he or she is working. They look at all options available to them and for how long, until they qualify for Medicare. I discuss all options available to them, including COBRA, or the cost and benefits of getting health insurance on their own. They look at both and decide based on their needs what is best for them. I also explain that they can change their plan every January if it does not meet their needs in the future.”

With retirement health care insurance expected to be a growth market, brokers can maximize their opportunities by marketing their products before the need arises.

“Consumers should be considering long-term care while they are healthy and mobile,” Callahan adds. “As for retirement coverage, they should begin gathering information and meeting with an agent about six months before turning 65. They need to know that COBRA is not the right choice for them if they will be retiring at or after 65. If they are going to retire before 65, then they need to compare the COBRA coverage with what is available in the individual marketplace. That can be accomplished 60 to 90 days before retiring.”

Brokers with expertise in retirement health care need to market themselves to potential customers. “Tell clients that you work in the Medicare or individual medical market,” Callahan says. “Send letters to clients when they turn 64 to prepare them, and talk to senior groups.”

Gussin agrees.

“Agents should reach out to the media in their area, offer to give talks at local organizations and help consumers in their community better understand the role of the agent,” he says. “Remind the consumer that there is no cost to use an agent. I always say agents are paid by the insurance companies, just like the doctors and hospitals are. The more exposure agents get, the more business opportunities they will have.”

Demographic, regulatory and business management trends all indicate a growing need for viable health care insurance alternatives in retirement

“In our most recent study, we found that health care expenses were the top financial concern for older clients, even for the wealthiest retirees and pre-retirees,” Bill Hunter, director of Personal Retirement Strategies and Solutions for Merriill Lynch, said in a news release. “Planning early and strategically to better prepare for health care costs in retirement reduces the odds that younger generations will have that worry.”

As with any type of insurance, successful brokers will be the ones who sell solutions—not products—and create win-win outcomes for their customers and themselves.

“Make sure to educate your client, and be patient,” Callahan says. “Moving to Medicare and a supplement is like learning a new insurance language. If you do a great job for your clients, they will refer you to their friends.”